Agriculture accounting is better with apps

Accountant & Bookkeeper Guides

7 min read

The agricultural industry is one where assets can die, or badly-timed rain can ruin a whole year. That makes farm budgeting and forecasting tough. Here’s how an enterprising accounting firm embraced technology to help their farming clients.

by Jeremy Skedgwell – Director, Diprose Miller

This guide is brought to you by Xero and our Xero partner, Jeremy Skedgwell, because we share a passion for helping practices everywhere thrive.

Diprose Miller has been providing advice and accounting services to farmers for over 50 years. They make up about 60% of our business. Most of our other clients serve and rely upon the farming sector, so agriculture accounting is close to our hearts. It’s made us one of the biggest firms in the eastern Waikato area of New Zealand.

As part of doing due diligence, our firm put a handful of clients on Xero in 2015. We wanted to see what the software could do. By March 2017 we had transitioned all of our clients onto the system.

It saves our clients so much time and it integrates with other agriculture apps that are designed specifically for the sector. Plus it can be adapted to do work for other rural organizations  – like mechanics, electricians, builders and community groups.

It starts with the accounting

When we put clients on Xero, one of the first things we do is set up bank feeds. That allows bank data to go straight into the client’s accounting software, without anyone touching it. Many farmers had previously entered bank statements line by line – and they felt they had to be an accountant to know how to code the data.

With bank feeds, the data is cleaner, more current and more reliable. All the client has to do is go in and reconcile it, but we don’t explain it that way. Accounting jargon makes it sound more complicated than it needs to be. So we just tell clients they have to tell the software what the transactions were for.

Clients only need the basics

We give farmers a one-hour lesson to get started. It’s enough to make them comfortable with the essentials. Once they’re doing that, we know the data is clean and we can handle the more advanced functions for them.

One of the first clients I put onto Xero was the local senior citizens association. When they embraced it, I was confident our business clients would too. We offer follow-up training for anyone who wants it, but only a few feel the need.

Opening up the world of agriculture apps

Once agriculture accounting data is online, you can be creative about how you use it. We tell our clients that Xero is like an iPhone – a platform with add-on apps that perform a range of functions.

Visualising farm performance

Diprose Miller uses Spotlight (a Xero add-on) to create visual reports of farm performance for our clients. It can show a client how much they spend to produce a kilogram of milk solids, for example. But the results are presented graphically rather than as a page of numbers. Most people find it more intuitive in this format. They can assess business performance at a glance, without needing to pore over spreadsheets.

In the past, our staff had to manually transcribe accounting data into a visual reporting tool to do this sort of thing. That can lead to transposition errors. But now the data flows straight in from Xero so these sorts of graphs are always available.

Farm budgeting

Figured is a dedicated agriculture app that also integrates with Xero to help with farm planning. It allows farmers to set up budgets for different scenarios and, when commodity prices change, those budgets update automatically. Using Figured, clients can immediately see how market changes affect their business.

It’s popular because it tracks farm-specific metrics like livestock births and deaths. It also reports income in relevant terms for the farmer, such as dollars per hectare or dollars per kilogram of milk solids produced. Figured now also supports livestock reconciliation and milk-trading statements, which makes it especially useful to accountants and bankers.

We offer follow-up training for anyone who wants it, but only a few feel the need.

Looking after other industries too

Wherever there are farms, there are agricultural service industries. A large provincial firm like ours is going to do a lot more than just agricultural accounting. There are retailers, logistics companies, construction businesses and more that need our expertise. It’s important to have an accounting platform that can fit those other types of businesses.

That’s another area where online accounting gives a firm like us options. An ecosystem of add-on apps has developed around the core accounting product, so we can plug in our choice of tools to help clients in all sorts of industries.

There are products to help engineers and mechanics cost out jobs, for example, and we have set up a local electrician with a mobile invoicing system so they can bill customers from their vehicles as soon as a job is finished. It helps their electrical business stay on top of invoicing, and improves cash flow into the business.  

A highly compatible accounting platform is ideal for a firm that serves farming and related industries. It allows us to add on agriculture apps, construction apps, retailer apps, or whatever else we might need.

Where’s it all going?

Cloud accounting is all about integration. The apps already allow us to provide specialist services to multiple sectors, but the future promises even more.  

Already we’ve seen improved integration with the tax department where we can file tax information directly with one mouse-click. In the future, I believe online accounting will make it easier to apply for finance too. As accounting software processes a business’s financial data, it will automatically generate a credit score that banks can use to assess loan applications. It’ll speed up access to cash and capital.

Managing change at the practice level

Introducing new software at a large accounting practice isn’t light work. Educating and transitioning clients is relatively straightforward, but we had to manage the internal process carefully.

Five tips I’d give to any large firm considering the move are:

  1. Switch in stages
    We moved our practice onto the cloud in three stages. The first tranche was small but we made sure every staff member had some clients that they managed on Xero. It’s important not to force the change upon staff to quickly. We let them ease in.

  2. Spend time with resistant staff
    There will be pushback against change. We assumed resistant staff would never buy in, but one-on-one meetings changed that. Often, they just misunderstood what the technology could do for them. Be patient and keep talking it through.

  3. Find champions
    Just as some people will resist, others will see the potential of online accounting immediately. Harness those people to energise and support their colleagues.

  4. Respect experience
    Because some people tend to embrace technology more than others, those individuals will probably become your experts through the transition. Don’t let that destabilise firm dynamics. Reinforce how much you value all your senior accountants and the wealth of knowledge they hold.

  5. Focus on the can, not the can’t
    People who are more comfortable with your legacy system will focus on the things your new system can’t do. Try to focus instead on what the new system can do. It’ll give you a lot more to talk about.

Agriculture accounting powered by agriculture apps

Online accounting is changing how business is done for many industries – agriculture included. The add-on apps are developing at a rapid pace and will help you work closer with your clients and get more clarity on the direction of their business.

Agriculture-focused firms should choose a versatile accounting platform like Xero that integrates with a range of agricultural apps, while also supporting product and service industries that exist within rural communities.