What is a cash flow projection?
A cash flow projection is a forward-looking budget, usually monthly or by season. It lists expected cash receipts, expected cash expenses, loan advances and loan payments, and shows the ending cash balance for each period.
FSA's loan materials ask for projected income and expense information, and the exact form can vary, so check with the county office for the version they want.
If you farm with a partner or family member, decide who is responsible for keeping the projection current. Shared documents get stale quickly when nobody owns them.
Why does timing matter more than totals?
A farm can make a profit for the year and still run out of cash in July. If seed, fuel and labor are paid in spring and crops sell in fall, you need money to carry the gap.
The projection reveals the gap in advance, so you can plan how to cover it with savings, a credit line or a loan.
Seasonal businesses such as pumpkin patches, u-pick farms or fall calf sales show this problem most sharply, and the projection is how they prove they have a plan for the quiet months.
How do I build one step by step?
Start with a blank twelve-month grid. Fill in sales by the month you expect to be paid, not the month you produce. Then add expenses by the month you pay them. Include family living and taxes.
Work from your records. Last year's bank statements show when bills actually hit, and that is more reliable than memory.
Add a short note column explaining each line's source, such as invoice, last year's statement or an extension budget. Notes turn a grid of numbers into evidence.
- List every income source and its payment month
- List every expense and its due month
- Add loan principal and interest payments
- Add family living and tax payments
- Carry the balance forward month to month
What assumptions should I use?
Be conservative. Use yields and prices you have achieved in at least average years, and cite your sources. Do not copy a record year.
Avoid listing a specific price or rate you have not verified. If you cite a published budget or outlook, name its source and date, and check farmdoc daily or your extension office for regional benchmarks.
If you are new and have no records, use published enterprise budgets, adjust them to your scale, and say clearly that they are estimates. Honest labeling beats false precision.
How do I stress test my plan?
Run the projection a second time with lower income and higher costs. For example, drop yields or prices modestly and add a repair bill. See whether you can still pay everything.
If the answer is no, you have learned something valuable. You can reduce expenses, delay a purchase or ask about different loan terms before problems appear.
A stress test also helps you decide how much reserve to keep. Knowing the amount you would need in a bad year gives a concrete savings target.
What do reviewers look for?
They compare your income and payments to see whether a margin remains. They check that your numbers match your history and tax returns, and that your plan explains any large changes.
They also notice what is missing. A projection with no family living line or no tax line raises questions.
A reviewer may also test your numbers against typical figures for your region and enterprise. If yours differ sharply, be ready to explain why, with evidence from your own history.
- A positive margin after payments
- Consistency with past records
- Explained changes from last year
- Reasonable reserves for surprises
What mistakes should I avoid?
Do not stuff every month with optimistic income. Do not skip depreciation of machinery in your thinking about replacements, even though it is not a cash cost. And do not forget loan payments on existing debts.
Finally, keep a copy of your assumptions so you can explain any line when asked. Update the projection quarterly once you are farming, and compare actual results to the plan.
Share the final projection with your spouse or partner, or anyone else who relies on the farm income. Everyone should understand when cash is tight.
- Missing the family living line
- Skipping tax payments
- Leaving out existing loan payments
- Using a record year as the baseline
Key takeaways
- A cash flow projection shows when money moves, not only the yearly total.
- Build it from real records and conservative prices and yields.
- Stress test with a lower-income scenario.
- Include family living, taxes and all existing loan payments.
Sources and official links
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.