Setting up a July to June cashflow

In Australia the financial year runs from 1 July to 30 June. Most farm accounts and bank reviews follow it, so it's an easy place to start your cashflow. If your main sales fall just after June, run the forecast far enough to include them.

Step 1: The layout

Use a spreadsheet with one column for each month, July to June. Down the side, list:

• opening balance
• cash in, line by line
• cash out, line by line
• net cash for the month (cash in less cash out)
• closing balance

The closing balance for one month becomes the opening balance for the next. Start July with the real balance from your bank statement. If you're in overdraft, show it as a minus number, so the figure reads the same as your statement. Our cashflow budget template is set up this way.

Step 2: Put sales in the month the cash arrives

This is where most forecasts go wrong. A sale belongs in the month the money hits your account, not the month the stock leaves. Agents and processors often pay a week or more after the sale. Check last year's bank statements to see how long yours took.

• Pigs usually sell every week, so income is fairly steady. Forecast pigs sold, carcase weight and price, then total by month. Some months have five sale weeks.
• Cattle income often comes in a few sale months, such as weaners in autumn and cull cows later in the year.
• Sheep usually bring a wool cheque some time after shearing, plus lamb sales spread over several months.

Step 3: List every cost in the month it's paid

Go through last year's statements line by line: feed, animal health, shearing, freight, selling costs, wages, fuel, repairs and power. Then add the once-a-year bills, like rates, insurance, registrations and a big fertiliser order. These are easy to forget, and they often land when the overdraft is already deep.

Step 4: Debt and drawings

Put in every loan repayment, both interest and principal, in the month it's paid. Add drawings, which are the family's living costs. Add any planned spending on machinery, stock or land. A cashflow without drawings will always look better than the real account.

Step 5: Give GST its own line

Build the trading lines without GST, and add GST as a separate line. Lesson 3 explains why.

Start from what you know

Last year's bank statements are the best starting point. They show what really went out and when. Then change the figures for what you expect this year. The cashflow forecaster builds a simple version from your own numbers.