The ability to meet financial obligations as they come due is essential to a successful business.

Cash flow needs arise from many sources in agricultural operations, including production expenses like fertilizer, veterinary charges, harvest costs, etc. Debt repayment, property taxes, and insurance payments represent another demand for cash for operations. 

In addition, home remodeling costs, family living expenses, and college tuition payments may also play a role in agricultural cash flow needs, although they are not business expenses.

Maintaining an adequate level of current assets (assets easily convertible to cash) can help meet these needs. However, the best plan for minimizing this area of risk is solid cash flow planning and budgeting.

The old adage “an ounce of prevention is worth a pound of cure” is more than just a word to the wise in this case. Few people enjoy detailed budgeting, but the risk of being caught unprepared is too high for some managers.

Again, you need to find the level of risk appropriate for your situation.