Level Up your Money Management

By now we know that the world as we know it has changed completely for the time being. For all intents and purposes, “normal” life has been cancelled for 2020. Even if social distancing, non-essential closures and travel restrictions are lifted by this summer, there will not be a rewind to business as usual.

The biggest skill this year is going to money management. Everyone’s cash-flow has been impacted on some level. The budgets that we all started the year with have most likely gone out the window at this point. With that in mind, I’ve created this long-term cash-flow budget in Excel for you to download and use.

Once you have the budget downloaded, you will see it goes from April 2020 to October 2021. Any of the green cells should be changed for your own numbers. The remaining cells are formulas to help you get a long-range forecast of your cash-flow.

Fill in the budget

This budget is all about cash. When recording anything, make sure you use the total amount you paid or received regardless of sales taxes. The starting balance should be the cash you have available when you start the budget. You can use your actual cash balance or the limit of your operating line of credit, whichever gives you more understanding.

Once you have your opening balance entered, record the expenses that you have every month. These are the expenses that no matter what happens, you have to pay them. Then also include any incoming cash that you receive with a predictable frequency like government benefits (children’s benefit, GST credits, etc).

After you have the constant information filled in, take a look at the balances. Add in cash you expect the receive from farm sales, off-farm jobs and any other sources you have. In the outflow section, include any normal farm transactions from your regular budgets and prior year financial statements.

The Long-Range Forecast

This spreadsheet was designed to give you a long-range forecast of your cash. Not your income, but the cash you have available to pay your bills. By having this long-range view with a monthly snapshot, you can begin to plan out the next 18 months. The cash value at the end of every month carries forward to the next month.

Having so many months in one budget can be overwhelming but it can also help you plan ahead. If you spot a problem in one month with an expense, you can see if you expect an inflow shortly after to cover any deficit. You can use the longe-range forecast of your cash flow to understand if you need to speak to your financial institution about making changes.

Often budgets cover one year or one season. Usually, budgets are about calculating profit margins with cash management as a secondary focus. This budget is to help you see how far your cash will go until the end of the harvest in 2021. I know that seems like forever away especially with everything going on but outside of cropping which is just starting but many sectors of agriculture are already in the early planning stages for 2021 in terms of production.

Money Management

As mentioned early on, the main skill for 2020 is going to be money management on top of normal farm management. All the markets have had some level of disruption both in price and flow. Dairy farmers are being asked to dump their milk on a rotating schedule. Thankfully, they will still get paid for it but the milk price has been lowered for all dairy producers per the DFO to make this happen. Beef Farmers of Ontario are asking all dairy and beef farmers to limit culling cows as much as possible for the time being.

Hog producers have seen the prices for hogs fall to very low levels. They also have a problem with the normal movement of hogs since a major hog processor was closed. Poultry faces similar issues from processing and beef have had this issue since the fall. As farmers, it’s important to keep track of what cash is available and which, if any, expenses can be reduced.

Hopefully, this spreadsheet will help you plan out your finances for the next 18 months or so. I’m still working on putting together a list of tools to help with your cash flow overall. For now, I hope you can use this budget to understand what your cash flow needs will be.

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About the author

I'm Ursina, a farmer's daughter who dreamed of one day owning her own farm and made it a reality. I love reading, big sweaters and trail riding across my farm with my horse. My mission? To help others turn their farm dreams into a reality and build their own farm business.

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