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Planning for cash flow shortfalls

An ag lending official is urging farmers to plan ahead for projected cash flow shortfalls.

Paul Dietmann with Compeer Financial says as margins remain tight, a monthly cash flow strategy can alleviate a lot of stress.

“For a lot of farmers, the way that they manage cash flow is just paying bills until the checking account is empty (or) putting things on credit cards.  Then running credit cards to the limit and then hoping some cash comes in through the mail.”

He tells Brownfield tracking cash flow month-by-month helps to identify where the money is coming from and when to expect it.

“It can include farm (and) non-farm income, loan proceeds, government payments, things like that.  So we’re looking at when that cash is coming in, and then all the ways that cash is flowing back out.  For operating expenses, principal and interest payments, family living costs.”

That formulates a farmer’s bottom-line, and Dietmann recommends using any leftover money to begin a new cash balance for the following month.

He says managing cash flow this way also pinpoints future projected shortfalls, allowing for ample time to make adjustments.

 

 

 

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