Farming and Xero


Overview

Traditionally farming software has been combined with accounting software on farm. As rural broadband takes hold and accountants and advisors work closer with farmers to achieve better outcomes we believe a tightly integrated ‘best of breed’ approach is a better solution.

Xero has worked with farming specialists and farming solution providers to determine a framework for tightly integrating farm management software and accounting to create a seamless approach for farm financial management.

Accounting software is best for Farming software is best for
  • Bank reconciliations
  • Invoicing and receivables
  • Payables and creditors
  • Expense management
  • Financial reporting
  • Loan application support
  • GST
  • Annual Reports
  • Farm budgeting and planning
  • Farm nutrient management and planning
  • Farm maps
  • Livestock management and compliance
  • Livestock Inventory
  • Farm reporting

In addition a modern integrated Farm Management solution needs to be connected to rural banks and rural suppliers to automate the movement of financial information

This document lays out the approach for Farm Software providers to connect their solutions into Xero to provide a seamless Farm Management experience for their customers and allow the powerful advisor community to assist Farmers.


Benefits

Integrating with Xero allows farm software to team up and deliver one complete online solution for farming in the cloud with real-time accurate information for stakeholders. A quick summary of benefits are listed below.

  • Full integrated cloud solution
  • Real-time accurate farming and business information online
  • Ability to share with key stakeholders- Bank, Financial Advisors, Off-farm shareholders, Farm planners etc
  • Power of Xero for the farming sector- Direct bank feeds, Multi-user, Access from anywhere on any device with web browser
  • Power of the Xero Eco-system for farmers- Farm workflow management, payroll, gst etc
  • Ability for all the individual farm software to integrate for access to real-time financial data (ie pasture management software getting access to actual $ results)
  • There are many rural feeds and farm addons available to ease the collection or input of farm data. Contact us for more details.

Timing

Full announcement of all farming partners who are ready to launch and demo at Xerocon in NZ (February 2014). Will also announce all farming partners (including rural feed partners) at this time.


Design

Here is our candidate model. We’d welcome your feedback.

Farming

In summary the model is as follows.

  1. Farm Management software (FMS) will provide the subsidiary ledger and inventory system for livestock. Xero is the accounting software and only records the total livestock by type.
  2. The FMS understands births, deaths and aging of livestock information.
  3. From time to time the FMS will synchronize it’s ledger with the summary information held in the Xero. Xero can contain any number of Livestock asset accounts that will display on the Farms Balance Sheet.
  4. Some livestock information, such as livestock purchases or sales will be recorded in Xero and therefore need to be ‘cleared’ when a livestock reconciliation takes place. There are several options for coding these transactions. See the process flows below.
  5. The actual stock numbers are managed in the FMS system.
  6. The reconciliation process involves using the stock quantities in the FMS and the stock values from Xero then adding on the farm adjustments.
  7. Once reconciled in the FMS and valuations completed, an adjustment journal (Stock Reconciliation Journal) is sent to Xero and any livestock clearing accounts are cleared. At that time both systems are in sync
  8. At year end the FMS the livestock schedules are sent to Xero which can be displayed in the Annual Report.

Workflows

Farmer using Xero and Farming Software

In chronological order, here is the recommended process flow where an organisation uses a Xero Business edition and Farm Management Software:

Xero Farm Management Software
Setup
Set up farming chart of accounts (COA), tracking categories and contacts. Each accounting firm may have a suggested farming chart.Contact us if you require farming COA templates

Notes:

Several options can be implemented for the sale and purchases of stock in Xero:

1. In the P&L setup Revenue/Expense accounts for each stock type.
2. In the Balance Sheet Current Assets setup a Livestock-unreconciled account for each stock type. or
3. For a more detailed COA setup Revenue/Expense accounts for each stock type and class.

Whichever option is selected it is up to the FMS to complete the correct reconciling journals at period end.

Tracking- Farming entities which have multiple farms so they can run as separate departments linking to tracking values within Xero. See Tracking Categories.

Contacts-Reconciling farm transactions using Contacts stored in Xero. See Contacts.

