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Farmers are now in the position of having to farm for cash. This means it is vital they manage their
finances to ensure a stable cash position.
If you have Cashmanager RURAL, this Seven Steps summary will assist you to get started with a
cashflow forecast. These steps are not a set of instructions on how to use the software, but a guide
covering the high level issues that form the process you need to follow.
The advice given applies to all methods of forecasting, regardless of the software used. However,
this document is heavily biased towards Cashmanager RURAL and points out the pitfalls with
alternative systems. For this we make no apology, as Cashmanager RURAL is a tool that makes
forecasting easier than any other system.
A common situation is where an accountant keeps the actual records and an advisor provides a
forecast on a spreadsheet. For farmers this is not a user friendly solution and is a core reason why
so many farmers find forecasting frustrating.
We are strong advocates of farmers taking ownership and managing their own finances. However,
we equally encourage consultation with rural professionals. Take your forecast to a professional and
ask them to validate your estimates and provide guidance on what if options. It is time and money
well invested.
Forecasts are best done well before the start of the financial year, BUT its never too late to
start!
When starting before balance date, you will need to determine what your expected financial
position will be on that date. This may require preparation of a forecast for the last few
months of this year before you start next year. This is worthwhile as its important the
budget for the next 12 months has the correct starting point
When preparing a budget after the financial year has started, you have the advantage of
being able to use actual information for these months. However unless you have good
systems, understanding what income is owed or bills to be paid at the start of the forecast
period is not easy
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Figures are based on the invoiced date, not the cash date and difficult to reconcile to
cash movement at the bank.
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a. Double click on a cell and a worksheet will appear. In this worksheet you record a
new line for each purchase. Remember the date is when you pay for the fertiliser.
Not when applied. Records the tonnes purchased and the price per tonne. In the
notes detail which paddocks.
7. When codes other than the big ticket items like income are complete, have a break. You
need to be fresh for the next session.
8. Income should be detailed in worksheets, but you can just type in monthly totals if you wish.
The manuals detail how to enter data. The difficult decision is what quantities and what
price to enter. Be realistic. There is no point in being too optimistic, neither is there any
value in being pessimistic. Save these scenarios for a later What if study.
9. Expect to have to spend several sessions on your forecast. It is not a task that can be done
with one iteration. Chances are that you will not like the answer from the first forecast.
Several sessions of fine tuning will produce what you need. Consult a professional once you
have had a really good go at your forecast. Cashmanager RURAL offers lots of tools that will
help them validate your estimates.
General Ledger accounting software
General ledger software is not designed for cashflow forecasting. Some allow totals to be recorded
against income and expenditure. But they dont cover items that come below the Net Profit, such as
drawings, debt repayment and capital. A month by month bank balance after GST is most unlikely.
Spreadsheets
If you have the skills, these are useful because they save a lot of maths. But they are not a patch on
Cashmanager RURAL!
Note these points:1. Dont use a spreadsheet built by someone else.
2. Structure your forecast so it relates to codes your transactions are recorded under.
Mismatches can cause major headaches when you wish to validate against last year, or later
when you wish to replace the first months with actual data.
3. Keep it very simple, any complexity risks errors. Its a fact many business go bust because of
unknown errors in their spreadsheets.
4. Try to design it so the information will be easy to use for management decisions during the
year.
5. To be useful you must be able to validate your forecast against last year, your gut feeling and
benchmark figures. The more detail you have the easier this is.
Summary
Forecasting under the same structure actual data is recorded, is very important. It is this feature
which allows quick and reliable validation whether planning forward or reviewing backwards. A good
forecast will require several short sessions to get it fine tuned. And when you think you have a plan
that will work, consult an advisor and seek their advice. Its time and money well spent.
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