Liquidity is the ability to pay bills as they come due. In tough times when selling prices are low or input expenses are high, farm managers may not have the liquidity, or cash, necessary for paying bills. So decisions have to be made as to which bills should be paid first.
Managers approach cash-flow problems differently. Some reduce purchases of inputs such as grain and DHIA or reproduction services while others seek off-farm employment to supplement cash income or for health insurance benefits. Open accounts, including credit cards or accounts payables, can also be used to work through cash flow problems.
While options do exist, cutting your cost in the short run generally comes at the expense of long run profitability, say experts at the University of Wisconsin.
Get their advice as to which bills you should pay first when finances are tight.
Source: University of Wisconsin