Keeping your cashflow current

A cashflow built in July and left in a drawer is out of date by September. Prices move, sales slip and a pump breaks. The forecast is only useful if you keep it up to date.

The monthly routine

Once a month, when the bank statement is in:

1. Put in the actuals. Replace last month's forecast figures with what really happened.
2. Compare. Put actual next to forecast for each line. The budget vs actual template lays it out.
3. Find the big gaps. Don't chase every dollar. Look for the lines that are well off and ask why.
4. Ask: timing or real? A sale that came a month late is a timing difference, and it should catch up. A lower price is a real difference, and it won't come back.
5. Update the months ahead. If feed prices have gone up, change the coming months too, not just the one that's passed.
6. Roll it forward. Add a new month at the end, so you always see 12 months ahead.
7. Check the lowest month again. Has it moved, or got deeper?

The monthly money routine checklist sets out these steps. Once you're used to it, it doesn't take long.

Keep it honest

It's tempting to make the forecast look better than you expect, especially before a bank review. Don't. A forecast that's always too hopeful gives you no warning. The point is to see trouble months ahead, while there's still time to sell early, put off a purchase or talk to the bank.

Keep a short note of the reason for each big change. When the bank manager asks why feed went up, you'll have the answer.

Don't forget the once-a-year bills

Each time you roll forward, check what's coming in the new month: rates, insurance, registrations, a BAS payment or a loan review date. These are the bills that catch people out.

When the gap is big

If the updated forecast shows the overdraft going past its limit, act now, not in the month it happens. Ring the bank, explain what's changed and bring your plan.

If things are very tight, the Rural Financial Counselling Service is free and independent. It helps primary producers who are in financial hardship, or at risk of it. The national number is 1300 771 741.

It pays off at review time

A cashflow you've kept up all year, with notes, is the strongest thing you can take to the bank. It shows you know your numbers.