By Dr. Paul N. EllingerAssociate Professor of Finance and AgribusinessUniversity of Illinois at Urbana-Champaignand
Cynthia BostonResearch AssistantUniversity of Illinois at Urbana-Champaign
This documentation guide is prepared in the Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign. Resources for developing this program have been provided by:
The Center of Farm and Rural Business FinanceC-FAR Illinois Council of Food and
University of Illinois at Urbana-ChampaignAgricultural Research: SRI Information
and Technology
Illinois Farm Business Farm Management Association
Cash Flow Projection Users Guide
Cash Flow: Program Overview
The information needed to run this program can come from:
1.An individual’s farm records.
- Completed crop and/or livestock budgets.
- Current balance sheet (farm and non-farm).
- Lease and rental agreements.
- Current depreciation schedule.
- Loan records (schedule of principal and interest payments, and interest rates).
- Income and Real Estate Tax records.
- Estimates of annual family living expenses.
- Other sources of income.
To make use of the program, you must be able to provide estimates of your costs, yields, and financial and tax information. The program requests the following information:
A. Crop Enterprises:
Acres, yields, prices, direct variable costs, undistributed crop costs.
B. Livestock Enterprises:
Number of units produced, number of units sold, death loss, replacement animals kept, average weight per unit sold, average net price received per unit sold, quantities and price of feed required, and direct variable costs.
C. Total-Farm Undistributed Costs:
Hired labor, machinery repairs, building repairs, property and liability insurance, cash rent on land, fuel and oil, real estate taxes, utilities, miscellaneous costs, annual depreciation on machinery and equipment, and annual depreciation on buildings and improvements.
D. Balance Sheet and Financial Information:
Cash on hand; a breakdown of specific current assets for both farm and non-farm; a breakdown of all farm and non-farm current, intermediate, and long-term loan payment schedules and interest rates; annual family living expenses; and nontaxable cash receipts.
E. Non-Farm Income and Costs:
Family living expenses, non-farm income and expenses, health and life insurance, non-taxable receipts, and investments.
Cash Flow Projection Users Guide
Cash Flow: Input Form Completion
Completing the paper input forms:
This section of the User’s Guide provides instructions and suggestions to help you enter cash flow data on the paper-input forms (which can be found in the Appendix of the guide) with a minimum amount of additional assistance. Explanations of the type of information needed for each section are provided. Descriptive titles as well as section numbers are used to facilitate quick access to specific topics as needed.
Copies of the input forms are located in the Appendix. You should always have a blank set of the forms to be completed before you start to run the program. It is advisable to make photocopies of forms in the Appendix and to save the Appendix copy as the original.
The input forms are designed to simplify the process of gathering the data needed for the projected cash flow. At the same time, the format is consistent with the sequence of data entry into the computer.
The input forms consist of four separate Pages that are to be filled out front and back. The Pages are further broken down into Sections. These Sections are numbered so that the Page from which the information is to be taken is first and the Section or part of the Page is second. For example, Section 1-3 Crop Expense Payment Schedule involves information from Section or Form 3 on Page 1.
Cash Flow Projection Users Guide
Cash Flow: Input Form Completion
Completing the paper input forms (cont.):
Below is a list of the sections with their numbers. The sections are grouped according to purpose and can help you identify where you are in the program.
Section-Page
Page 1 - Crop Production Data
1-1Crop Budget, Acres Owned/Rented/Yields
1-2Crop Costs
1-3Crop Expense Payment Schedule
1-4Rental Agreement Adjustments
Page 2 - Crop Sales, Inventory and Financial Information
2-1Crop Price Estimates
2-2Crop Inventory
2-3Crop Sales Schedule
2-4Accrual and Financial Information
Page 3 - Livestock Information
3-1Livestock Price Estimates
3-2Livestock and Commercial Feed Inventory
3-3Livestock Sales Schedule
3-4Livestock Purchases Schedule
3-5Feed Usage Per Unit of Production
3-6Inventory Adjustments
3-7Feed Purchases
Page 4 - Unallocated Items and Loan Information
4-1Undistributed Costs
4-2Other Income
4-3Loan Payment Schedule - Direct Entry
4-4Loan Payment Schedule - Straight amortization
4-5Capital Purchases
Cash Flow Projection Users Guide
Cash Flow: Input Form Completion
Questions to help you gather information
The following list of 27 questions may help you identify the kind of information you will need to complete the input forms. The number before each question designates the form Page and Section of the Cash Flow Projection input forms (found in the Appendix of this guide) to be used to enter the data requested. It may be helpful to review these questions before you begin filling out the forms.
