One contracting business, several farm businesses to account for
Your contracting business runs several farms under contract farming agreements. On each one you do all the field work, and the landowner provides the land and perhaps buildings. Each agreement has its own terms: a basic fee for your work, a first charge for the landowner, and a split of any surplus. The arable farm by the river uses one arrangement; the estate on the hill has another, agreed a few years later.
Throughout the year, your operators do the work, inputs are bought, some in the farm's name and some in yours, grain is sold, scheme income arrives. At the end of the year, somebody has to work out the account for each agreement: what came in, what went out, what the charges are, and what the split is. That is where the paperwork turns out to be a mess.
Why contract farming accounts get tangled
Contract farming mixes two businesses on the same land, and the records are kept by whichever business did the thing.
- Your operators and machines work across your own contracting customers and the contract farms, often in the same week.
- Inputs may be bought by you, by the farm, or through a buying group, and invoices go to different places.
- Grain and other sales are made in the farm's name, and the proceeds go to a separate account.
- The agreement's charges are defined in the agreement, which is a legal document, not a spreadsheet.
- Scheme payments and other income may or may not fall inside the agreement.
What the agreement means, and how each item should be treated, is for the agreement itself and the advisers who drafted it. We do not interpret it. The work we do is making sure every piece of income and cost is recorded against the right agreement, so the calculation, however it is done, starts from complete figures.
What tangled accounts cost
Contract farming agreements depend on trust between the contractor and the landowner. Accounts that arrive late, with items missing or queried, damage it. Costs that belong to one agreement but are paid by the contracting business and never recharged are lost. Work done on the contract farm but not recorded against it disappears into the contracting business's general costs.
Time goes on it too. Building each farm's account at the year end, by going through invoices, worksheets and bank statements, is a long job, and the questions it raises come months after the event.
One account per agreement, all season
What we build is an account for each contract farming agreement that collects everything as it happens.
- Each agreement is set up with its farm, fields, and the categories you and your advisers use for the year end calculation. We record the terms you give us, not our reading of the agreement.
- Work done by your operators and machines on the agreement's fields is recorded from job records and charged at the rates your agreement sets for your work.
- Input invoices, whoever they are addressed to, are tagged to the agreement and its fields as they arrive. Items paid by your business are flagged for recharge.
- Sales, from contract notes and statements, and other income you have agreed to include, are recorded against the agreement.
- Each agreement shows income and costs by category, month by month, with the charges you have set out, so a running estimate of the position is available at any time.
- At the year end, the account is exported for your accountant and the landowner's, with every item traceable to its invoice or record.
| Item | Recorded from | Goes to |
|---|---|---|
| Your field operations | Job records on agreement fields | Your work charge |
| Seed, fertiliser, sprays | Invoices tagged to the agreement | Agreement costs |
| Grain and crop sales | Contract notes and statements | Agreement income |
| Items paid by you | Invoices flagged for recharge | Recharge list |
A mid-season meeting with the landowner
In June the landowner asks how the year is going. You open the agreement account: inputs so far, your work charge to date, grain sold forward and an estimate of the position. There are two items from your own purchases waiting to be recharged. The conversation is about the crop and the plan, not about finding paperwork.
At the year end, the accountant gets an export that already matches the categories you agreed, with no gaps to chase.
Is your contract farming paperwork like this?
- Each agreement's year end account takes weeks to build.
- Inputs for contract farms are sometimes paid by your business and not recharged.
- Work on contract farms is not separated from your other contracting work.
- Landowners only see the figures at the end of the year.
- Queries on the account arrive months after the event.