Nick Birchley – Rural Financial Counsellor
Elements of a Cashflow
Most cashflows are done exclusive of GST.
When assessing income for a cashflow it is important to assess all types of income sources on and off farm.
This will help the financier paint an accurate picture of how much farm income is relied upon.
How these income sources interact with the business will need to be indicated within the cashflow.
There are three types of income commonly seen within farming systems.
- Off farm income
- Nonrecurring income
- Farm Income
Documenting these and how they interact with the business will help develop an accurate picture of the businesses cashflow.
Expenditure can often be broken down into four separate sub items.
- Variable operating expenses
- Fixed operating expenses
- Finance expenses
- Capital Expenses & other expenses
At times it can be dificult to identify which categories to use to define expenses.
Feel free to pause the video and take a snap shot of how typical farm expenses can be broken down in this way.
When planning a cashflow past years can often act as a guide to predict future performance.
Updating the figures to reflect current prices and expenses will improve the accuracy of the cashflow prediction.