14 Feb The Power of Cash Flow
Too often we see customers requesting additional working capital due to “unexpected” low cash flow at the point when they are about to overdraw their trading account. As a result, these requests become urgent, and in most cases a funding solution can be implemented relatively quickly, however, the funding solution can be expensive.
To avoid urgent and expensive working capital requests, a regular review of your cash flow is warranted. This is easily done via a cash flow budget.
In a farming business, a good time to review your cash flow budget is post a major production cycle when production and prices are known. This could be post grain harvest, shearing, calving etc.
The cash flow budget should be reviewed more than once a year and be deemed a “live” budgeting tool, as farming cash flow can change quickly due to the many variables than can impact the cash flow of the farming business.
This year for example, cash flow can quickly be impacted by increased input costs, changing commodity prices, delayed payment due to delivery logistics, interest rate increase, planned cropping areas changing due to seasonal change, retention of livestock for breeding and the list goes on.
By regularly reviewing your budget and testing the sensitivity of your cash flow to key variables, you will be in a better position to discuss the likely working capital funding solutions with your lender/broker in a timely manner, and avoid unnecessary stress and costly funding solutions.
Please call us today to discuss your cash flow and potential working capital funding solutions.