Farmers must brush up on their financial management skills to tackle the industry’s current cash flow crisis.
Falling prices, tight margins and growing debts are all putting farmers at risk of running into serious cash flow problems.
A 2016 study conducted by the Prince’s Countryside Fund found that 49% of surveyed farm businesses were suffering from cash flow problems, and the problem has only intensified since then.
Cash flow is essential to any business’ financial security and ability to invest in new opportunities and grow. Farmers in financial difficulty should act immediately to free up money and resolve cash flow issues.
Review your budgeting– If your farm business is struggling with cash flow then it’s time to sit down and review your budget and financial plan for the year ahead. Cut all non-essential expenditure for the short-term and prioritise expenditure that will generate cash flow.
Chase debtors– If you have outstanding debts owed to you then now is the time to start chasing them. Poor accounts receivable management is one of the biggest causes of cash flow problems. Make sure that you have a process in place to encourage debtors to pay you on time.
Extend repayment periods– If you have loans outstanding then speak with your lenders to see if you can arrange to extend your repayment period to reduce your monthly outgoings.
Liquidate stored crops– Liquidating your stored crops isn’t a decision that should be made lightly, but if you’re in desperate need of an injection of cash it offers a quick way of putting cash in your pocket. This is only a short-term strategy and reserves should be built up again once you are out of immediate financial danger.
Defer large investments– Reign in the spending until you’re confident that your business is out of the danger zone. If you’re having problems with vehicles or machinery, try getting them repaired instead of replacing them until your cash flow is looking healthier.
Explore farm funding options– There are plenty of useful farm funding solutions on the market today that can help struggling farms to safely and affordably gain the cash flow they require to grow their business. Farm asset finance can help farmers to afford the new equipment or vehicles they need to work more efficiently, and farm asset refinancing allows farmers to free up money tied up in unused assets.
To find out more about the farm funding solutions available from Richmond Asset Finance, give our team a call on 0113 288 3277.