Farming is a risky business - much riskier than most other small to medium-sized businesses. It requires you to commit most of your annual costs upfront and then manage enormous future financial uncertainty. It demands robust farm finance strategies. Therefore, efficient cash flow budgeting and forecasting are crucial for your farm business.
Many Australian farm businesses use Excel as their primary financial management software, which is cheap, readily available, and relatively simple to learn and use with downloadable standard budget templates.
However, although Excel can "do the job” if used well and is a powerful modelling tool, it has some vast and deal-breaking drawbacks, making it a strict no for your farm budgeting and annual forecasting.
1. Creating a budget in excel is hard
Cash flow budgeting is complicated. And you need great talent and time to build bug-free budgeting in Excel, especially with having to write complex formula’s to validate calculations and remove errors.
At the same time, specialist farm finance applications like Agrimaster come with fully built and tested cash flow forecasting and budgeting features. It makes creating farm budgets easy, accurate, and manageable.
2. Updating budgets in Excel is time-consuming
Behind most numbers in a budget is a calculation, for example,
Wheat revenue in December = $190,000
The calculation behind this number is = (1000Ha x 3tonnes = 3000 Tonnes. Sell 500 Tonne in December at $380 per Tonne)
Suppose you want to build a new budget or change a figure, e.g., change the hectares of wheat you plan to grow. In that case, you need to check and recalculate every cell in your budget, with chemicals required, income, expenditure etc. requiring numerous manual calculations which is time-consuming.
Contrastingly, in Agrimaster, if you want to change the hectares of wheat you plan to grow, you need to change just one number. Agrimaster's specialized integrated production-based features will automatically recalculate all connected cells in your forecast income and expenditure for up to 5 years!
3. Your budget will only be as good as the formula you type in
Creating an excel formula is tricky and error-prone. They can be accidentally deleted, written over, moved, or disconnected. And when you cannot trust the formula you type in, you cannot trust the results, and therefore, you won't trust the entire budget. This is also why most accountants spend just as long checking the data accuracy in Excel as they do to create the cash flow itself.
Comparatively, in Agrimaster, software test analysts professionally test formulas, ensuring they cannot be broken or deleted. Therefore, you never need to check them.
4. Farm tax forecasting is tricky in Excel
Tax, especially GST and PAYG, can wreak havoc on-farm cash flow. Therefore, you must know when and how much tax is forecasted to be refunded and paid each month. Moreover, GST and PAYG don't always get paid or refunded in the same month as calculated.
This means that you must budget exclusive of GST. Then calculate the GST cash flow separately based on the budgeted income and expenditure. However, with Agrimaster, GST, PAYG, fuel tax, and interest in and out are calculated automatically and added to the cash flow in the correct month.
5. Sharing Excel budgets is problematic
Sharing your excel budget with another person increases the risks of it breaking dramatically. On top of that, it's hard for the excel builder to remember how complex formulas work and in what cells.
Moreover, advisers/accountants hired to build budgets with Excel provide read-only copies to avoid the risk of you breaking it, forcing you to pay more to make a change.
However, with Agrimaster, you are in 100% control of your budget. You can easily share your work with all stakeholders with one source of truth. Also, you can make copies, build alternative what-if scenarios, and run reports whenever you need them.
The bottom line is that while Excel is cheap and a good place for history, it is terrible for planning; the risk of getting it wrong is costly, and your time in the office is valuable. So, take back control of your farm finance and invest in a specialist farm budgeting application like Agrimaster.
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