Fonterra’s announcement of a lift in income for this season will be appreciated by farmers. But far from taking the pressure off the need to build and use a cashflow forecast, the 55 cent jump in the payout has increased the need, but this time for all the right reasons, says Brian Eccles, owner of Cashmanager RURAL farm management software.

“When cash flow is tight, preparing a cash flow for the bank will smooth the way for arranging seasonal finance, and if you demonstrate good management skills, the improved credit rating could shave a few thousand off the interest bill” say Brian. “But when there is a little bit of spare income, preparing a cashflow forecast is all about generating benefits for yourself. That’s the right reason” says Brian.

When there is no spare cash, it’s easy not to spend. However, when the pressure is off, there is room to make discretionary expenditure, but deciding on the best way to use these funds is challenging. This is when working to a plan has a big advantage. Chances are that if a plan is made and followed there will be some cash left over for you to spend in the way you desire. Sadly many farmers dream about having spare cash, but never actually achieve that result. The financial rule “Expenditure always rises to meet income” is proven true once again.

Cashflow forecasting is all about planning to spend cash on the farm wisely and planning to have a little spare to spend on yourself or your family. It’s why we farm.

The key to successful forecasting is to be able to integrate the forecast with actual, monitor progress towards goals monthly and to use a system that encourages ‘what if’ planning. A good system should make it easy to quickly review options so that even when you are really busy, it gets done. Planning should not be a spare time task and with a good system it does not need to be.