Budgeting & cashflow

Why every farming business needs a robust budget

A budget is an integral management tool for any farming business, regardless of the historic financial performance.

Budgets allow greater financial control because income and expenditure can monitored and they highlight aspects of a business or specific enterprise that requires investment or support.

That clearer picture enables decision-making to be improved, such as decisions on cropping, labour and machinery.

Internal and external risks can be identified and strategies developed and implemented to mitigate their impact on the business.

Robust budgets and cashflows are fundamental in facilitating discussions with banks and illustrating the mechanics of a business, supporting overdraft facilities to ensure limits are correct and to forecast the timing of cash requirements throughout the year.

They are also essential when it comes to exploring future lending requirements, demonstrating too that the business can service that debt.

Detailed financial planning will forecast any breaches in an overdraft facility, allowing a potential problem to be addressed and managed to prevent it from occurring.

The short-term focus of any business needs to be working capital requirements to ensure trade can continue - this could mean reviewing existing facilities, forecasting future requirements, and reviewing long-term debt obligations.

A budget offers a standard for evaluating and monitoring business performance and the data can be used for benchmarking and setting financial objectives.

When setting targets, it is imperative that progress can be measured. This can then be reported back and analysed to ensure efficient delivery.

Brown&Co’s agricultural business consultants create detailed farm budgets by collating information on cropping, yields, variable costs, other business income, fixed costs, ‘one-off’ capital costs, director’s costs, private family costs and more.

We have a bespoke farm budgeting tool that can be tailored to an individual business to provide a detailed overview and analysis of key physical and financial aspects. This allows plans to be created which are based on performance evaluations while identifying new opportunities and areas for improvement.