National Women in Sustainable Agriculture Conference 2016

1. 11/30/2016
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Sow Good Financial Habits:
Cash Flow Budgeting
KELLY MCADAM
UNIVERSITY OF NEW HAMPSHIRE COOPERATIVE EXTENSION
NATIONAL WOMEN IN SUSTAINABLE AGRICULTURE CONFERENCE
PORTLAND, OR
What does creating a
budget mean to you?
HTTP://BIT.LY/CASHFLOW2016WISA

2. 11/30/2016
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A Cash Flow Budget…
Summary of projected cash inflows and cash outflows of a
business over a given period of time
◦Usually projected one year out
◦Monthly projections
A Cash Flow Budget helps answer…
Is my business plan financially feasible?
When can I anticipate cash shortages?
Will I have the cash available when I need to make
purchases?
If not, how much will I need to borrow and when can I pay it
off?

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Business Checking Account(s) typically
is the Focal Point
Cash In Cash Out
Cash In
Receive cash from selling
products or services
Collections from
customers (accounts
receivable)
Sale of an asset
Money borrowed
Sale of stock or other
cash transfers into the
business

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Cash Out
Expenses incurred to produce
and sell your products
Purchase of assets
Payments on debt
Personal draws
Quick Overview
Month One
Cash Inflows:
$12,500
Cash Outflows
7,450
Cash Remaining:
5,050
Month Two
Beginning Cash
$5,050
Cash Inflows:
13650
Cash Outflows
8025
Cash Remaining:
10,675

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Beginning cash balance
+ Cash receipts
- Cash expenses
= Cash surplus (deficit)
+ New loans
- Payments on new loans
= Ending cash balance
January February March April May June July August SeptemberOctober NovemberDecember
Beginning Cash Balance: -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Operating Receipts:
Total Operating Receipts 0 0 0 0 0 0 0 0 0 0 0 0
Capital Sales
Total Capital Sales 0 0 0 0 0 0 0 0 0 0 0 0
Other Cash Inflows:
0 0 0 0 0 0 0 0 0 0 0 0
Total Cash Inflows: -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Total Cash Available: -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Operating Expenses:
Total Operating Expenses 0 0 0 0 0 0 0 0 0 0 0 0
Capital Expenditures:
0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0
Total Capital Expenditures: 0 0 0 0 0 0 0 0 0 0 0 0
Payments on Existing Debt
Family Living/Draws
Total Cash Required: -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
Cash Surplus or Deficit: -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$
New Loan Payments & Transfers-In:
New Operating Loans
New Term Debt
Other Transfers-In
New Loan Payments & Transfers-out:
Payments on Operting Loans

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Getting our hands dirty
PREPARING A CASH FLOW BUDGET
What are some of your Cash Inflows?
Examples of Operating Receipts
Examples of Capital Sales that
might occur in one year?
Other cash inflows?Cash Inflows
from selling
assets

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Forecasting Cash Inflows
Record all cash receipts when actually received
To deal with uncertainty – prepare a few alternative
scenarios
 Best
 Most Likely
 Worst Case
What are some of your Cash Outflows?
Examples of Operating Expenses
Examples of Capital Expenditures?
Others?
◦ Depreciation?
◦ Interest?
◦ Taxes?
Cash
Outflows
from sale of
assets
Cash Outflows
from producing
and selling your
products

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Calculate Cash Surplus or Deficit
What is your minimum
acceptable cash balance at
the end of each month?
How will you get there?
How can I meet cash obligations?
Borrowing
Transfers-In from other
sources:
◦Personal cash
◦Other cash reserves
Adjusting your budget
For any Borrowing or
Transfers-In, have a plan for
paying that cash back

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Managing cash surplus
Double check! Are you sure
you included all expenses?
Prioritize how you will spend a
cash surplus
◦Take a Personal Draw?
◦Pay down existing debt?
◦Purchase that needed piece
of equipment, etc.?
◦Invest, rainy day fund
Cash Inflow our Outflow?
Sale of Apples, Blueberries (credit card sales, cash sales)
◦ Operating Receipt, Cash Inflow
Sale of a mower
◦ Capital Sale, Cash Outflow
I sell apples in November, but don’t receive the check yet.
◦ Record only when expect to receive payment, Operating Receipt, Cash Inflow
Purchase of fertilizer
◦ Operating Expense, Cash Outflow
Pay employees
◦ Operating Expense, Cash Outflow
Depreciation
◦ Not a cash transaction

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Scenario, Happy Fruit Farm
Cash Flow Budget
For Year: 2017 Happy Fruit Farm
January February March April May June July August September October November December
Beginning Cash Balance: 9,500.00$ 7,280.00$ 5,260.00$ 3,240.00$ 1,220.00$ (4,100.00)$ (7,970.00)$ (8,440.00)$ (3,560.00)$ 4,470.00$ 13,800.00$ 13,580.00$
Operating Receipts:
PYO Apples 6500 10500 12500 2500 2500
PYO Blueberries 6500 6500 3500
Pumpkins-Retail 2500 3000
Pumpkins-Wholesale 1000 1500
Total Operating Receipts 0 0 0 0 0 0 6500 13000 17500 17000 2500 2500
Capital Sales
Sale of mower 1500
Total Capital Sales 0 0 0 1500 0 0 0 0 0 0 0 0
Other Cash Inflows:
0 0 0 0 0 0 0 0 0 0 0 0
Total Cash Inflows: -$ -$ -$ 1,500.00$ -$ -$ 6,500.00$ 13,000.00$ 17,500.00$ 17,000.00$ 2,500.00$ 2,500.00$
Total Cash Available: 9,500.00$ 7,280.00$ 5,260.00$ 4,740.00$ 1,220.00$ (4,100.00)$ (1,470.00)$ 4,560.00$ 13,940.00$ 21,470.00$ 16,300.00$ 16,080.00$
Operating Expenses:
Seed 200
Chemicals 800
Fertilizer 500 200
Fuel 100 200 250 250 300 450 450 100 100
Possible Solutions?
Hold off on purchasing a new mower, or refrain from a down
payment
Re-think product pricing
Transfer money-in, and pay back when cash inflows are greater
(August-September)
Re-allocate expenses for farm truck, possibly others

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Pitfalls when Forecasting Cash Flow
Overstating sales forecasts
Underestimating costs and delays likely to be
encountered
Ignoring historic trends or performances
Making unduly-optimistic assumptions about the
availability of bank loans, credit, grants, equity, etc.
Other Pointers
Don’t get too hung up on the placement of inflows and outflows, just
make sure they are accounted for.
Lots of estimating can be involved. Be sure to look back and see
what actually happened. (Cash Flow Statement)

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Does Positive Cash Flow Mean Profit?
Cash purchases of equipment and inventory will not show
on your Income Statement but will be in your cash flow
Sales of equipment, breeding livestock, other assets will
not show on the Income Statement, but will be in your cash
flow
Depreciation is a non-cash transaction, but will be on your
Income Statement
Not Exactly…
Your Turn!

13. 11/30/2016
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Kelly McAdam
UNH Cooperative Extension
64 Court St. Laconia, NH 03246
(603) 527-5475
kelly.mcadam@unh.edu
Thank you!
http://bit.ly/CashFlow2016WISA