Financial Plan II: Herding Dollars Part II

This is the second part of our exploration of financial planning. Now that we’ve done a bit of financial goal setting and estimating start-up costs, we’ll focus on managing cash flow.

Cash flow is a summary of when and where money is entering and leaving your farm business. This is a critical piece of financial resilience – farming income is often highly variable throughout the year so you need to plan for how you’re going to pay for expenses that might not be aligned with income. Cash flow can also play a major role in deciding on how to manage your farm enterprises. It can help answer questions like “should I buy more heifers?”, “what would it look like to include value-added products at my market stall?”, “how much land should I rent?”, and much more!

For this topic we’ll be joined by two farmers who have extensive knowledge and experience with cash flow:

Ross is a first-generation rancher and professional agrologist in southern Saskatchewan. 98 Ranch Inc. is a 3500 acre ranch that produces grass-fed beef and strives for grassland and related wildlife habitat conservation. Ross also works as a Term Conservation Program Specialist for Ducks Unlimited Canada. In the past he has worked on a variety of projects related to grassland ecology & conservation, land management & community pasture management, oil & gas development & reclamation, applied research project planning and implementation, and grass-fed production system advising.

Maddy Clerk is a market gardener, chartered accountant and financial planning manager. She co-owned and operated City Beet Farm for 4 seasons, focusing on running an 82 person CSA, a weekly market, and online direct-to-consumer sales of vegetables and cut flowers. Maddy is passionate about empowering farmers and creative entrepreneurs with the financial skills to build their businesses. She has developed financial planning courses for farmers with Richmond Farm School, Tsawwassen Farm School, Vancouver Community College, Young Agrarians and the Bad Academy.

VIDEOS

Farmer Story of Using Cash Flow – Ross MacDonald (98 Ranch Inc)

Intro to Cash Flow – Maddy Clerk

Accounting Basics – Maddy Clerk

Example Cash Flow Statement – Maddy Clerk

Cash Flow Forecasting – Maddy Clerk

WORKSHEET

The worksheet for this topic involves filling out a cash flow spreadsheet and doing some cash flow forecasting. This is not an easy task so take your time with it! It’s recommended that you do at least two years of forecasting but you may want to try more if your returns are longer lived (e.g. orchard) or if you’re considering applying for loans. You may also want to try cash flow forecasting that considers conservative and optimistic sales.

If you have multiple enterprises, then make sure to look at individual enterprises rather than your farm as a whole because it will help you gain a better understanding of how your money is moving. You can then combine these enterprises to get a picture of how the enterprises compliment/hinder each other!

Cash Flow Worksheet (doc)
Cash Flow Worksheet (pdf)

You are welcome to create your own cash flow statement and forecast or start with a template. The excel template below is one that I recommend using (same one from last week).

Start Up Costs & Cash Flow Projections Template (excel)

If you’d like some support with filling out the cash flow template, here are two videos that walk through the sales projections and cash flow sheet.

RESOURCES

Income Statement & Balance Sheet Templates

In addition to cash flow, here are templates for the other two big reports that you may need for your farm: income statement (also called profit and loss statement) and balance sheet.

Template – Balance sheet
Template – Income (profit & loss) statement

RECORDING

And if you’d like to play around with the basic chicken cash flow we worked with during the session you can check it out here (make your own copy because it’s set to view only mode):