Most cash problems on a farm aren’t really about profit. They’re about timing. The lambs sell in the autumn, the fertiliser bill lands in the spring, rent is due on Lady Day, and the overdraft has to stretch across the gap. The good news is that timing can be managed. Here are ten ways to do it.
1. Know your tightest month
You can’t fix a squeeze you can’t see. A month-by-month forecast shows your lowest bank balance in the year and when it happens. Everything else on this list works better once you know that. See our guide to building a farm cashflow forecast.
2. Spread your sales
Selling everything at once concentrates the risk on one price and one payday. Where you can, stagger grain sales, consider forward contracts for part of the crop, and plan livestock sales across several months. Steadier income means a smaller overdraft peak.
3. Get paid for everything you’re owed
Contracting work, livery, holiday lets and sales to neighbours often get invoiced late or chased half-heartedly. Invoice when the job’s done, agree clear terms, and chase on a set day each month. Check milk and grain statements against what you expected too, as mistakes happen.
4. Use supplier credit wisely
Feed, fertiliser and agrochemical suppliers often offer credit terms. Use them in full rather than paying early. Weigh early-order discounts against what that cash costs you: a 3% discount isn’t a saving if it pushes you into an expensive overdraft.
5. Get your VAT back faster
Most farm sales are zero-rated, while many inputs carry VAT, so plenty of farms are owed money by HMRC each quarter. If that’s you, monthly VAT returns can bring the cash back up to two months sooner. Reclaim VAT on big purchases on the next return, not months later.
6. Match borrowing to the farming year
Repayments timed after harvest or after the lamb sales are far easier to meet than twelve equal monthly payments. Ask your lender about seasonal repayment profiles. Avoid buying machinery or buildings out of the overdraft, because it leaves no room for the working year. See testing a farm investment.
7. Free up cash tied up on the farm
Spare machinery in the back of the shed, surplus feed or inputs bought too far ahead, and kit you only use twice a year are all cash sitting still. Sell what you don’t need, and compare owning a machine with paying a contractor for the job.
8. Put scheme payments in the plan
If the Sustainable Farming Incentive fits your farm, it pays quarterly, starting in the fourth month of the agreement. Put each payment on the date it’s actually expected, and count the cost of the actions too. Our SFI and delinked payments guide explains the timings.
9. Plan for tax, and use what’s there for farmers
Set money aside for tax as profits are made, not when the bill arrives. Farmers can average profits over two or five years for income tax, which can smooth out a bumper year. If this year’s profits are down, ask your accountant about reducing your payments on account.
10. Set a steady drawings figure
Family drawings that rise and fall with the bank balance make cash much harder to manage. Agree a regular monthly amount the farm can afford, and review it once a year.
Most of these cost nothing but a bit of planning. Together they can take thousands off your peak overdraft.
Want to see what these would do for your farm?
Try my free 4-week cashflow tool, or start with a free cash health review. I’ll show you where your tight months are and which of these would help most.
An accountant of ten years who has built more cashflow forecasts than hot dinners. I help farms and agricultural businesses across Yorkshire see what’s coming and plan for it. More about me.