Farm Management Software Blog

Managing Cash Flow or Only Coasting?

Posted by Norman Brown on Wed, Oct 23, 2013 @ 02:37 PM

Cash Flow Monitor resized 600

Life's been good…and easy…for most crop producers in the past seven years.  Changing conditions, though, will require a new emphasis on proven farm management accounting principles aided by 21st Century technologies.

According to financial consultant Dick Wittman, less than half of the top U.S. producers have a cash flow plan in place.   The majority is “coasting on the momentum of previous years,” warns Wittman in Go with the flow in the October 2013 issue of Farm Futures.  His recommendations:

  1. Assess your accounting program’s budgeting features.  “A good system must be able to take into account beginning and ending balance sheet data to facilitate preparation of an accrual-based projection of farm profitability.”  (FBS’s LifeCycle Budget  not only flows cash between projected balance sheets and income statements but also flows inventories of crops, animals and inputs as well as loan amortization.)

  2. Quality cash flow projection programs also can conduct “scenario” or “what-if” planning.  (LifeCycle allow 10 concurrent, multi-year scenarios.)

  3. Cash flow lets you be proactive, rather than reactive.  (LifeCycle permits “real-time” monitoring of sales, expenses and even margins through integration with TransAction Plus Accounting, Crop Audit and Smart Feeder.

Read more on how cash flow planning has changed since the 80s in Farm Futures Now!

Also in the October 2013 Farm Future cover story, Showdown in Corn Country, editor Bryce Knorr offers a five-step battle plan to build a defense against the looming financial storm in farm country:

  1. Face the challenge of a changing market.

  2. Don’t ignore storage risk.

  3. Hammer out costs.

  4. Lock in profits.

  5. Keep upside open.

All these steps should be incorporated into the cash flow plan previously discussed.  In addition, steps #3 and 4 require an accurate tracking of your farm’s unique costs which is only possible through a management accounting system like FBS’s E.CLIPSE module.

We look forward to helping you prepare for, weather and thrive in the changing market conditions ahead through FBS Integrated SerVware.

Tags: cost accounting, agricultural managerial accounting, farm budgeting, farm mamanagement accounting, Dick Wittman, Farm Futures, farm cash flow projections