Accounting departments – just like any other department in a company – have different roles with different responsibilities and functions. Many farming operations have not reached the level to justify employing a full accounting department, but it is important to know what you are looking for in a potential employee when the time comes. Here’s an overview:
A bookkeeper is a jack-of-all-trades position. This individual should be reconciling your cash and loan accounts and filing source documents (invoices, settlement documents, kill sheets). They may or may not be responsible for developing these processes and procedures, which will be up to you and your level of confidence in their abilities and experience. They should be comfortable working independently with cash basis accounting and may or may not be able to make accrual adjustments (again, depending upon their ability and experience).
In general, I would recommend hiring a bookkeeper if you either don’t feel comfortable with cash basis accounting, do not have the time to reconcile your bank statements, or just do not want to. After a long day in the field, the last thing many people want to do is sit down with a bunch of paper work. Spending the time and/or money earlier in the year will save both during tax season working with a CPA or tax preparer.
As the name suggests, the Controller “controls” the books. They are usually responsible for general financial accounting, managerial accounting, and tax reporting. It involves designing accounting processes and procedures, developing costing methodology, and ensuring that the accounting staff follow procedures.
Controllers are not always necessary if you are looking to report on an accrual basis.
As I mentioned before, a bookkeeper with ability and experience can manage accrual books. However, you will definitely want to consider hiring an individual at a Controller level if you want to evolve accrual basis reporting with managerial and enterprise accounting. They should have previous experience with accounting and financial reporting. Personally, I see a lot of Controllers with CPA experience (sometimes with a CPA license and sometimes not) because of broad exposure they get in the industry.
Chief Financial Officer (CFO)
In my opinion – and this is up for debate -- the difference between a Controller and a CFO is that the Controller focuses on the day-to-day while the CFO focuses on where the company wants to be tomorrow.
Ultimately, the CFO is responsible for oversight of the accounting functions and individuals carrying out those tasks, but their focus should be on the why and how for the company’s financial position. The CFO focuses on the long-term growth and sustainability of the company. It is important for an accounting and financial perspective that this person is involved in the initial planning phase of any project. The CFO is the resource for the executive committee (and in some cases, board of directors or owners) to provide that insight.
Certified Public Accountant (CPA)
A CPA is a licensed accounting service provider that is independent of your organization. For most farmers, most of the work you give to your CPA involves income tax planning and return preparation.
While the actual time involved in this process is most likely much less than planting or harvesting, the effect on your business can be just as great. All business decisions affect taxes in one way or another, so it is important that the tax considerations be discussed when making these decisions.
Along with income taxes and return preparation, some CPAs also provide services for bookkeeping, payroll, virtual controllers, estate planning, transition planning, and a multitude of other services. Next time you need to talk to your CPA, ask them what services they provide and consider if you need additional advice in one area or another. Personally, I work mostly with family farming operations on a multitude of different service levels. Everyone is unique with their own business practices and strategies.
I hope this helps if you are thinking about “what comes next” for your operation.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.