Who Should Really Be Doing the Work?
- Grant Wiese
- Sep 22
- 3 min read
SW Financial Literacy
Who Should Really Be Doing the Work?
It’s that time of year again, the requests for balance sheets and financial statements have begun. We shouldn’t be surprised. With the cost of early inputs on the rise and profits trending lower, the probability of default is higher.
Many suppliers are now providing their own financing and offering extremely low interest rates as part of the discount. Whether borrowing money from your input supplier or the bank, it carries the same risk to you. As the amount borrowed rises, input providers are becoming more aware of the risk to their own balance sheets as well.
I read this letter and quickly became outraged by its contents. It reads: “The Balance Sheet should be prepared by your bank, accountant, or financial institution within the last twelve months.”
Now, I’m not upset that they’re asking for a prepared balance sheet. I think that’s an excellent idea, we should all have a balance sheet readily available and updated within the past 12 months. But maybe it was just the wording, because reading that line makes it sound like your bank, accountant, or financial institution can actually build a balance sheet for you.
Hopefully I’m wrong in that interpretation. Maybe they meant that you prepare your balance sheet, and the input supplier just requires it to be on the letterhead of a professional institution. The idea being that you’ve run your balance sheet by someone to promote accuracy.
But it sure doesn’t sound like that.
Balance sheets should be made 100% by you, and you should always have copies of your balance sheets on hand. **Not having copies of your own balance sheets creates risk for you personally. Regardless of your banking relationship, never let your only copy sit at the bank. Many producers have felt strong-armed into loans because they didn’t have their own statements to take elsewhere.**
If you need help, I’d recommend working with your lender or financial institution to make sure you’re inputting everything accurately. If you don’t have a template, here’s the one I use:
I do not recommend having a third party build your annual balance sheet for you. Some producers do get quarterly balance sheets from their CPA or bookkeeper, often full of ratios and analysis. That can be useful for mid-year tracking, especially comparing input expenses against projections.
But remember: the information is only as good as what gets entered. Even if someone else does your books, you still need to review them monthly and make sure you’re tracking your operation. Great-looking numbers don’t guarantee accurate financial decisions.
Farm CPAs are critical to the industry. If you’re having issues with your CPA understanding farm complexities—or if you struggle to get on the same page with them about taxes or write-offs—make the switch. I recently switched CPAs myself and couldn’t be happier.
Farm CPAs are especially important for taxes, but I do not recommend having them prepare your balance sheet, except in one situation:
If you are a business with over $7,000,000 of gross income, have a CFO managing your funds, and are switching to accrual-based financials, then you probably need an accrual balance sheet from your CPA. But even then, you should still be creating a market-based balance sheet yourself.
Bottom line: you need to make your own balance sheet. Every year.
In my 14 years of lending, reviewing tens of thousands of financial statements, I have yet to see a market-based balance sheet created by a CPA that was both accurate and useful for lending. Accounting rules are different. The way CPAs construct a balance sheet—what they include, what they leave off—often doesn’t line up with what lending institutions actually want and need. You’ll most likely end up with an inaccurate balance sheet, understating your assets and position.
So, what’s the best approach when updating your balance sheet for input financing or early purchases?
Create your balance sheet yourself, then run it by your lender to verify accuracy.
If you don’t feel comfortable doing this, please reply to this newsletter. I’m considering running a balance sheet and financial training workshop later this winter and would like to gauge interest. Share where you need the most help, and I’ll build something just for you.
Need help with your balance sheet?
Yes, help putting it together.
Yes, help understanding what it means.
No, I'm good for now.
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Have a great week!
Grant
