How to Build a Farm Budget Cashflow Plan

7 steps to organize income, expenses, and timing for better financial control

A cashflow plan helps you see when money will come into the farm and when it will go out. It is one of the most practical tools for managing your operation’s finances because it helps prevent cash shortages during the year. While your farms budget shows whether you can expect a profit, a cashflow plan shows whether you will have enough money available at each stage of the season to pay your bills.

The following steps explain how to build a simple cashflow plan that can be used by farms of any size.

1. Start with a cashflow calendar

Begin by laying out the entire year month by month. You can do this on paper or in a spreadsheet. Mark down the expected timing of both income and expenses.

Income periods might include:

• Crop and livestock sales
• Government payments
• Custom work or other service income
  

Expense periods might include:

• Seed, fertilizer, and chemical purchases
• Feed and fuel
• Loan payments and insurance premiums
• Equipment repairs
• Family living expenses
  
  

Farming often has uneven or “lumpy” cashflow. Income tends to come in a few key months, while expenses occur all year long. Seeing this pattern visually helps you anticipate when cash will be tight and plan ahead for financing or delayed purchases.

2. Estimate income realistically

Next, calculate your expected income as accurately as possible. Base it on:

• Expected yields multiplied by conservative price estimates. Use realistic averages or forward contract prices rather than best-case scenarios.
• Other income sources, such as custom hire work, rental income, or off-farm wages.
  

If prices, acres, or yields change during the season, update your plan. The goal is to have numbers that reflect what is most likely to happen, not what you hope will happen.

3. Include all cash expenses

List every cost that involves actual cash leaving your account, not just production costs. Include both variable and fixed expenses:

• Inputs such as seed, chemicals, fertilizer, and feed
• Fuel, repairs, and parts
• Labor or custom hire
• Loan interest and principal payments
• Land rent or mortgage payments
• Family living or household costs

A good cashflow plan separates operating expenses (those that vary with production) from overhead expenses (those that remain steady). This separation helps you understand which costs change with activity and which do not.

4. Factor in loan payments and capital purchases

Debt payments and large equipment purchases have a major impact on cashflow. Even though they may not appear as expenses on the income statement, they still reduce the amount of cash available.

Schedule both principal and interest payments in the months they are due. If you plan to buy or trade equipment, include those costs in your plan as well. These larger transactions can quickly change your available cash, so seeing them in advance helps you prepare.

5. Identify surplus and shortfall months

After you’ve listed all income and expenses, review your calendar or spreadsheet to find the months where cash will dip below zero or rise above it.

When you expect a shortfall, you can:

• Arrange financing or a line of credit early
• Delay certain purchases or payments if possible
• Schedule grain or livestock sales strategically to increase cash inflow

When you expect a surplus, consider how best to use it, such as paying down debt or building a reserve for future expenses. Recognizing these patterns ahead of time helps you make decisions before problems occur.

6. Track and adjust during the year

A cashflow plan is not something you create once and forget. It should be reviewed regularly. Compare your actual income and expenses to what you projected each month. If yields, prices, or costs change, update the plan to stay accurate.

Regular tracking helps you see trends early and make adjustments before small issues become larger financial challenges. It also helps improve next year’s plan because you’ll have more realistic data to work with.

7. Use software or digital tools

You can create a cashflow plan with a paper ledger or spreadsheet, but software can make the process easier and more accurate. Programs such as Traction Ag can can:

• Automatically import transactions from bank accounts
• Organize income and expenses by month or enterprise
• Compare budgeted amounts to actual results
• Produce simple reports for lenders or personal review

Digital tools also make it easier to update your plan throughout the season and to analyze how different parts of the farm affect overall cashflow.

Making your cashflow plan work for you

A cashflow plan is one of the most useful management tools a farmer can have. By mapping out income and expenses through the year, you can see where the tight spots are and make informed decisions about borrowing, spending, and sales. Combined with a farm budget, a cashflow plan gives a full picture of both profitability and financial stability.

Regularly reviewing and updating your plan throughout the year helps keep it accurate and relevant. As your operation grows or changes, your cashflow plan grows with it, giving you the information you need to manage the farm confidently and stay prepared for what’s ahead.