Flow state: Best practices for cash handling & your farm business

“’There’s money in the account’ is not an effective business strategy,” Penn State Extension’s Carla Snyder joked during a recent “Lunch & Learn.” As a farm business owner, it’s important to know the status of every cent of cold, hard cash, not just your assets or investments. Effective planning can buoy your cash flow through both lean and flush seasons.

Have a Formula

Some statistics from the U.S. Bureau of Labor set the tone: only 25% of new businesses make it to 15 years or longer. But 82% of business failures can be attributed to poor cash flow management.

A cash flow statement can help; this document tracks money flowing in and out of the business for a given period (usually broken down by month). This statement only tracks real costs – “it wouldn’t include non-cash items like depreciation or personal experiences not paid by the business.”

USDA’s FSA has a great template for use in Microsoft Excel. Intuit QuickBooks is another great option. There are many cash flow statements, trackers and financial resources available from various lenders.

Tracking your cash flow comprehensively can help avoid cashflow crunches – the “inability to meet your current business obligations with cash on hand.” Crunches can be caused by low product sales, late invoice payments, slow bookkeeping or unexpected events (like weather phenomenon).

Update Regularly

“The February 2026 forecast [from USDA’s Economic Research Service] noted some declines from 2025. While we might have been prepared for that, we weren’t ready for some of the supply chain disruptions – like the fertilizer situation, the historic freeze in the Mid-Atlantic market or the drought conditions across part of the South,” noted co-presenter Brian Mower. Those weather systems are perfect examples of circumstances that can drive a cash crunch.

To be as prepared as possible, it’s important to project your business’s cash flow based on things like input costs, projected sales, etc. and update regularly.

If you’re a new grower, think through your crop plan. Start by breaking down baseline payments month-to-month like insurance, rent, loans, etc., and then build out your operational costs, noting when cash will be needed to cover input costs, when sales will begin and so on. If you’re not regularly updating, little disparities can be missed and those “pinholes” can quickly become giant operational tears.

Updating your projections can help compensate for things like cost changes with a supplier or help you plan for an upcoming month of reduced sales. It can help accommodate equipment repairs. The more specific you are with your categorical breakdowns, the more helpful your cash flow statement will be.

These pivots should include an inventory movement strategy. Moving inventory frees up cash and reduces storage and maintenance costs – notably utility strain (electrical, heating/cooling).

You can change up your marketing strategy or improve pricing (think product emphases and promotional sales – “Beat the heat AND help us clear out our freezers! 50% off black cherry ice cream through Friday!”

(Penn State Extension’s article “Growth Strategy: Pricing Strategies for Farm & Food Business” by Sarah Cornelisse, Molly Berntsen and Maria L. Graziani has some great thoughts on pricing for farm/food retail, for those interested in some additional reading on the idea of utilizing pricing to move inventory.)

If you have excess raw product, you could partner with a processor or a private label outfit. A surplus of soon-to-expire tomatoes becomes tasty salsa: you haven’t lost the product, you’ve potentially boosted another small business and you’ve walked away with funds to pour back into your operation. Everyone wins.

Regardless of how you move the product, make sure you’re keeping good records. Tracking consumer trends and the resultant answer of “what worked and what didn’t?” will help you pilot your cash flow for future months.

Ask For What You’re Owed

Another good tip? Stay on top of client communication. Co-presenter Miranda Harple shared a statistic from a QuickBooks: a 2025 study showed “U.S. small businesses with outstanding invoices are currently owed more than $17,000 each on average.” That’s a lot of money sitting on the books.

Clearly communicate payment terms. Promptly invoice your customers. A timely (and airtight) billing process ensures timely cash management on your business’s end.

Day-to-day, review and control your expenses. When shopping for the business, it’s important to have a game plan. Take advantage of bulk pricing or sales on products and supplies. Make timely changes, like adjusting for the ebb and flow of seasonal customers.

It’s also important to have a cushion to fall back on, said Harple. Most experts would say it’s ideal to have at least three to six months of business expenses set aside. Harple shared information from the Consumer Finance Protection Bureau (CFPB) that provides a good starting line for those who perhaps haven’t considered a dedicated emergency fund for their business before.

Work From Where You’re Standing

“Looking towards your balance sheet – if you had to sell today, what would your business be worth?” asked co-presenter Jodi Gauker.

If cash remains tight, there still is recourse for your team. Add up all of your farm or farm businesses’ assets and evaluate the list. Do you have unused feed? Neglected equipment taking up space? Under- or unutilized field space? What can you do to liquidate those assets into cash flow?

You can also increase your liabilities. Banks and lenders can be an asset to your company. If you’re going to explore loan financing or extending/growing your credit, make sure to reach out early and not when your cash flow is at its most tenuous. These credit appraisal and loan authorization processes can take time. You don’t want to miss out on valuable days, weeks or months that you might not have.

The takeaway is that there’s always a way forward when you couple smart management choices with proactive bookkeeping.

by Andy Haman