Plowing the Back 40: Accounting and Technology Issues for Agribusiness Clients

Do you remember laughing at the ridiculous residents of Hooterville when Oliver Douglas escaped the bustle of New York City to move he and his Swedish wife, Lisa, to the country? The goal was to get away from the lights of Broadway to plow the fields and work the land.

As it turns out, the farming life for Oliver was difficult, and at first, he knew little more than how to drive a tractor. The reality soon set in, and although we had lots of fun laughing at him, the business of “agribusiness” is a serious business with big city concerns.

Similar to other niche industries, agribusiness has its own set of particular accounting challenges. Whether consulting on technology specifically related to farming and ranching, or accounting and compliance issues related to federal control of food production, accounting firms must speak a unique language to work in this competitive environment.

“You have to know the industry and the lingo,” says Christopher W. Hesse, CPA, director of Taxation and a member of LeMaster Daniels PLLC, a full-service accounting firm in Spokane, Wash. One of the firm’s niche industries it services is agriculture. “Many of our CPAs grew up on farms, and those who didn’t have a genuine interest in agriculture and demonstrate the passion that provides comfort to the client. If you don’t know the terminology, it won’t be possible to convince the client that you know his or her business.”

Again, similar to other industries, there are nuances to learn in order to deliver tax, assurance and consulting services. For example, Hesse says knowing the approximate prices of farm commodities and the direction in which prices are currently moving is important because it demonstrates not only a level of knowledge of the agriculture industry, but a passion and genuine concern.

Agriculture Accounting Requires Specific Solutions
Although the industry may be different, the need for core accounting services is still the norm with agribusiness clients. But there are specific needs based on various situations.

Timothy P. Moag, CPA, a tax director and leader of the Agriculture Business Specialization Group for Freed, Maxick & Battaglia, P.C. in Buffalo, N.Y., says more clients ask for a computerized general ledger bookkeeping and financial reporting system than anything else. The twist, in this case, is to make the GL applicable to the client’s business.

“Typically, we apply our agricultural expertise to assist the client in the design of the accounting system and chart of accounts with standardized account titles and account numbers that we tailor to the client situation,” says Moag. “The primary differences in a chart of accounts for a dairy farm versus a crop farm are within the revenue accounts. Clients also often ask for assistance with setting up on-farm payroll preparation as part of their accounting system. We will assist in the payroll module set up, and provide instruction to the client on payroll reporting requirements.”

Affiliated with RSM McGladrey, Freed Maxick’s larger agricultural clients are more frequently being asked by their lenders to prepare accrual basis review-level financial statements.

“This level of financial reporting requires the farm client to provide accounts receivable and accounts payable information,” says Moag. “While this information can be maintained in their accounting system, providing inventory amounts proves to be more challenging.”