Budgeting and Money Management Basics

Why Budget?

The financial control of your business rests squarely on your shoulders. Budgeting

• Taking financial control of your business, for example:
• Ensuring you can meet your financial commitments e.g. debt servicing, tax, living, farming business
• Assessing where cost saving can be made
• Determining overdraft needs
• Supporting the decision making process
• Providing focus on the wider business, not just cows and grass 
• Assessing the viability of new proposals, borrowing or ventures

Take the time to complete a budget. Knowing your true position will help you make factual and realistic decisions, rather than be consumed by worry.

Have you got a simple budget?

DairyNZ Budgeting Basics

DairyNZ has developed simple budget templates and guides. You can print these budgets off and work through them by hand or download and use the spreadsheet version.

Annual Cash Budget

An annual cash budget is a traditional budget detailing cash received and all cash expenses going out. It indicates if the business is sustainable and will tell you if you can expect any cash surplus or a deficit at the end of the season.

• Annual Cash Budget  View PDF (73kb) I  View Excel Spreadsheet (66kb) (Updated March 2010)
• Annual Cash Budget - Example  View Excel Spreadsheet (68kb)

Monthly Cashflow Budget

A cashflow budget outlines your monthly financial situation. It formalises, on a month-by-month basis, what income you expect and what you anticipate spending. All cash income and expenses are itemised out month-by-month and any surplus or deficit is shown progressively. You can then compare your actual expenditure with your monthly expenditure to monitor your cashflow position, and take corrective action where necessary.

• Monthly Cashflow Budget  View PDF (163kb) (Updated March 2010)

Quick Cash Budget

A quick cash budget is a condensed version of the annual cash budget that combines the many expenses listed under Farm Working Expenses into one heading.  As its name implies it is simplified to give a quick overview of your cash budget situation.

• Quick Cash Budget  View PDF (121kb) I  View Excel Spreadsheet (56kb)
• Quick Cash Budget - Example  View Excel Spreadsheet (56kb)

Personal Cash Budget

A personal cash budget applies to anyone who wants to know where their money is going.  Completing a personal budget gives greater control over personal expenditure and lets you determine where savings could be made for larger items, such as overseas holidays, or to build up a sum of money for future investments or retirement. It is particularly useful for farmers on a wage or salary.

• Personal Cash Budget  View PDF (114kb) I  View Excel Spreadsheet (58kb)
• Personal Cash Budget - Example  View Excel Spreadsheet (62kb)

You can also:

Develop your own budget

MS Microsoft Excel is an excellent tool. You can develop cells for each month across the top and cells for each input item (income and FWEs and so on) down the side. Use the features of the spreadsheet to add columns and rows and do calculations needed to evaluate cashflow.

Use commercial products

Cashmanager RURAL helps farmers prepare, monitor and review their finances.  Cashmanager allows you to record transactions, do monthly cashflows, GST, generate invoices, keep a wagebook, run reports for your bank manager, accountant and yourself to track profitability.

Bank budget templates - ask your banker if they have a template you may use.Your farm advisor or consultant may use software to assess the farm business, ask them if they have anything appropriate for budgeting.

Ask your accountant if they have budget or financial record keeping templates that could be useful for you to use and may incorporate well with the systems in place at their practice. Potentially this could save you money if your accounts are in order when you hand them on.

Refer to your Fonterra or co-operative website.  For example the Fencepost www.fonterra.com website has a handy Payment Predictor in the Tools section (only accessible by Fonterra suppliers).

i.Agri Ltd develops and markets the 'Landmark Software for the Land and Small Business' range of software which is written specifically for farm and business accounting operations in all countries around the world.  Their book keeping management software offers unique tools for financial planning, budgeting, invoicing and reporting.

Resources to help you budget

DairyBase reports are extremely useful as you can see what you have spent historically and how this compares with benchmarks for your region.  

The DairyNZ Economic Survey is published annually and contains tables of average farm financial data for the past decade. There is also a forecast section which may help indicate trends in the current season.

Budgeting Tips

Complete your first budget by ‘pen and paper’ before using the computer spreadsheet options. This will help make you more familiar with the budgeting process.

Underestimate income and overestimate expenses to give you a conservative budget. Develop several budgets e.g. war budget for basic survival, a more realistic budget and an optimistic budget. 

It is useful to review the last two or three years of expenditure – particularly if you can look back to 2006/07 which was a lower income and expenditure year, and would provide some more similar data in which to model current budgets.