Farm Statements: Cash Flow Statement

The cash flow statement is a listing of all the cash inflows (money coming into the arm business) and cash outflows (money coming out of the farm business) during a certain period (week, month, quarter). It examines how cash has entered and left our financial life in the farm during the year. To complete the statement one must have a good “Balance Sheet” from the beginning of the year, another for the end of the year, and an accrual adjusted “Income Statement” for the year.

The “Statement of Cash Flows” begins by showing the farmer’s “Beginning Cash Balance” (farm and non-farm). This is the cash and account balances that are shown on his Balance Sheet from the beginning of the year. The “Statement of Cash Flows” is divided into three groups, each examining a different source of and use for cash. These are “Cash from Operating Activities”, “Cash from Investing Activities” and

Uses of a Cash Flow Statement

Cash flow statements are a powerful management tool.  From a financial analysis standpoint you can determine a lot of useful information from this statement.  The main uses of a cash flow are:

  • clearly seeing when you have cash coming into or leaving your production;
  • easily identifying your top five cash outflows for cost control management;
  • identifying potential surplus or deficit periods throughout your production year;
  • estimating the minimum operating loan that you should request from your lender;
  • determining when you will need to borrow from or repay an operating loan;
  • determining when to schedule your loan payments or insurance premium payments; and
  • estimating whether you have enough cash to make capital purchases.

Cash flow statement analysis

Developing an accurate cash flow means you need a list of all sources, uses, amounts and timing of cash inflow and outflow. The following are a list of questions that the farmer can ask to help analyse cash flow statements:

  • Will the change in farm production (livestock production) produce sufficient cash inflow to meet the cash outflow associated with the level of production?
  • What effect will the proposed change in production have on the present cash inflow situation? Will additional funds be required?
  • Does the operation have sufficient cash available to undertake this change in production or is a term loan required?
  • If a loan is required for the change what repayment terms would allow for suitable cash flow in the production?

Cash flow statement explanation of terms

  • Cash inflow: These are farm sources of income like sale of livestock
  • Cash outflow: these are the expenses in the farm
  • Projected cash flow statement: A projected cash flow statement is used to evaluate cash inflows and outflows to determine when, how much, and for how long cash deficits or surpluses will exist for a farm business during an upcoming time period. That information can then be used to justify loan requests, determine repayment schedules, and plan for short-term investments
  • Interest on operating loan: The effective annual rate is the actual interest rate that you pay on a loan if the loan is affected by compounding.
  • Previous ending balance: Cash balance at the end of the financial year. It is derived from the balance sheet.

Example of a cash flow statement

CASH INFLOW Total 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
  Projected Actual Projected Actual Projected Actual Projected Actual Projected Actual
Livestock sales
Other farm Income
Governments Payments and rebates
New Borrowings
Capital sales
Net Non-farm Income
Machinery and equipment repairs
Fuel, Oil, Grease
Feeder livestock purchases
Livestock feed and supplements
Livestock supplies
Veterinary fees and drugs/medication
Breeding stock purchases
Land rent
Property taxes
Insurance and licenses
Building and fence repairs
Hired labor
Accounting and legal fees
Family living allowance
Income tax (farm potion)
Purchase of capital assets
Debt repayment (principal and Interest)
Surplus or (deficit)
Previous ending balance (opening balance)
Net cash balance
Interest on operating loan


  • Surplus or (deficit) = total cash inflow – total cash outflow
  • Previous ending balance = opening balance in the balance sheet statement
  • Net cash balance = Surplus or (deficit) – previous ending balance
  • Ending cash balance = Net cash balance – interest on operating loan