Using Farm Planning software for financial forecasting

Financial forecasting is an important part of farm planning, as it helps you to anticipate and plan for the financial needs of your operation. In financial forecasting, growers and farmers will typically use past financial data to predict future income and expenses. You can use this information to identify trends and patterns in financial performance, and to make more informed decisions about how to manage resources and invest in the right places. In order to create a more accurate forecast model, you need to look at several value points.  

Income 

How much do your current crops sell for? Before deducting anything, you need the overall income, to compare against. This includes all forms of revenue; from all crop types you grow.  

Expenses 

Now you need to calculate how much of your farms cash flow is being used for outgoing costs. This should include inventory, machinery, employees, clothing, seeds, water, fertiliser, and every expenditure in between.  

The breakeven point 

Next you need to know how much profit is needed to cover all the above outgoing costs. The breakeven point needs to be the absolute minimum of income needed to cover all costs, including labour and staff payroll.  

Financial risk management 

Before you can mitigate financial risks, you need to know what potential risks there are. This could be anything from bad weather reducing the yield, a malfunctioning piece of machinery, or market factors. You then need to assess and set which risks require a higher priority. Once this is completed, you need to develop strategies that reduce the effect on your business, if the risk was to happen. Reviewing and monitoring the process regularly.  

Employee risk management 

There is always going to be some form of risk to your employees while on your farm. The best thing to do is manage what risks are present and put processes in place to mitigate them. Risk management isn’t just going to protect your work force, it is also going to reduce unexpected costs. If your workers are less likely to be injured, you are less likely to have a dip in productivity due to absence. Health and safety is a legal requirement, and you need to show proof of the measures you have taken to reduce the risks of harm. Adding processes that makes a labourer complete a mandatory check before using machinery, will reduce workplace injuries.