Connect to Xero API with OAuth
(Optional) Sync chart of accounts and tracking to FMS.
Complete Farm budget/forecast
Sync live actuals and retrieve the budget summary report from Xero.
Daily Processing
Daily bank reconciliation – stock transactions to be coded as per COA setup
Send any sale invoices
– stock transactions to be coded as per COA setup
Process any payables
– stock transactions to be coded as per COA setup
Process any expense claims
If the purchase/sell of stock quantities/values and other farm expenses are recorded in FMS then sync these to Xero using account sales/purchases invoices so they can be reconciled to the bank transactions.Note:
Xero has feeds from many rural suppliers
In addition there are Add-ons that can that can be used to provide easy input/breakdown of trading accounts directly into the FMS if needed.
Record births and deaths
Livestock reconciliation
Sync to Xero for all (or farm accounts only) journals in period.
Enter any on farm changes to stock
Note: There are some farm addons available to make this task easier. See here
For livestock purchases and sales
1. Reconcile [stock-unreconciled] from Xero for each stock type.
or
2. Revenue/Expense accounts for each stock type.
or
3. Revenue/Expense accounts for each stock type and class.
Apply livestock aging
When happy livestock count is accurate, close reconciliation
Complete livestock valuations and determine journal entries (Stock Reconciliation Journal)
Post journal changes to Xero
1. Clear [stock-unreconciled] accounts if used
2. Complete end of year or end of period journals
Periodic
Prepare and file GST returns
Business Management Reporting
Farm Management Reporting
Annual
Prepare Livestock Schedules
Prepare Annual Reports. Contact us if you require further information on this.
Add livestock schedules into Xero annual accounts.
Finalise Annual Reports

Accountant using Xero, preparing Farm Annual Accounts

In chronological order, here is the recommended process flow where an Accountant needs to complete the farm annual accounts using Xero Partner editions and simple farm software:

Xero Farm Management Software
Setup
Set up farming chart of accounts (COA), tracking categories and contacts. Each accounting firm may have a suggested farming chart. Contact us if you require farming COA templates

Notes:

Several options can be implemented for the sale and purchases of stock in Xero:

1. In the P&L setup Revenue/Expense accounts for each stock type.
or
2. In the Balance Sheet Current Assets setup a Livestock-unreconciled account for each stock type. (recommended for the accountant setup)
or
3. For a more detailed COA setup Revenue/Expense accounts for each stock type and class.

Whichever option is selected it is up to the FMS to complete the correct reconciling journals at period end.

Connect to Xero API with OAuth
(Optional) Sync chart of accounts and tracking to FMS.
Complete Farm budget/forecast
Sync live actuals and retrieve the budget summary report from Xero.
Processing
Bank reconciliation – stock transactions to be coded as per COA setup
If the purchase/sell of stock quantities/values and other farm expenses are recorded in FMS then sync these to Xero using spend and receive monies so they can be reconciled to the bank transactions.Note:
Xero has feeds from many rural suppliers
In addition there are addons that can that can be used to provide easy input/breakdown of trading accounts directly into the FMS if needed. See Farm addons here .
Livestock reconciliation
Record births and deaths
Sync to Xero for all (or farm accounts only) journals in period
Enter any on farm changes to stockNote: There are some farm Add-ons available to make this task easier. See here
For livestock purchases and sales
1. Reconcile [stock-unreconciled] from Xero for each stock type.
or
2. Revenue/Expense accounts for each stock type.
or
3. Revenue/Expense accounts for each stock type and class.
Apply livestock ageing
When happy livestock count is accurate then close reconciliation
Complete livestock valuations and determine journal entries
Post journal changes to Xero
1. Clear [stock-unreconciled] accounts if used
2. Complete end of year or end of period journals
Annual
Prepare Livestock Schedules
Prepare Annual Reports.
Contact us if you require further information on this.
Add livestock schedules into Xero annual accounts.
Finalise Annual Reports

Other information

  • Our Accounting partners have given positive feedback on the design. It is important they can produce a livestock schedule and valuation for clients who have still not transitioned to the full solution. Having an entry level partner edition for the add-on allows the Accountant to use the system for one-off annual work and will get them familiar with the product and allow them to grow their client base onto the full solution.
  • Internet- Farmside has been widely adopted and the Government’s Rural Broadband Initiative is now available to many farms. Uptake has been slow, but as more solutions like this become available to farmers they will be able to justify cost.
  • Banking 2.0- Xero is working with the major banks in New Zealand to complete the loop between the bank and Xero. This will allow automatic provisioning of feeds and the ability for the Xero user to push batch payments directly into their online banking.
  • Currently in Xero, farm organisations use inventory Items to track stock classes. Xero does not expect this practice to continue once they adopt an FMS Add-on. Instead the FMS system will become the subsidiary ledger/inventory system for farming with the primary interaction being the COA.
  • Farming entities which have multiple farms run as separate departments need to link to tracking values within Xero.
  • Contact us about Add-on partner API’s that allow other farm software to draw financial information out (i.e. feed budgeting software can use real-time actual financial results)

To discuss the opportunity to be a farming add-on partner or for any questions, please contact ben.richmond@xero.com