Understanding Cash Flow Statements: A Guide for Farmers
- Joshua Brock
- 1 day ago
- 7 min read
This is the first in a series of articles expanding on the original, “From Seed to Success: How KPIs Can Transform Your Market Garden”. With each article in the “Farm KPIs” series, we dive deeper into a specific metric (crops, livestock, financial, etc.) by defining what it is, why it’s important, how to track it, and how to put the data into practical use.
Why Cash Flow Matters on the Farm
Running a farm isn’t just about growing food—it’s also about managing a business. One of the most important tools in any farm’s financial toolbox is the cash flow statement. Whether you're planting your first acre or you've been farming for years, understanding your cash flow can mean the difference between scraping by or building long-term sustainability.
Here’s a look at what we’ll cover in this article:
What Is a Cash Flow Statement?
A cash flow statement is a financial document that tracks all the cash coming into and going out of your farm over a specific time period—usually monthly, quarterly, or yearly. It’s divided into three main sections:
Cash Inflows – Money received (e.g., crop sales, livestock sales, grants, loans)
Cash Outflows – Money spent (e.g., seed, feed, wages, fuel, loan payments)
Net Cash Flow – The difference between what you earned and what you spent
If you’re ending the month or season with more cash than you started with, you’re in positive cash flow and kudos to you and your team! If not, you're running at a deficit—which might be okay short-term, but not sustainable long-term.
As we know, farming is a seasonal, highly cyclical business. Unless you’re following a CSA-model where most of your income is realized at the start of the season, you may be playing catch-up through the course of the season and it’s imperative that you plan accordingly.
How Is a Cash Flow Statement Different from a Profit and Loss Statement?
While a profit and loss (P&L) statement shows whether your farm is profitable on paper, the cash flow statement shows whether you actually have money in the bank to keep things running.
A farm farming crops might be profitable over the year, but cash poor during key months—especially during planting season when expenses skyrocket before harvest income arrives. For livestock farmers and ranchers, cash flow statements help anticipate future cash needs, such as feed purchases, livestock acquisition, or equipment maintenance.
Livestock farmers may need to analyze cash flow on a monthly or even weekly basis, especially during periods of high or low production. For example, a dairy farmer may need to track cash flow closely during the milking season and plan for feed purchases. They can also analyze cash flow for specific enterprises, such as dairy production, custom work, or hay sales, to determine profitability.
Another key difference is that the cash flow includes a starting balance, which is effectively the cash on hand you would start that period with. We wanted to find a graphical representation of the differences, that was specific enough, without being overwhelming. We came across this example by financial expert and author, Brian Feroldi:
Why Farmers Should Track Cash Flow
Predict Seasonal Needs: Farming is highly seasonal. You may have large expenses like fertilizer, equipment repairs, birthing calves in the Spring, but may not see income until months later. A cash flow statement helps you plan for these gaps.
Make Smarter Decisions: Thinking of expanding your operation, hiring labor, expanding your herd, or buying new equipment? A current cash flow report shows if now is the right time, or if you should wait.
Secure Loans or Grants: Most lenders and grant programs will ask for cash flow projections. Having one ready builds trust and shows you’re serious about managing your farm as a business. We have a great article on the topic, entitled, “Navigating Agricultural Financing as a Farmer: Challenges and Opportunities”.
Avoid Crisis Mode: A farm that runs out of cash can quickly spiral into debt. Tracking cash flow helps you see problems early and adjust.
Managing Cash In Times of Growth on the Farm
If your business is growing, and your profit increasing, you may expect your cash flow to improve. Growth often causes cash flow problems though, as most often, growth itself often requires cash on hand. Managing cash flow effectively is crucial for a farm's financial health and ability to grow, as it ensures liquidity to cover expenses, seize opportunities, and mitigate risks associated with seasonal income, unpredictable markets, and unforeseen events.
There are a few reasons for this:
Funding expansion - sales often need to be fueled by working capital, otherwise known as “available cash”. Growth requires investment in new equipment, land, and inputs, all of which necessitate readily available cash.
Working capital needs - a business often needs inventory it can sell in order to grow. This requires time and capital to make and store these items.
Maintaining financial stability - a new business needs time to grow its customer base. Effective cash management ensures the farm can meet its financial obligations, avoid excessive debt, and maintain a strong credit position.
Mitigating risks and uncertainties - unpredictable factors like weather, commodity price volatility, equipment breakdowns, and input shortages can drastically impact cash flow, making robust management crucial for resilience.
How to Create a Simple Cash Flow Statement
Start with these five columns:
Month | Cash Inflows | Cash Outflows | Net Cash Flow | Running Balance |
January | $4,500 (CSA signups) | $5,000 (repairs, seeds) | -$500 | $9,500 |
February | $0 | $3,000 (feed, rent) | -$3,000 | $6,500 |
March | $500 (egg sales) | $2,500 (labor, fuel) | -$2,000 | $4,500 |
Tip: Always include a running balance to see your actual cash position over time!
