Planning ahead is a key management strategy, especially when it comes to cash flow. A cash flow projection (or cash flow budget) uses your projected income and expenses to estimate the amount of money you expect to flow in and out of your business.
Monthly cash flow projections can help identify when you may experience cash shortfalls in your production year. In developing your workforce plan, you want to make sure that you have adequate cash on hand to cover your payroll expenses. If you anticipate a temporary cash shortage, you might explore opening a line of credit or a short-term operating loan to help bridge the gap.
Here are some resources to help you develop cash flow projections:
- Understanding Cash Flow Analysis, is an Iowa State University Extension and Outreach web page that provides a written description of how to construct and use cash flow projections to help manage farm finances. ISU Extension's Farm Management team has also developed Microsoft Excel templates that are available for download and can be used for creating cash flow budgets . You can choose between the short form Cash Flow Budget, or their more in-depth Farm Cash Flow decision tool.
- The Vermont Farm & Forest Viability Program also makes Microsoft Excel-based cash flow templates available for download. Their templates are designed for specific categories of agricultural operations.