Farm Cash Flow Planning

• cash flow
• planning
• operating credit

What is a cash flow plan?

It is a month-by-month projection of the money you expect to receive and pay. It differs from an income statement, which measures profit, because it tracks the timing of cash, including loan draws, principal payments and family living withdrawals.

Extension sites such as Iowa State's Ag Decision Maker and the University of Minnesota's farm finance center offer free templates.

Cash flow plans work best with some structure. Group inflows and outflows into a few categories and keep the same categories each year. That makes it easy to compare actual and projected cash and to find where the differences come from, rather than hunting through a long list of items.

How do you build one?

Start with twelve columns. List expected cash inflows by month: sales, program payments you are sure of, off-farm income and loan proceeds. List outflows: inputs, labor, rent, loan payments, taxes and family living.

Begin with the opening cash balance. Each month's ending balance becomes the next month's starting balance.

• Opening cash balance
• Monthly inflows and outflows
• Ending balance and borrowing need

Where do the numbers come from?

Use last year's bank statements and records, then adjust for planned changes. Be conservative on income timing: assume sales come later and inputs cost more. For payments from programs, check the official program page before counting on a date.

Use your whole-farm or enterprise budgets to anchor the totals.

Think about family living and taxes as fixed items, not afterthoughts. Set an amount you plan to withdraw each month and a schedule for estimated tax payments, then treat them like other bills. Many cash crunches come from these items being left out of the plan.

What does it reveal?

It shows months when you will be short, how much operating credit you need and for how long, and whether you can afford a purchase or a loan payment. It also shows when to schedule big expenses.

If cash is short in several months, consider a line of credit, changing sale timing or trimming costs.

Review the plan after each major sale or input purchase. Replace the estimate with the actual figure and roll the balance forward. This habit takes little time and keeps the plan useful instead of stale.

How do you share it with a lender?

Give the lender the plan and the assumptions behind it. Explain how a line of credit will be drawn and repaid. Lenders usually prefer a clear plan with a margin for error to a perfect-looking one.

Update it during the year and show actuals next to the projection.

If your plan shows a gap, you have several choices: delay a purchase, change the timing of a sale, negotiate payment terms with suppliers, or arrange a line of credit. The earlier you see the gap, the more of these choices you have, and the cheaper they tend to be.

How often should you update it?

Review monthly, even for a few minutes. Compare actual cash to the plan. Where you differ, ask why, then adjust the months ahead.

A major price move, a failed crop or a new loan calls for an immediate revision.

Ask your lender what format it prefers. Some provide templates, and using the lender's format saves time and avoids questions. Keep your own version too, since it may include details that matter to you but not to the bank.

What mistakes should you avoid?

Forgetting tax payments, principal payments and family living, assuming income arrives on time and failing to update. Another is using the plan only when applying for a loan.

If you see a shortfall coming, call your lender early. Lenders can usually do more when they hear early.

Consider building two versions of the plan, an expected case and a cautious case. The cautious case assumes lower prices, lower yields or delayed sales, and shows how much borrowing you would need. Sharing both with your lender signals that you plan for trouble, and it lets you agree in advance on how credit will be used if the cautious case comes true.

Last reviewed: November 12, 2026. Written by the Farm Money & Grants Editorial Team. Educational only, not tax, legal or financial advice. See our editorial policy.