Februarie/Maart

46
••• DEvElopiNG aGricUlTUrE
Tighten your farm cash flow
continued from page 45
even before they occur. This will give you time to
alter your plans and remedy the problems by timing
cash inflows and outflows, thereby maintaining
liquidity reserves.
• Improving profitability. analyse profits and the
profitability of your business. Once the farm is
profitable, you can concentrate on other cash
flow problems. Take note however that treating a
cash flow problem at the expense of profitability
is a short-term remedy that may have bad longterm
effects.
• Changing production plans. Perhaps another
crop in the rotation or a livestock enterprise
would increase cash flow and allow you to maintain
profitability at the same time.
• Improving your marketing plan. Consider cash
needs and markets available in the timing of your
sales.
• leasing or renting. Down payments can put a
heavy burden on your cash flow. assess the impact
of leasing and rental against the profitability
of your farm.
• Reducing living expenses. Carefully review your
>
family budget. Distinguish between necessities
and wants. base family spending on the performance
of the farm business.
• Earning a non-farm income. You can engage in
another income generating business. however,
be aware that the business is not detrimental to
your focus on the farm business operations.
• Refinancing. When the market is expected to
improve in the short run, you can use refinancing
as a strategy to buy time so that a cash short fall
can be absorbed over several production periods.
however, if the farm is not profitable itself, the
problem is just prolonged.
Tip: Do not use production credit for intermediate
or long-term assets, because proceeds from
one production period can not be expected to
cover even for the costs of assets.
• liquidating assets. If assets are to be liquidated,
sell your unprofitable assets first. Then you
may even consider downsizing the operations.
This has to be done after doing an indepth longterm
financial analysis of the impact of these sort
of corrective measures.
• Maintain credit reserves. Manage debt in order
to maintain a credit reserve. If you borrow to the
limit and other cash inflows stop, your liquidity
reserve will sooner dry up and bills will accumulate.
let your creditors know about your cash flow
problems and what you are doing to solve them.
good cash flow management has a double benefit
– it can help you to avoid the debilitating effect of a
cash crises and it can grant you a commercial edge
in all your transactions. S
Resource
Cash flow planning and management, Publication 933.
agricultural extension Services: University of Tennessee.
>>
Sipho Lowane is an Agricultural Economist and Coordinator
at Senwes Agricultural Services. Contact him at (018)
464-7378 or send an email to sipho.lowane@senwes.co.za.
www.senwes.co.za • Februarie/Maart 2011