Your operation is an increasingly complex business, with rising demands to manage your operation across many enterprises. The result is a greater need for good accounting information about your business on a day-to-day basis.
Many farmers have turned to what are called “Main Street” accounting programs designed for use by “everyone” to balance the checkbook or manage a small business. While these programs increasingly have add-ons, agriculture brings along some complexities that may require you to consider moving up. How do you know when it’s time?
“I think it comes from one of our customers who was using one of the ‘Main Street’ programs,” says Ken Hilton, president, Red Wing Software. “He was making it work, but told me that he had to do this other thing on another piece of software, and this other task in a spreadsheet. If you’re doing all these things outside the software you’re using, that software isn’t working for you.”
That’s the first step. Is your accounting program filling your needs, and for agriculture’s special nature of using cash accounting for tax purposes but accrual accounting for trend analysis? That could be a challenge. But there are other issues you may want to consider.
Larry Hatfield, CEO of Vertical Solutions — makers of EasyFarm, a farm-focused program — says many issues stall the farm accounting conversation, but the one most often encountered is that “the last thing farmers want to do is accounting in the first place. They need something that’s preset for farming, and an easy and fast way to do it.”
For example, in Easy Farm, prepaid chemical services aren’t a problem for the system. However, this is an issue for most popular non-ag accounting programs. Just knowing how to account for those purchases is critical, and makes the best use of the little time producers have to do their books.
EasyFarm isn’t designed to just push out accrual accounting reports, but its full-farm focus does get more of your information in shape so you can work with an adviser to manage those issues, Hatfield says. “That’s not the focus of the software. Among other things, it’s a tool to collate the appropriate information so focused discussions can happen between the producer and his financial adviser.”
Norm Brown, founder of FBS Systems, along with Mike Boggs, FBS director of professional services, talked with Farm Industry News about accounting as well. Brown explains there are two types of accounting — a retrospective historical financial record, and the other as a dynamic management platform. “That’s two different worlds, with two different goals,” Brown says.
Accrual accounting and trend analysis
For larger farms working on many enterprise areas, tracking those accurately is key. Hilton notes it’s impossible to do farm trend analysis without true accrual accounting. Red Wing has created CenterPoint Software, which manages details…