Tips for Farmers and Ranchers on Maintaining Business Cash Flow
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This article is brought to you by Carrie Spencer from The Spencer Adventures.
If you're in the farming or ranching business, you're undoubtedly familiar with cash flow problems. As an entrepreneur, this can be extremely frustrating, leaving you living hand-to-mouth and impeding your ability to invest in and scale up your business.
However, there are steps you can take to tackle cash flow issues as a farmer or rancher. Farm Girl Chef Elisabeth Watkins invites you to find out what they are below.
Get organized about tracking expenses and income.
Organization is essential to good financial management. Creating a budget is a positive first step that will allow you to easily track all of your income and expenses, letting you prepare for possible cash flow issues in advance. The University of Nebraska-Lincoln offers sample budgets for farmers and ranchers to get you started.
Stay on top of accounts receivable.
When you started your business, you likely didn't anticipate waiting 30, 60, or 90 days for payments. A budget makes it easier to track accounts receivable. At a glance, you can see who owes you money and how much they owe. You can then follow up on past-due accounts as needed. The Research Foundation for the State University of New York provides tips on how to chase past due invoices, including payment request templates.
Cut costs to save cash.
With the succinct overview of your expenses provided by your budget, you will also be able to find ways to cut costs. This can lighten the burden in periods when cash flow is low. Successful Farming explains how to cut expenses, from analyzing the usage of fertilizers and chemicals to strategically planning seed planting.
Open a business bank account.
To further keep your accounts receivable and expenses organized and easy to track, it’s important to have a business bank account. If you’re still combining your personal finances with your business finances, this makes it harder to keep track of your money. Having an account specific to your business can help you stay organized and have a big picture view of your business cash flow.
Run cash flow reports regularly
One of the best ways to stay on top of your cash flow is to regularly run reports so you can have a real-time view of your financial health. This is critical to helping you make the right business decisions, which is why it’s beneficial to employ robust financial reporting tools. For example, a system like QuickBooks Online Advanced makes it easy to see cash flow trends and categories, it allows you to make adjustments as needed, you can compare and contrast your cash flow history, and you can even add charts and exporting to your financial reports.
Take steps to minimize late fees and interest.
You've probably taken out a loan at some point in your farming or ranching career to cover basic overhead costs, like seed and equipment. If you have loans, consider setting up auto-payments to reduce the risk of late fees and accumulated interest. Late payments can also negatively impact your credit score, as My Fico explains. This can make it harder to get credit in the future.
Find innovative ways to increase cash flow in downturns.
Finally, look for alternative means of bringing in some money when the agricultural business is slow or you simply need to bump up cash flow. Beef Magazine offers diverse ideas, like refinancing debt with equity, selling current assets, or looking into joint machinery ownership with others in your area.
Running a farm or ranch isn't an easy job. The added burden of cash flow issues can add undue stress. Avoid these problems by implementing the tips above.
This article is brought to you by Carrie Spencer from The Spencer Adventures.
