The role of accounting on the farm is often aimed at year-end work to gather financial data for tax planning. Is that the best approach? Should you consider engaging your accountant more often? Xero, a cloud-based, small-business accounting service, recently looked at that question in a survey of farmers.

“I think a lot of farmers engage accountants,” says Tanner Hoffman, leader of industry vertical development at Xero. “Roughly, 80% of farmers in the states are engaging an accountant — but for tax purposes.”

Where farmers aren’t using accounting is in business planning, budgeting and tactics that are more geared toward running the business, Hoffman notes. “It’s more of a compliance interaction,” he says.

Xero’s survey shows about 50% of farmers don’t engage their accountants in any form of budgeting or business management.

Hoffman says outside the United States, farmers have to access their accounts more often due to different rules requiring more quarterly reporting. “But in the states, it’s an annual thing. You maybe do a little tax planning in the November, December time frame, and if you’re a typical Midwest farmer, you’re coming in sometime in February and putting your return together.”

Xero got started in New Zealand, a country where agriculture is the chief industry. The company has been moving into the U.S. market for the last decade.

“We’re probably a challenger brand as far as our market share goes, but we have been born in the cloud,” Hoffman explains.

Business management

Hoffman says having that accounting resource for end-of-year planning remains a valuable service. But could your small-business accountant do more for your operation?

“Even if there isn’t a formal budgeting process [for the farm], just making sure that the books are reconciled and the information is there, especially being in the cloud, you can get a big back-and-forth throughout the year,” he explains.

Hoffman may work for a New Zealand-based company, but he lives and farms in Nebraska. He understands how the U.S. ag market interacts for financial information. And given the increasingly complex nature of the decisions farmers make, having someone else looking at the books may offer insight.

For example, say a quarter section comes up for sale nearby and you want to put together a plan to purchase that ground. “There’s a whole host of people around that type of decision that are looking for financial information, especially on the lending side,” Hoffman says. “It could be a real scramble, and a kind of daunting task for a farmer who’s not in their books every day to put that kind of information together.”

If the farm was more regularly engaged with an accountant, you could streamline the process. “We feel like the accountant paired with a forward-thinking financial officer, or lender, can probably make that a little bit easier, and a less cumbersome process,” Hoffman says.

Farms aren’t making those big moves every day, but increasingly complex decisions may show a greater need to have that expertise on tap more regularly, he notes. A growing list of cloud-based accounting services are coming online, and with that approach, farmers can easily provide access to key information to those trusted sources on a regular basis to help track the financial health of the farm.

“I farm, and I feel like there’s an opportunity to be wiser with the decisions you make,” Hoffman says. “With some of the new stuff coming, I think about how we’ll push our chips to the table on the carbon side of things, on cover crops. And making decisions like that, you need scenario-based planning.”

With tighter margins, having a grasp of costs combined with potential benefits can help reduce the risk of decisions. A cloud-based system makes that contact easier. You can learn more about Xero at xero.com.