Introduction

The annual net cash flow (or net receipt) of money interests most farmers. For the semi-subsistence farmer, a budget also has to be drawn up showing the ‘net food flow', i.e. the expected supply and demand for food, before the cash flow budget can be constructed. Both budgets can stimulate and assist farmers and their advisers to make plans.

The cash flow is found simply by subtracting the money spent over the whole year from the money received. Farm advisers often find it useful to calculate cash flows on a monthly or quarterly basis to help their farmer clients. These are especially useful for shortterm crops. They may do this when they are budgeting next year's programme, or when comparing this year's actual results, with the expected results set out in the budget which they prepared before the start of the year. When a farmer is planning either next year's programme, or a longer-term project which may involve investing borrowed capital, he wants to know certain things from his adviser.

Cash flow budgets are important in:

Cash Flow Budgets

These are designed for the farm adviser to assist the farmer in planning his future activities, either on a short-term (monthly, quarterly or year-long) or a medium-term (4–5 year) basis. Cash flow budgets are also used to provide continuous feedback or monitoring during the period of the programme. The adviser will be able to compare the actual cash income and costs with the estimates made when the adviser drew up the budget.