Section-Page
1-1 Of the crops to be grown, what is your share and the yield of each?
1-2 What are the estimated total costs per acre (yours plus land-owners)?
1-3 What percent of your cost will you pay each month?
1-4 Did you list total costs per acre that will not be shared with landowner in the same proportion as yield is shared?
2-1 What price per bushel or per unit do you expect to receive each quarter for crops sold?
2-2 How many bushels and/or tons of each grain or feed do you have on hand at the beginning of the year?
2-2 What is your estimated price for feed and grains on hand?
2-2 For roughages, how much will be left on hand at the end of the year?
2-3 How many bushels of grain or tons of hay are to be sold in each month?
2-4 What are your beginning bank, operating loan, and accrual balances?
3-1 What price do you expect to receive or pay for livestock sold or purchased?
3-2 How many cwt. of livestock and commercial feed is on hand at the beginning of each year?
3-2 What is your price per cwt. for each livestock and/or commercial feed on hand?
3-3 What is your estimated sales in cwt. or head per month?
Cash Flow Projection Users Guide
Cash Flow: Input Form Completion
Questions to help you gather information (cont.):
3-4 What are your estimated purchases in cwt. or head per month?
3-5 How many bushels of corn per cwt. livestock produced to you plan to feed?
3-5 How many lbs. of commercial feed per cwt. livestock produced to you plan to feed?
3-5 What is the price of commercial feed?
3-5 Will the rate of use of corn and commercial feeds be uniform each month?
3-7 Do you need to purchase corn for feed?
3-7 Do you need to purchase feed for other livestock? If yes, how many dollars worth each month?
4-1 What are your total annual cash costs not listed as variable costs for crops on Page1?
4-1 What percent (of these costs) will be paid each month?
4-2 What other farm (i.e., custom work, government payments, etc.) Or non-farm receipts will you have each month?
4-3 What is loan balance for each outstanding loan at the beginning of the year and how much is the accrued interest?
4-4 What is the payment schedule for each of your loans?
4-5 What capital purchases will be made?
Cash Flow Projection Users Guide
Cash Flow: Input Form Completion
Entering values and using data:
Because this program requires a great deal of input data to operate properly, completing the paper input forms would help you operate the program most effectively.
When completing the input forms, you will need to refer to historical financial and production records, as well as business plans you have formulated for the coming year. Therefore, it would be useful to assemble as much of this information as possible before beginning. Also, be prepared to spend a substantial amount of time. Note that the entire process of compiling and entering the information requested by the program may take from 3 to 12 hours, depending on the size and complexity of the operation for which data is being entered. The quality of the results will be directly related to the accuracy of the input assumptions used, so take your time and plan carefully.
In some situations, not all sections of the input form will be completed. For example, the cash grain farmer need not fill out the livestock forms. You can skip any form and/or section that do not apply to your farming operation. These sections will become apparent as you proceed.
Completed input forms will help you enter data more quickly into the computer program and will permit some checking of the data before running the calculations in the program. (A complete set of input forms is available in the Appendix of this guide. However, we recommend you make a photocopy of the forms each time you need a set and keep those in this User’s Guide clean for making additional copies.)
The following pages describe each Section of the Cover Sheet and Pages 1, 2, 3 and 4 of the paper Input Forms.
General Information Cover Sheet:
Complete the name, address, and preparer’s name as specified on the cover page of the CashFlow Projection input form.
Next, enter the month and year that you want the cash flow projection to begin. If you are preparing a cash flow for the period of 1/1/2000 to 12/31/2000, then enter 1 for month and 2000 for year. Any reference to month 1 on the input forms will relate to the beginning month indicated here. For example, if your cash flow period began in July, enter 7 for month of beginning cash flow date. In this case, all references to month 1 on the input forms would relate to July.
Cash Flow: Input Form Completion
Page 1 Crop Production Data (Sections 1-1, 1-2, 1-3, and 1-4)
Page 1 of the Cash Flow Projection paper input forms is used to describe the anticipated cropping plans for a given crop enterprise during the upcoming crop year. This description is given in both production-level and economic terms.
Page 1 is made up of four separate Sections. Each section has a unique function, but is related to the others in terms of how it must be completed. Below is a description of the information needed in each section as well as a discussion of the relationship that exists between Sections 1-1, 1-2, 1-3 and 1-4.
Each different crop type should be represented on a separate copy of the Page 1 form. For example, if you expect to plant corn, wheat, and soybeans, you should fill out three separate copies of the paper Page 1 (Sections 1-1, 1-2, 1-3 and 1-4) form. Set-aside acres should be listed as a separate crop enterprise in order to get the seed and any other miscellaneous costs into the cash flow projection.
