As a farmer and owner of one of Placer County’s many small to medium size agribusinesses, your main concern is operating a profitable business. But if you’ve been in business for a while you’ve probably discovered; there’s much more to running a farm business than growing crops, raising livestock, and selling your products at the market.
Take cash flow, for instance.
Cash flow is a challenge that nearly every business faces and farmers are no different. It not only affects your everyday business operations, but it also affects your ability to get approved for loans or a line of credit. The good news is that unlike the weather and environmental conditions like drought, cash flow is something that farm owners can control.
Maybe you’re a second or third generation farmer who already understands how important managing your cash flow is to your farm operation’s success. If so, chances are you already have an accounting firm like Cook CPA Group on your side.
But if you’re just starting out, you may not realize how vital managing your cash flow is. Sure, you’ve grasped the fact that you need cash—maybe lots of it—to pay for things, but keeping track or accounts payable and receivable and reconciling budgets (do you even have one?) is a whole different story.
The reality is that if you don’t have a handle on your cash flow your business won’t reach its full potential, or worse, will eventually fail.
And no one wants that to happen, including us.
Cook CPA Group is here to help you get your cash flow under control.
We’re local; we understand your business, and we’re good at what we do. As Placer County’s top CPA for farmers, we make sure you file tax returns, pay estimated taxes on time, and comply with payroll requirements. But we do more than make sure you stay on top of your tax obligations. As your trusted advisor, we help you with all of with all of your tax and accounting needs—including cash flow management.
Cook CPA Group’s Insider Tips for Managing Cash Flow
As a CPA for farmers, we spend a lot of time working closely with agribusiness, and we’d like to share some of our “insider” tips for managing cash flow. Here are the top ten:
1. Use a cash flow worksheet. Cash flow worksheets are useful for identifying your current financial position and include cash reserves, payables, and receivables.
2. Periodically review your cash flow worksheet. Reviewing your cash flow worksheet helps you spot trends in your cash flow situation and makes it easier to plan for future cash shortfalls. If you know you need to buy seeds in spring, but also know that this is the time of year that your cash reserves are lowest, you will know how much money to set aside throughout the rest of the year.
3. Focus on cash flow, not profits. While the ultimate goal is, of course, to make a profit, when it comes to money in, money out, it’s best to devote your attention to managing cash flow—because it never manages itself, does it?
4. Know your break-even point. When you know exactly how much money it takes to start turning a profit (on paper at least), it’s easier to make informed decisions about your business.
5. Maintain cash reserves. Even the best businesses run short of cash at times, so it’s important to keep a cash reserve. If you’re managing your cash flow successfully, you’ll know exactly how much you need.
6. Take advantage of discounts. In the farming business, timing is everything. Instead of looking at the calendar, think ahead and take advantage of discounts or ask about options to pre-pay no matter what time of year.
7. Get creative with cash. If you know you’ll be short on cash next month; maybe it’s time to get creative and offer an incentive to get your customers and vendors to pay you faster. Likewise, put on your marketing hat and find new ways to increase sales to generate some extra cash or move inventory.
8. Pay attention to global supply–and the weather. The recent drought in California was tough for farmers, but it might not have been tough elsewhere around the globe. If your product is olives and your competition in Spain had a bumper crop this year, but you didn’t, it could affect your business.
9. Take advantage of technology. Instead of using generic software consider using software like FINPACK made specifically for the agricultural business.
10. Hire an accounting firm that works with farmers. Hiring a CPA for farmers like Cook CPA Group makes all the difference because we understand your business and how it works. It’s as simple as that.
Avoid a Cash Crisis Now and Start Planning for the Future
Whether you run a hobby farm, vineyard, walnut grove, or raise chickens, running a successful and profitable farm business is a nearly impossible task unless you’re able to manage your cash flow.
If your farm business is suffering because your cash flow is always in crisis mode, call Cook CPA Group today at 916.724.1665 and find out how we can help your small to medium size agribusiness thrive.