A recent dairy stakeholder workshop facilitated by the College of Agriculture, Food and Rural Enterprise (CAFRE) highlighted the need to focus on cash flow management and forward planning.
By now we are all well attuned to the old adage, “if you don’t measure it, you can’t manage it.” Typically, this has been used in the context of productivity and farm performance, but it also rings true from a financial planning perspective. Despite the many factors beyond our control, namely volatile markets and the unfavourable weather conditions experienced this year, forward planning, particularly for cash flow, is an essential component of a resilient business.
Establishing a cash flow position is the first thing a business needs to trade profitably. It is not only important during challenging price years but should be a firmly instilled discipline all year round to allow for proper financial and business planning. By tracking the cash flow in and out, it allows for better decision-making, enabling action to be taken early to avoid any cash shortages.
It is also worth noting that banks are increasingly asking customers for cash flow forecasts so that they can understand the size of the funding gap and how long it is likely to last, to be in a better position to offer the right support.
Early communication with both your bank and accountant can make a real difference in understanding the options available for the likes of restructuring debt and tax bill planning. Delaying the inevitable by not having a firm grasp of the cash flow situation, thereby allowing credit terms to slip beyond control, can cause the situation to deteriorate even further and induce stress. Cash flow management, good credit discipline and being proactive can therefore make a big difference to your business and mental well-being.
CAFRE have resources available to help with preparing a cash flow forecast and are hosting two meetings to outline the options available to dairy farmers at 8pm on Monday 6th November in Greenmount Campus and Tuesday 7th November in Loughry Campus.
Help is also available from your local FAR adviser who will be able to provide targeted nutritional advice to assist with feeding plans so that the focus is on feeding to yield and not overfeeding. However, it is also important to be cautious of the longer-term consequences of short-term decision-making. Indiscriminately reducing feed rates might save cash in the short-term, but risk future fertility and the growth of young stock if the nutritional requirements are not met.
It is important to seek advice early, whether nutritional or financial. Support is available.