Section 1-1 Crop Budget Acres Owned/Rented/Yields
This section is designed to help the user gather information describing expected productivity of the different parcels of land. It also defines the percent of that crop that you are entitled to at harvest. Each line represents a parcel or a group of similar parcels of land. You may use one line for each parcel of land. However, you may use one line to represent more than one parcel only if the following four conditions are met:
1. All acres will be harvested in the same month.
- All acres have the same estimated yields.
- All acres have the same cropping costs
- All acres have the same rental agreements.
Otherwise, you should use separate lines as needed to accurately describe the specific cropping terms of each parcel. The number of lines used to describe a given crop enterprise depends on the uniformity of the crop yields, costs, and rental agreements.
Section 1-1 Land Class Description
This description should uniquely identify a parcel or parcels of land with given yield, rental agreement, and crop cost estimates. You may wish to use a description such as cash rent, crop share, sandy soil, back 40, hundred bushel, etc., to describe the current line of information.
Cash Flow Projection Users Guide
Cash Flow: Input Form Completion
Section 1-1 Acres Owned
For parcel(s) described in the first column, enter the number of tillable acres that you own. The Cash Flow Projection program will assume that you receive 100 percent of the crop harvested and pay all of the cropping costs on the owned land. If all or a part of the ground on this line is rented, then enter only the portion you own in this column.
Section 1-1 Rental Agreement/Acres
For the parcel(s) described in the first column, enter the total (operator plus landlord) number of tillable acres that you rent. This will include crop share or cash rental agreements. If part of the land on this line is owned, enter only the number of rented acres in this column. Note that both rented and owned land can be included on one line is this section. The distinction is made between the two by the acreage allotments made here.
Section 1-1 Rental Agreement/Operator Percentage
If an acres rented figure has been entered for the current line, use this column to enter your share of the harvested crop. For example, use 100 percent if the rental agreement is cash rent, 67 percent for 1/3-2/3 crop share, 60 percent for 2/5-3/5 crop share, or 50 percent for 50/50 crop share.
Section 1-1 Yield in Bushels Per Acre
Enter your anticipated yield in bushels per acre.
Section 1-1 Memo Area: My Share of Production
Completion of this column is optional. However, it is recommended that you use this space to record the number of bushels that you will receive at harvest. This figure will not be entered into the computer, but you may find these totals to be helpful later when you estimate the number of bushels available to sell on Page 2, Section 2-3.
Section 1-1 Harvest Month Number (#)
Enter the number of the month that corresponds to the month that you intend to harvest the parcel(s) on the given line. Remember, month number 1 is relative to the beginning month you indicated on the name and information section on the cover page of the paper input forms. This specification is necessary to tell the computer when the harvested crop should be added to inventory.
Cash Flow Projection Users Guide
Cash Flow: Input Form Completion
Section 1-2 Crop Costs
In this section, you should record various crop costs for each parcel of land described in Section 1-1. Enter the total (operator plus landlord) per-acre cost of each input that relates to the parcel of land described on that line.
After you have entered your data into the program, the computer will calculate your share of the total cropping costs for the rented acres based on the operator’s percent entered in Section 1-1.
It is extremely important that you enter the total cost per acre for each cost item, including the landlord’s share where applicable.
Note:You may use Section 4-1 of Page 4 to enter estimated totals of drying and storage, crop insurance, machine hire, and other crop expenses instead of using the dollar-per-acre amounts in this section. Thus, you may enter these expenses either in Section 1-2 of Page 1ORin Section 4-1 of Page 4. Do NOTenter amounts in BOTH sections that relate to the same expense.
Section 1-3 Crop Expense Payment Schedule
Section 1-3 has one column for each month in the projection year and one line for each different cost item. This section is used to indicate the anticipated payment schedule for the costs entered in Section 1-2. For each of the crop expense categories used, you must estimate the percent of that cost that you expect will be incurred during each period. After distributing each crop cost, check to make sure that each line totals 100 percent.
Section 1-4 Rental Expense Percent Different From Income
There are a wide variety of rental agreements in which the cropping costs are not shared in the same proportions as the harvested bushels. Normally, the program will allocate the expenses listed in Section 1-1 in the same proportions as the crop is shred.
However, in Section 1-4, you can alter this assumption by indicating the percent of each expense in Section 1-2 for which you will be responsible. You only need to complete this form if there are crop expenses that are not shared in the same proportions as the harvested bushels. And, if you are completing this Section, you only need to enter percentages for the specific cost items that are different.