Budget and Cashflow

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Cash is King

A business can only be managed well when the owner has an understanding of cash flow and the need for a budget. It is often too easy to continue to pay outgoings and expenses and lose track of what is coming into the business. You may then realise that you don’t have enough funds to support business continuity or for the improvements you want to implement in the near future. Knowing what is coming in and going out of the business (cash flow), helps you to plan and avoid surprises.


Many businesses have gone under because of poor cash flow management. To minimise the possibility of a cash problem the answer is as simple as understanding your budget and cash flow. Once again, this is how you get to know your numbers!


We have created a practical easy-to-read guide to help you manage cashflow and budget, two core elements in your business. After reading this guide and applying its principles, you will be able to have a clear picture of your current position, determine the direction you want to head and plot the best route to get there. Check all our downloadable resources.

Download Cashflow Guide


What is a Cash Flow Forecast?

A cash flow forecast is a model of the future financial liquidity of your business over a specific time period. It estimates the flow of cash into and out of your bank account. This flow of cash is the life blood of any business. Yes, cash is king.

A typical cash flow forecast sets out the income and outgoings for the business over a 12 month period.

Why use a Cash Flow Forecast?

A cash flow forecast helps to identify potential shortfalls in cash that may hinder your business operation. A cash flow forecast can also identify possible cash surpluses which can be utilised elsewhere in the business.

A cash flow forecast also provides a clear direction to external stakeholders (such as your bank) about where your business is trending on the basis of existing production. It also shows where your business stands with regards to pay-out figures at the date of preparation.

Your cash flow forecast may also be used to determine your overdraft requirement for an up-coming time period and allows for these limits to be set. This helps to ensure you are not holding longer-term borrowings in expensive on-call accounts, therefore reducing interest charges.

A cash flow forecast lets you plan for significant expenditure during the year and lets you know whether these expenses can be funded from cash or if additional borrowings are required.

Ideally speaking, you should complete your initial cash flow forecast prior to the commencement of the year’s trading and then amend it each time there are variable changes (e.g. pay-out, interest rate fluctuations and production increases or decreases). Remember that the cash flow forecast is a fluid document.

Just as it is important  to be ready for possible losses and to take steps to prevent cash flow shortfalls, it is equally important to look forward should there be more profit than you expect and to find meaningful ways to use this for the growth of your business and to maximise your tax position.

We believe that a business cash flow forecast should be completed by the business owner/operator or in conjunction with your accountant.

Actuals to Budget

Don’t be tempted to complete your budget and cash flow and then place them in a desk drawer and forget about them. Things do change during the season and it is good practice to update your records regularly. At the same time, remember to note pay-out differences and to measure how you are actually performing against the budget that you’ve set.

We recommend at the end of every month, or in line with your GST period, you spend a little time reviewing your numbers and nothing changes. That way small incremental changes won't add up and come as one big surprise.

Keeping a record of your actual income and expenditure allows you to see the variances with your plan. This is an important part of knowing your numbers so that you can measure your performance and eventual seasonal outcomes. This is meant to inform you and keep you ‘on the ball’ with regard to business performance.