Profit and cash flow are not the same
A farm may be profitable on paper and still struggle to pay for labour, inputs, fuel or transport. This can happen when costs must be paid before harvest or buyers pay after delivery.
Cash flow tracks when money enters and leaves the business. Profitability measures whether revenue exceeds costs over a period. A farm needs both a viable model and enough cash available when bills fall due.
Why farms experience cash shortages
Crop production often requires spending weeks or months before sales begin. Costs may rise unexpectedly because of weather, pest pressure, irrigation repairs, labour changes or rejected produce. Payment delays create another gap when delivered produce has not yet been paid for.
Prepare a monthly cash-flow forecast
List expected cash inflows and outflows month by month. Include seed, land preparation, labour, fertilizer, crop protection, water, fuel, harvesting, packaging, transport, rent, repairs and loan repayments.
Estimate when sales will actually be paid, not merely when produce is harvested. Use conservative assumptions and revise the forecast as dates, prices and volumes become clearer. Compare forecast figures with actual cash movements monthly.
Build a buffer and plan for delays
Where possible, keep a reserve for urgent repairs, production disruptions and delayed payments. The appropriate size depends on the farm’s scale and risks; avoid setting a target that creates unsustainable borrowing.
Prepare contingency options in advance, such as staged planting, prioritising essential operations, negotiating clear payment terms or arranging reliable working capital. Do not assume emergency finance will always be available.
Keep farm finances organised
Separate farm transactions from personal spending where practical. Record sales, expenses, debts owed to the farm and amounts the farm owes others. Keep invoices, receipts, delivery notes and payment confirmations.
Track unpaid invoices and follow up according to agreed terms. Review whether each production block is generating the cash and returns expected.
Use cash flow to make better decisions
Before expanding acreage or investing in equipment, assess not only total cost but when money will be needed and when returns are likely to arrive. Growth can strain a farm if the cash-flow gap is not funded.
RonaGrow Limited helps farmers connect production planning, operating costs and market timing. Contact us to discuss practical support for managing farm operations and planning production.
RonaGrow Limited — From Soil With Care.