Use a spreadsheet like Excel, Google Sheets, or farm management software (we have one in mind!) to track this monthly. Update it at least once a month—or more often during busy seasons. While being “smart” with your money can seem like an enormous challenge on top of all your other responsibilities, it is critical to ensure the success and longevity of your farm.
In addition to the article we linked to above, we have a number of articles that touch on the importance of operating a financially sound agricultural business;
Farmbrite’s Cash Flow report, where transactions prior to your start date are used to calculate a Beginning Cash Balance - this gives you a running total for your business operations.
Integrated into Farmbrite’s accounting features, specifically the Accounting section, is an automated process of taking the income and expenses users are entering over time and generating a variety of standard financial reports. Farms can then make use of these reports in monitoring the health of their operation and preparing the proper tax documentation such as the IRS Schedule F.
Farmbrite carries over any income or deficit from the year prior and uses that as the starting point for this farm’s cash flow for the 2024 year. The category items in the expenses and income section come directly from the Schedule F by default, but you can customize a chart of accounts to create your own categories.
Farm-Specific Inflows and Outflows to Include
Cash Inflows (Income Sources)
Crop Sales - Income from selling vegetables, grains, hay, or other crops at farmers markets, farm stands, or wholesale.
Livestock Sales - Revenue from selling meat animals (e.g., pigs, beef, lambs), breeding stock, or culled animals.
Dairy or Egg Sales - Milk, cheese, butter, or egg sales—direct to consumer or through co-ops/distributors.
CSA (Community Supported Agriculture) - Advance payments from customers for seasonal farm shares.
Farmers Market Revenue - Weekly or seasonal income from selling at farmers markets.
On-Farm Events - Fees collected from farm tours, U-pick operations, weddings, or workshops.
Government Payments & Grants - Subsidies or support from NRCS, FSA, EQIP, REAP, or state-level agricultural programs.
Custom Work or Services - Income from baling hay, plowing, or doing work for neighbors.
Agrotourism & Rentals - Cabin stays, farm Airbnb, land leases, or educational programming.
Equipment or Asset Sales - Income from selling used tractors, tools, fencing, etc.
Insurance Payouts - Reimbursement for crop damage or disaster recovery.
Loan Draws or Investments - Capital from operating loans or investor contributions (track separately from earned income).
Cash Outflows (Expenses)
Seed & Planting Supplies - Seeds, transplants, potting soil, trays, row covers, or irrigation supplies.
Feed & Supplements - Bulk feed, minerals, salt licks, and nutritional supplements for livestock.
Veterinary & Animal Care - Medications, vet visits, hoof trimming, vaccinations, or shearing.
Fertilizer & Soil Amendments - Compost, lime, fish emulsion, or synthetic fertilizers.
Pest & Disease Control - Organic or conventional pesticides, traps, or disease treatments.
Labor - Wages for hired hands, payroll taxes, contract labor, and seasonal help.
Fuel & Utilities - Diesel, gas, propane, electricity, and water used on the farm.
Maintenance & Repairs - Fixes for equipment, fencing, plumbing, and vehicles.
Equipment Purchases - Tractors, ATVs, irrigation systems, greenhouse supplies. (Note: large capital items may be better tracked under depreciation, but still affect cash flow.)
Insurance - Farm liability, crop insurance, equipment or vehicle coverage.
Loan Payments - Monthly repayments on operating or equipment loans, land mortgages.
Rent or Land Lease - Land rental or lease payments.
Marketing & Packaging - Website hosting, business cards, social media ads, CSA boxes, or egg cartons.
Licenses, Permits & Certifications - Organic certification, health department permits, LLC fees, market applications.
Office & Admin Supplies - Paper, printer ink, accounting software, bookkeeping fees.
Education & Training - Online courses, field days, conferences, or workshops.
Miscellaneous - Unexpected costs, buffer category for small or irregular items.
Final Thoughts: Make Cash Flow Part of Your Routine
Even if you're not a numbers person, tracking your farm’s cash flow is one of the most important habits you can develop. Think of it like checking the soil health of your finances. Knowing where your money is going and when it’s coming in helps you avoid surprises and plan for success.
To get you started, we’ve included a free Cash Flow Template in Excel format.
We hope you’ll find this useful to get you started. Additionally, here is a great video from the good folks at Just A Few Acres Farm with their video, “How We Manage Small Farm Cash Flow” with a practical, hands-on discussion about how they manage their cash flow throughout the course of the season.
Need help incorporating your farm cash flow statement into the routine of your farm or operation? Drop us a line—we’re happy to help you get tracking. And as always, Happy Farming!