Why It's Not Enough to Modernize Accounting

February 23, 2016 12:00 PM

Bankers like Alan Hoskins, president of American Farm Mortgage and Financial Services say so-called “shoebox accounting” is increasingly rare. But he says modernizing accounting is still not enough in today’s financial environment.

“It’s a great first step, but there’s no standing still,” he says. “You either move forward, or you move backward. This is an opportunity to take data and become more inquisitive and find new ways to improve finances.”

That’s not a job that falls solely on the farmer, either, Hoskins argues. Rather, it’s a task that a farmer should tackle with his or her banker, accountant and even attorney.

“If we’re truly going to add value to our customers, part of what we need to do is just sit down and go through the numbers and help them understand those numbers,” he says.

Trendspotting can provide tremendous value to a farm operation, Hoskins says. When farmers have four or five years of balance sheets, they can really look into areas where they excel, as well as areas to improve.

Farmers should also revisit finances on an ongoing monthly basis, Hoskins says.

“A factory has 12 production cycles per year,” he says. “Corn and soybeans have one crop per year – but by looking at it every month, it allows you to see the trends of cash flow. You’ll be able to make better management decisions by embracing that habit.”

Good habits are often simply the product of repetition, Hoskins says. To that end, make sure you’re exercising your financial muscles and establishing positive patterns of financial review and open communications with your lender, he says.

“I think that’ll lead to better discussions with your lenders, and it will ultimately help you to understand your finances in a different way,” he says.

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Spell Check

Cromer, OH
2/24/2016 11:32 PM

  It's true that technology is never going to replace the insights of the farming team, however clearly even today's accounting systems could do a much better job at presenting relevant reports. In particular, few systems are able to show decent enterprise reports and management accounting capabilities...

Bruce Dehm
Geneseo, NY
2/25/2016 07:13 AM

  We've been providing monthly actual to budget reports, monthly benchmarks and trend analyses for 25 years for dairy producers. The author is right, there is a lot more information to be discovered in the farm financials, but sadly, even with great improvements in farm bookkeeping software, a great proportion of farms will lag behind in maintaining a complete and accurate set of books. I'm challenging all farm bookkeepers to bring you farm's books to the next level of accuracy so that it is possible to make good management decision from the information the farm's set of books supply. Bruce Dehm, Dehm Associates LLC


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