Question: In a cash flow projections analysis of a farm, what would you do if a certain month indicated that there would be more expenses than income
Options:
Terminate the enterprise causing the cash flow problems that month
Change from cash to actual accounting method
Use savings delay expenses move up sales or borrow money*
Change depreciation methods
• Cash flow shortfalls are a common challenge in farm management. Here are some strategies to address a month with higher expenses than income:
-Savings: Utilize existing savings to cover the shortfall.
-Delay Expenses: If possible, delay non-essential expenses like equipment maintenance or fertilizer purchases until a month with higher income.
-Move Up Sales: Can you accelerate the sale of some products (livestock, crops) to generate immediate income?
-Borrow Money: As a last resort, consider a short-term loan to bridge the gap. However, borrowing should be managed carefully to avoid a debt burden.