Plan now to navigate your way through the tough times ahead

Rising costs are putting pressure on many farming businesses. Typical warning signs include overdrafts and credit accounts creeping upwards with difficulties meeting regular payments. The preparation of a simple cashflow can go a long way to identifying any future issues.

Take the time to list future cash inflows including: allocating each item of income and expenditure across the months ahead using a simple spreadsheet, or table. Using the current bank balance as a starting point, peaks and troughs will be shown, highlighting the problem periods. Key areas to consider: mountains. It means that there are thousands of potential hydropower sites across the UK that could be used for energy storage – as many as 6,500 sites, according to the company’s own analysis.

• Future sales of stock and crops.

• VAT receipts, subsidies and asset sales.

• Off-farm or other income sources.

• Any outstanding sales which have yet to paid.

• Matching expenditure with projected income.

• Can sales be brought forward, or can purchases and payments be delayed?

• Do loan and finance payment match cash inflow?

Talking is key - speak early to suppliers and lenders about tailoring payments to a more appropriate time for the business.

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When listing outgoings, consider:

• Current invoices unpaid or not yet received.

• Future input and trading expenditure.

• VAT or tax liabilities.

• Hire purchase and loan repayments and interest.

• Household bills, or drawings paid by the business.

The cashflow projection can then be mapped out,

Is the lack of cash purely down to timing? If there is an overall deficit, is the spike in input prices merely a temporary blip to an inherently profitable business or are there deeper fundamental issues at play? Deficits need to be addressed at some point to ensure there is adequate working capital going forward. Drilling down to find the root causes of why cash is tight is key to looking at potential solutions in the short and long term.