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How to improve your farm's finances for agricultural finance

agricultural financeagricultural finance
agricultural financeagricultural finance

 

How to improve your farm's finances for agricultural finance

 

Running a food production farm requires more work than one would think. 

 

Not only do you need to ensure you’re selling fresh, sustainable produce, but you also need to be purchasing new farming equipment from time to time. Farming equipment is expensive and can put a strain on your farm's finances. And although agricultural finances are available for farmers, a cash-flow plan still needs to be planned out thoroughly.

 

The agricultural sector is reliant on many resources to succeed. Seasonal changes and cash-flow can significantly impact your crops or the quality of your meat. So, it would be in your farm’s best interest to have a financial structure in place, for any emergencies.

 

There will come a time when you need to look at farming equipment finances, and having a cash-flow plan allows you to budget for any equipment expenses. If you’re wondering how to apply for agri finance then read down below to improve your farms cash-flow. 

 

Firstly, what is a cash-flow budget?

 

A cash-flow forecast is a safety net that is put in place to cover the months when your cash-flow is low. It is how you measure all your farm’s cash receipts and expenditures that are expected throughout a specific time period.

 

This budget is a valuable tool that forces you to plan out the full year thoroughly, helping you to take a look at your plans. This will show you if you have the necessary fundings for equipment purchases, and what your returns will be. A budget will also show you whether you need access to finance, and how long you will need to complete your repayment.

 

This will allow you to plan accordingly for your farm, and not face any complications when looking for finance options. When going to lenders, you will be able to inform them of your plans in a more detailed overview: where the money is going and what you’ll need it for.

 

Money coming into the farm

 

To approve your cash-flow forecast, the first step is to evaluate how much revenue is coming in. This is also referred to as an inflow. When doing this evaluation, you need to consider the seasons, as a large amount of your profit depends on the type of season you’re in.

 

For instance, if you’re selling fruit and vegetables, you need to think of the fruit that will be available in that specific season. There is no use of making a budget outline when the product won’t be available at a certain time. Also, take other factors like climate change into consideration. If you’ve been experiencing a drought in your area, think about how it could affect your farm over the upcoming months. This all needs to be thought out to ensure you have a tight-proof budget that can carry your farm through any financial issues.

 

Money going out of the farm

 

The next step would be taking your outflow into account.

 

Your outflow is all the monthly expenses that you have accumulated over the years, as well as your labour costs. You need to have a list of all your fixed expenses, which are your employee salaries, day to day farm expenses and your farm bills. Then, you would have your variable expenses that are items you won’t need to purchase each month. It’s important to keep a budgeted amount aside for any purchases you might need that you didn’t plan for. Once you have those two lists, calculate the total cost of your expenses.

 

Compare your expenses and income monthly

 

The last step is to analyse your expenses and income each month. This will give you a pattern of your finances, and that will act as your cash-flow plan. Your cash-flow plan will show you when you might be experiencing a drop in your income, along with the possible reason. The reasons can be anything from a lack of rain to a soil deficiency. If your soil isn’t rich in nutrients, your cattle cannot be feed nor can you plant new crops. Knowing that will help you make decisions when applying for agricultural funding at your farm.

 

Final thoughts

 

Receiving funding for your farm is recommended. If you plan accordingly and you know when to seek financial help, you can keep your farm running without sinking your budget.
 

agricultural finance