Farm income doesn't arrive evenly. Milk, livestock, crop or fruit payments come in waves, while wages, feed, fertiliser, interest and tax keep going out. A profitable farm can still run short of cash at the wrong time of year. Planning for that is what a cash flow budget is for.
Profit Isn't Cash
Your annual accounts show whether the farm made a profit. They don't show when the money came and went. Livestock on hand, debt repayments, capital spending and tax payments all affect your bank balance without showing up in profit the same way. That's why a farm needs a cash flow budget as well as its accounts.
Build a Month-by-Month Budget
Start with a budget for the season, set out month by month:
Income: when payments actually arrive, not when the product leaves the farm. For dairy, use your processor's advance and retrospective payment schedule and a cautious price.
Farm working expenses: wages, feed, fertiliser, animal health, repairs, and contractors, timed to when they're paid.
Debt: interest and principal repayments, including any seasonal or interest-only periods.
Capital spending: machinery, buildings, development, and livestock purchases.
Tax and GST: provisional tax instalments, terminal tax, and GST returns.
Drawings: what the family needs to live on.
Then run the budget again with a lower price and a higher cost. If a bad season would leave you over your facility limit, it's better to know now.
Keep the Bank Onside
Banks lend to farms on the strength of the cash flow budget and the track record behind it. Most want to see:
an annual budget before the season starts
regular actual-versus-budget reporting
early warning if things change, before the overdraft limit is reached
A seasonal overdraft or a revolving facility can cover the dry months. Agree the limit and the peak month with the bank up front, rather than asking for more at the last minute.
Plan Your Tax Payments
Provisional tax. If your residual income tax is more than $5,000, you'll usually pay provisional tax in instalments through the year. There are several ways to calculate it (standard, estimation, ratio, and the accounting income method, AIM). Some suit seasonal income better than others, so ask us which fits your farm.
GST. Choose a filing frequency that suits your cash flow, and remember that big capital purchases can create a large GST refund.
Tax pooling. Tax pooling can help if you've paid too little and want to reduce interest, or need flexibility on timing.
Smooth the Good and Bad Years
After a strong year, Inland Revenue's income equalisation scheme lets you deposit some of your farming income and claim a deduction in that year, then withdraw it later when income is lower. It doesn't replace a cash reserve, but it can even out the tax. See our guide to livestock values and income equalisation for how it works.
New Equipment
If you buy new machinery or plant, Investment Boost may give you an extra 20% deduction on top of normal depreciation. This applies to new assets (or assets new to New Zealand) that are acquired and first available for use on or after 22 May 2025. Second-hand assets bought in New Zealand don't qualify. Plan big purchases into the cash flow budget, because the deduction doesn't help if the payment leaves you short.
A Simple Routine
Set the budget before the season starts.
Update it each month with actual figures.
Look ahead three months and flag any month where the bank balance gets tight.
Review provisional tax at each instalment.
Talk to the bank early if something changes.
How Ake Can Help
We can build your seasonal cash flow budget, set up monthly reporting in Xero, and review your provisional tax so you're not caught out. Have a kōrero (conversation) with us before the season starts. Contact us.
This guide is general information, not tax or financial advice. Your situation will be different, so talk to us before you act.