November 1, 2022|
In their daily work, farmers face a lot of unknowns and uncontrollable circumstances. The weather, insects, price fluctuations, animal sickness and death and equipment malfunctions are just a few of these factors. How can agricultural associations support farmers with so many uncertainties?
The one thing that can be controlled is cash flow. By utilizing a good farm accounting software, valuable insights can be gained into a farming operation’s finances to help guide future purchases and make informed decisions.
With all of the benefits available from using accounting software, it may not be easy to understand any hesitancy on the part of a farmer to utilize a software accounting solution.
However, agriculture accounting industry experts note that there are three key challenges to getting farmers to embrace digital accounting: time, knowledge and additional cost.
Given the choice, most farmers prefer being in the field to sitting behind a desk. They simply don’t have the time to research the value of accounting software. So to help with the time and knowledge barriers, we’ll examine why it’s important to embrace technology. Plus, we’ve compiled a list of 10 key features of accounting software that may impact a farmer’s purchasing decision.
Change is inevitable. In order to truly support farmers, agriculture associations need to take advantage of every modern tool that is available to them, both in the field and the office.
Historically, farmers have utilized a cash basis accounting or cash in, cash out, system. However, many accounting experts today are encouraging the use of accrual accounting, which recognizes expenses when they are incurred and income when it’s earned.
Accrual accounting, when used continuously, shows actual yearly profit or loss and provides much better historical financial data and information that can be used for improved decision making and loan applications.
Utilizing an agricultural accounting software is another recommendation made by accounting experts in order to make your agriculture finances more efficient and compliant.
Accounting software solutions are slowly but surely becoming the norm. The days of transcribing receipts and sales slips by hand into a ledger or spiral notebook are numbered as agtech takes hold.
In recent years, there have been many farm specific softwares launched. Some are geared toward accounting only. However, many are farm management solutions that include a variety of other management capabilities in addition to accounting. There is also a variety of quality business accounting softwares that can be easily utilized.
With all of the options, some farmers and associations may find the choices overwhelming. These ten features of different software solutions will most likely factor into the purchasing decision.
There are accounting packages available at a wide range of price points. Some basic products, like invoice templates, can even be downloaded for free.
Generalized desktop accounting software that can be used by a wide range of businesses is usually cheaper than more specialized software. It should be able to handle regular accounting tasks such as managing bills and creating invoices.
Software specific to an industry generally costs more as there are going to be fewer users purchasing the product. Software created specifically for agriculture may also have additional features such as inventory management or the capability to track both farm and personal income and expenses.
Cloud-based accounting software may be the best choice for both agricultural associations and the farms they support. Most offerings provide all of the features of desktop software with the added bonus of mobile applications and remote access. Farmers in the field can easily connect bank accounts and share data through the cloud with their accountants or bankers. Although they generally cost more than desktop products, cloud users don’t have to worry about downloading programs, security or software upgrades or securing their data on a hard drive.
Regardless of the option that is chosen, the user should check for added charges for upgrades or support. Sometimes the price of a low cost software escalates with the addition of maintenance fees or add-ons. Make sure to check the software provider’s pricing page or literature for information about these services.
Although agriculture associations may have accountants on staff, ease of use is still an important consideration to make when selecting a solution. You will need to be sure that the solution is complex enough to cover your needs but not too complicated to be used effectively by your staff.
Keep in mind, the more features the software has, the more complicated it may be to work in. A clean user interface will make it much easier for everyone involved in the financial management process.
A chart of accounts is an organization tool that lists each different account or category that is set up for recording transactions. It’s basically a record of revenue and expense, assets, liabilities and equity.
The chart of accounts makes things easier to track as accounts can be organized, sorted and consolidated. It also allows for the review of income and expenses by date and category.
Just like software replaces a pen and ledger, the chart of accounts replaces the individual file folders in a filing cabinet. And it carries the added bonus of providing convenient access to all of the accounts in daily operations.
Inventory management is basically the accounting of inventory of materials and products needed for a business. In farming, this is generally fuel, seeds, fertilizer, feed, pesticides or other consumables needed for the business. It may also cover animal counts and data such as births and deaths.
Understanding and maintaining needed inventory is often critical to farmers whose timelines and working hours are often dependent upon the weather and other conditions.
Associations and farmers will need to be able to invoice members and buyers with their accounting software. Features that manage invoices, whether individual or recurring, purchase billings and estimates are helpful.
Expense tracking is equally important in accounting software. Users can enter bills as they are received and they will be tracked until vendor payments are made.
Some accounting softwares provide payroll management features. These features allow farmers and associations to manage the salaries of their employees and do basic pay runs.
Desktop accounting softwares like QuickBooks can be used for creating financial statements, tracking invoices, managing bills and other financial reporting such as cash flow statements and expense reports.
For software options that provide features like double entry accounting which can provide a current net worth statement at any time, a higher level software, or cloud-based software, like Sage Intacct, should be considered.
A software that offers bank account connectivity can save a lot of time. By integrating a bank or banks, farmers can immediately access bank statements or an electronic checkbook ledger and automatically import a transaction history, saving time on data entry and reducing the risk of human error. This allows for cashflow tracking and the bank takes care of the reconciliation. Real-time financial reporting and cash flow forecasts are also easily accessed.
Often small or single farms are family owned or sole proprietorships. A common mistake is not keeping farm and personal banking accounts separate. This can muddy the water at tax or audit time and make it difficult to filter out business expenditures. Utilizing a software that allows the separation of the two will make it easier for farmers to make better business and financial decisions.
Accounting software can make the financial picture much clearer for agriculture associations and the farmers they support. Whether it's for a small or large operation, finding the right agriculture accounting software is a big decision that can impact many areas of an operation. By tracking expenses, reconciling accounts or automating payroll, it can make life easier on the farm. It can also provide insights to improve operations and scale growth.
Download our agriculture association playbook at no cost. It provides more information to get the ball rolling with cloud-based accounting software.
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