Your accountant wants to be part of your management team

Dependable accountants are key to planning success.

A do-it-yourself mentality can be good for a lot of things. When it comes to financial planning, though, it’s likely not the best approach.

Dependable accountants are the key to planning success, according to Dick Wittman, a farmer and veteran farm finance expert based in the United States. A good advisor can help business owners prepare for challenges and opportunities through an analytical approach to farm finances.

Choose the right advisor

Producers should meet with their accountant at least once outside tax season.

The first step is finding the right advisor. Some accountants, Wittman says, prefer tax planning while others specialize in more general business financial analysis. Such individuals can help assess a wide variety of characteristics – deferred tax expenses, costs compared to market value of assets, cash and accrual-based profitability, and other foundational assessments – through financial statements.

The more thorough your statement, the more well-informed you’ll be as a business owner. Rather than basing a capital asset decision on affordability alone (whether to buy or lease a piece of equipment, for example), advisors can highlight which option makes the most sense for your wider business.

“There’s a tendency to do a knee-jerk reaction and not to be analytical,” Wittman says. “Sometimes farmers are not asking about alternatives because they don’t know what questions to ask.”

Choose a statement framework

Currently there is no standard Canadian financial statement format. Instead, Wittman says, lenders and financial management companies take their own approach, though metrics such as working capital, liquidity ratio, debt-to-net worth ratio and profitability are common to all good statement formats. The methodologies used to make calculations, however, vary by company and organization.

The solution is to use financial worksheets consistently. In practice, that means compiling similar information over time and comparing that information to generate an accurate financial picture. A trusted accountant can help review worksheet data to ensure the information is sound.

Turn data into decisions

“The challenge is the interpretation of the data. It’s really valuable to have a good analyst... most farms don’t rely on accountants to provide meaningful financial reports.”

Whatever the form, Wittman reiterates that financial statements are not just tools for acquiring loans. Financial information has multiple uses – including determining whether a farm is profitable and how succession planning could proceed – and is primarily valuable to the business operator. Investments in good advisors are critical to realizing that value.

“It does work. It’s doable. It requires an educational foundation and a good support team.”

Timing is key

When it comes to meeting with an accountant focused on tax planning, experts agree that producers developing successful business strategies and transition plans should meet with their accountant at least once outside tax season. This can prevent short-term issues and pursue longer-term goals.

For Shawn Deyell, a chartered professional accountant and partner with RLB based in Guelph, Ont., once-a-year meetings inevitably focus on addressing immediate tax issues. This means short-term needs take precedence over all other topics.

“That same meeting is not the best place for planning,” Deyell says. “Instead of being a financial janitor and tidying up after the fact, how do we make a plan going forward?”

Deyell says even one additional meeting each year can have a significant impact. This second meeting – ideally held half or three-quarters of the way through the year – gives farmers time to understand and adjust for issues during tax time. It’s also an opportunity to analyze short, medium and long-term business goals with less distraction.

Working relationships are useful

Deyell adds that further meetings might be necessary for those involved in transition planning or working through other major changes. According to Stuart Person, a farmer based in the Edmonton, Alta. area and Senior Vice President, Agriculture at MNP, a national tax and business advisory firm, frequent meetings are even more important for those taking more managerial roles on larger farms.

Regardless of farm size, more engagement helps establish good working relationships and allows for some tasks to be delegated.

“The more engaged you are as a farmer, the better result you’ll get out of working with an advisor,” Person says.

“Be humble. You’re not going to know everything in the business world… don’t try to do everything yourself. You can look at your accountant as a leverage tool by utilizing advice.”

What to bring to a meeting

Keeping a budget - even a general one – is useful when addressing goals during meetings, says Deyell.

Taking advantage of training opportunities is also an option. This, he says, can take the form of online courses on better financial management, as well as simply asking more questions of one’s financial advisor.

Meeting to discuss any significant business decision, adds Person, is always more productive if the farmer enters with some background information. He cites having preliminary discussions with family for transition discussions and knowing what the lending terms are for an equipment sale as examples.

“Any good advisor should be part of a team… the more communication that can happen earlier on, the better,” Deyell says.

Person agrees.

“I look at business advisors as building partnerships with farmers. We want to be their go-to,” he says.

Article by: Matt McIntosh