Accountant’s Work & Management Information

In the last post, you read (again) about how important good accounting is to your business. If that wasn’t
enough, here’s more.

Do you ever find yourself tiring of all the financial hub-bub in the media? It seems like every 2 or 3
months the same banks, or automakers, or grocery chains are “reporting earnings.” Well, that’s because
they do. Every quarter, the publicly traded companies release an earnings report, financial statements
as it were, to the shareholders. The shareholders are the owners of the company, and they demand
information that is accurate and on time so they can make an informed decision about increasing their
investment, standing pat, or divesting. The company is in a constant state of flux, and owners want to
know by how much their risk profile has changed in the last 3 months. Accurate and timely information
is not only demanded by the shareholders, it is the law under securities regulations.

So why are farms OK to receive their info once per year, and often as late as 5-7 months past their year-end? If the answer is, “Because the owners (shareholders) aren’t demanding it,” then I have to ask,
“Why the ____ aren’t they?”

Does your lender put more emphasis on the timing and quality of your financial statements than you
do? If your answer is “Yes,” then please keep reading. Actually, print this off and read it weekly until
Christmas.

Quality accounting is more than just minimizing income tax and filing GST & Agri-Stability. Your
accountant should be tasked with generating precise and informative reports that give you, the owner, a
representation of the financial position of your business, and the changes year over year to your farm’s
overall financial health.

If the information in those reports is of little interest to you, or if you’re embarrassed to admit you don’t
understand what the contents really mean, please don’t fret. There are many people who are available
to help including your accountant, your lender, and your business advisor. All of them WANT to help, but
they won’t insult you by assuming you don’t know. For help, first you must ask.

As for all you wonderful accountants out there reading this, please note that I will be working with each
and every one of my clients to fully utilize the financial reports that you create. I will be helping each
farm CEO make informed decisions with help in part from your reports. That said we need reports that
are useful, readable, and easy to navigate. Combining several line items from client info into one line
item on the Review Engagement does not help management make informed decisions! For example, the
account we know as “repairs and maintenance” does not on its own distinguish between equipment
repairs or building repairs unless you break it down for us. When I work with clients to determine their
equipment cost per acre, we need to know just how much R&M is equipment and how much is
something else.

I encourage everyone to have a discussion with your accountant. It’s easy to just do what we do and not
take the time to talk about what we really want. Accountants need to know about your 3 year plan so
they can offer appropriate tax advice. They also need to know if the report they prepare for you is
meeting your expectations. Not everything is negotiable, but you don’t know unless you have the
conversation!

Direct Questions

How are you utilizing the financial reports that are prepared by your accountant?

Do you have questions when you’re exploring the contents, or do you even feel like you’re reading a
foreign language when reviewing your financial reports?

How do you make decisions about the future if you’re not taking the time to evaluate and understand
past performance?

Are you getting information to your accountant in a timely fashion?

From the Home Quarter

Management decisions, if they are to be informed decisions, need to be made with quality reporting and
realistic expectations; both are key components of a sound business plan. I recently witnessed a
financing deal go south because of the lack of quality information. The account manager aptly described
the financing request plan and supporting information as GIGO: garbage in, garbage out. Other factors
that are usually afforded consideration in a financing deal were never given a chance because the poor
quality information derailed the opportunity first.

It is up to you to work with your accountant, one of your key advisors, to put together the type and
quality of reporting that will not only serve you in making management decisions, but also support your
goals when seeking opportunities for growth.

If you’d like help planning your farm for business and personal success, then call me or send an email.