My neighbor, who has a bigger farm operation than I do, has a CPA do his books. He says the CPA's reports impress both his short-term and long-term lenders. I've been using the same accounting outfit for 15 years. Is switching to a CPA worth the extra expense? How much more would I typically pay? — J.P., PENNSYLVANIA
There's no doubt good accountants are worth their weight in gold. The first question to ask is whether you want or need an adviser or an administrator. An adviser helps you with what you need to decide, while an administrator helps you with what you need to do.
An adviser would challenge the status quo of your conventional decisions. You would use one to discuss tax strategy, business entity design, estate planning, capital investment, expansion, lender choices and debt structure, for example. An accountant who acts as an adviser is a consultant for bigger-ticket items.
An administrator is someone you would hire to manage the execution of certain financial tasks. This type of accountant is typically involved in tax return preparation, other government forms, IRS communications, tax payments, bookkeeping, payroll and financial statement preparation. This accountant doesn't need to be a CPA, though many prefer such to offer enhanced credibility in submitting documents.
Don't get caught up in the CPA designation. Think about what you need out of the accounting function of your business, and don't be afraid to either switch, or hire two accountants. We use a number of consultants to professionalize our business, and we refuse to cut them out of the budget first when times turn hard.
Now is a financially stressful period. We must critically evaluate financials, from cost of production to working capital to earned equity. If you cannot do such yourself, get some help. Our mortgage banker's primary concern in these tough times is that too many farmers are lost in knowing their critical financial positions.
Financial savvy for this business takes homework, but it is the only way to be proactive with your banker. The thrust of your bookkeeping and accounting is for you to stay informed on a timely basis, so as to make better decisions and keep your "partners" informed, including your banker and your family.
Jerry and Jason Moss operate Moss Family Farms Inc. Email [email protected]