Farm accounting continues to evolve

Highlights

  • Farm accounting software, like AgExpert Analyst, has improved exponentially over the years
  • Keeping up-to-date financial records is critical to farm management, but can be a struggle on many farms
  • Having one person focused on farm accounting and a dedicated office space in the home can help you keep financial records current
  • Even if you outsource your accounting, you still need to maintain your books

Karen D. Wright, software expert and farmer, explains how farm accounting software is changing and evolving to keep up with the demands of modern farms, and suggests ways you can maximize your investment.

What are the biggest changes you’ve seen in farm accounting software and the use of that software?

Software programs like AgExpert Analyst have improved exponentially over the years. Functions such as GST and HST reporting are integrated. Inventory tracking is an essential feature. The program can handle payroll processing, and it’s much easier to drill down to cost of production.

There are many factors in farming over which you have little or no control, but with good accounting you can at least be prepared.

It’s also great to see producers who are fully invested in the program and excited by new features. These are often features that have been suggested by customers themselves. For the younger generation of users, computer use isn’t a barrier like it was with some of the users who converted from manual accounting. That’s gratifying for trainers like me.

The new trend is mobile apps so that data can be entered on the go. This reduces the chance of lost or misplaced receipts and keeps everything up-to-date.

Are there any patterns as to how the farm accounting task is handled within family farms?

Keeping the books up-to-date is still a struggle on many farms. The farm office is usually in the home and people have many other tasks and numerous distractions, especially during busy times of the year.

But there’s an increasing recognition of the importance of up-to-date financial records. They’re critical to farm management. It isn’t just to keep track of how much tax you have to pay. Organized records assist in prompt bill payment and accurate recording of all your business activities. That can assist in obtaining financing, minimize your accounting fees and make budgeting and cash flow planning much more accurate.

Having one person focused on the farm accounting function is usually helpful. One person responsible for making entries typically means better continuity. Dedicated office space within the home is important.

It’s interesting to see how the job is transferred from one generation to the next. Sometimes this is a grudging transfer with tension and apprehension. Other times, the older generation is pleased to be passing along this critical aspect of the farm business.

Do many farms outsource their bookkeeping?

Yes, this happens on some farms and I do that for a number of clients. Some farms don’t have anyone with the time or interest in accounting. Plus, farms have become larger and more complicated. If the job is outsourced, at least it’s done and the work doesn’t pile up.

However, the bookkeeper still needs the paper records to work from. There still needs to be a good flow of information. The days of shoebox accounting are all but over. Many accountants require records in a software program.

I encourage producers to do their own bookkeeping if possible. You can start with the basics and become more advanced as you grow with the functions of the accounting program. With AgExpert Analyst, training classes are offered throughout the year and one-on-one help is readily available.

If you don’t understand some of the basics of accounting, it’s more difficult to make sense of your financial statements. However, doing your own record- keeping puts you in the driver’s seat.

Farms with good records and good analysis of their records have reduced stress and are better able to react to whatever happens with the markets and the weather. There are many factors in farming over which you have little or no control, but with good accounting you can at least be prepared.

What advice do you have regarding the selection of professional accountants?

With the farm bookkeeping function, analysis sometimes takes a backseat to data entry and the ongoing aspects of running a business. Payroll needs to be maintained, income tax instalments must be current and taxes must be filed on time. But there are many ways to use the records for analysis of a farm’s financial strengths and weaknesses. A good accountant can be key in that regard.

There’s a wide variation in what accountants charge and the services they actually provide. It’s important to have a strong working relationship and if you’re not getting valuable and timely advice, it may be time to move your business to another firm.

Of course, you’ll need to do your homework and see what different firms provide and how their fees compare, but it’s important to have a good relationship with an accountant who can provide good service and valuable advice.

Did you know that we host learning events across Canada on topics just like this? Find an FCC event near you.