Effective Budgeting for agribusiness

Agribusinses Insights

With harvest rapidly ending, attention is turning to the next phase in the farming business operation, planning for the next season. A good way to start planning is to prepare your budget for the coming year!

budgetingThe purpose of a budget is to plan, organise and track your financial performance and requirements for the coming period. A good budget will include not only your income and expenses but also your capital and personal expenditure items.

Some of the key points to consider in your budget are:

  • Income – it is important to include all your income. This could include goods sold for cash, as well as sold on deferred terms. Also, include the sale of any capital items.
  • Expenses – do not just average common expenses out over the period of the budget. Ensure that you include expenses in the actual months in which they are expected to be spent.
  • Capital – ensure you include any capital items of plant and equipment that are required to be purchased. Give consideration as to how you will pay for these items. Will it be cash or with finance as each will impact your budget in different ways.
  • Personal – remember to add in any personal spending requirements from the business.
  • Loan repayments – if you are expected to make any repayments off chattel mortgages or term loans, make sure they are included.
  • Tax / GST – if there are any tax or GST payments that need to be included during the year make sure provision has been made to include these items.
  • Finance limits – consider the limits on your finance facilities. Do you need to increase your limit or is it sufficient?

It is important to remember that the budget should be an interactive and living document. It is not something that is prepared and then forgotten about.

To assist in getting the most from your budget:

  1. Rbudgetingeview the budget with your accountant. Your accountant is well placed to assist in making sure that you have picked up all relevant income and expenditure items and nothing has been missed.
  2. Keep your budget an interactive document that can be reviewed regularly and ensure that you are using the most appropriate program to prepare your budget with. Many programs allow real-time data processing to allocate budget to actual reporting, allowing you to make real-time decisions about your business and its finance requirements.

Happy budgeting!


If you have any questions regarding effective budgeting, get in touch with your local RSM advisor today.