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Unit 9: Financial Estimates and Projections

statement used here is a quarterly statement for one year and consists of 5 columns; a Notes
column for each of the 4 quarters plus one for projected annual totals. The number of lines
necessary to list revenues and expenses depends upon the number needed to account for
all revenue and expense items for the farming operation. The simple organization of this
statement would make it inadequate in many farming operations. It is used here to teach
the mechanics of cash flow budgeting.
Cash Available: The first line of any cash flow statement is usually the beginning cash
balance for the period. That balance includes all readily available funds (i.e., checking
accounts, cash, mutual funds with checkwriting privileges, or arrangements for transferring
funds to a checking account, etc.).
The next section is the receipt section, which is divided into three subsections: operating
receipts, capital receipts, and nonfarm income. Operating receipts include receipts from
crops, livestock, custom work, government payments, hedging account withdrawals, and
any other cash receipts to the farm business. Each projected cash receipt is entered in the
quarter that the cash is expected. It is usually a good idea to include several blank lines
throughout the form (for example), so that the statement can be tailored to meet your
needs.
Capital receipts are cash inflows from the sale of capital items, such as breeding livestock,
machinery, and equipment. Also, only the amount of cash expected to flow into the operation
is entered. If farmer A expects to trade a boar to farmer B and receive $50 in cash plus his
new boar, only the $50 is entered in farmer A’s projected cash flow statement. That amount
is entered in the quarter that the cash is expected.

Nonfarm income includes off-farm wages and cash received from interest payments,
dividends, and other nonfarm sources. The total cash available for the quarter is then
calculated by adding the beginning cash balance, operating receipts, capital receipts, and
nonfarm income.
Cash Required: The expense section is divided into four subsections: operating expenses,
livestock and feed purchases, capital expenditures, and other expenses. Operating expenses
include such things as seed, fertilizer, breeding expenses, real estate and property taxes,
insurance, utilities, and veterinary. The amount for each item is entered in the quarter
when it is expected to be paid, which may be different from when you actually take
possession of the item.
The next sub-section is labelled livestock and feed purchases and includes cash expenses
for feeder livestock as well as for purchasing breeding livestock. Also included are cash
outlays for feed.
The third sub-section is labelled capital expenditures and includes cash outlays to purchase
machinery, equipment, buildings, and improvements. If the dealer is to be paid in full and
you borrow the money from another lender (i.e., commercial bank, PCA, etc.), the entire
amount to be paid is entered in the appropriate quarter. The cash flowing into the operation
from the loan will be discussed later.

Other expenses can include hedging account deposits, gross family living withdrawals,
nonfarm business expenditures, and income tax and social security payments. Also included
in this section are principal and interest payments due for intermediate and long-term
loans. The total cash required for the quarter is calculated by adding all expenses projected
for the quarter.
The Cash Position: Subtracting total cash required from total cash available yields the
cash position before borrowing and inflows from savings. If the cash position is negative

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