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Cash Flow Tips

Design Your Cash-Flow Spreadsheet

Use with our sample cash-flow spreadsheets.

  1. The column labeled “Schd F” corresponds with specific lines on the Schedule F tax form.  This makes tax time much simpler, saving you time and money.
  2. Cash flow is based on the cash spent during that period. If a bill wasn’t paid or if a customer has not paid a bill, don’t include those figures.
  3. If applicable, include off-farm income & subtract family living expenses.  Make sure not to underestimate those expenses.
  4. If there is a clear separation from the farm and personal life of the farm family (no on-farm house, off-farm incomes covers all living expenses & is not used for farm expenses, or if your farm business is incorporated or an LLC), you will likely not include off-farm income in your cash flow.
  5. Farm’s cash balance for the first day of the year is listed at the top, while the last day is listed at the bottom. That last day balance is also your Ending Cash Balance.
  6. Two figures to note at the bottom of the statement: Net Change in Cash & Total Balance
  7. Is there enough left after everything has been paid, to be able to handle an unexpected emergency or event that puts the squeeze on cash?

Understanding Cash Flow

  1. Payments on active credit cards should be considered part of cash flow from operations.
  2. Periodic purchases and sales of capital assets show you’re generating adequate cash to invest and upgrade your operation.
  3. Cash flow in farming is seasonal in nature. Uneven cash flow can be evened out through financing, prepaid shares, new enterprises, season extension, etc.
  4. A sustainable operation needs cash flow in the short run & profitability and cash flow in the long to run to stay in business.
  5. A good cash flow sheet will help you fix a financial problem before it gets out of hand.
  6. A farm can be profitable and have a negative cash flow and an unprofitable farm can have a positive cash flow.  Learn to understand your financial situation to create a profitable farm with a positive cash flow.
  7. When penciling out an operation or a new enterprise, reduce revenues by 20-30 percent and see if the numbers still pencil out.
  8. This is one of the main documents a lender will look at when considering financing an operation.  Spend some time with it.


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