Do You Need A CFO?

Dedicated Expert Can Help Farmers Manage Financial Aspect of Their Operations

Dick Wittman removes twine from a large hay bale during morning feeding on the family farm at McCormack Ridge. (Progressive Farmer photo by Kyle Mills)

With so many moving parts in the ‌financial machine of ‌‌today's ‌farm operations, ‌farmers may ‌need a dedicated expert to manage this aspect of their operations.

"Farmers used to buy land and equipment when they wanted and stay with their favorite crop rotations because they could afford to do it that way," said Dick Wittman, Wittman Farms, Lapwai, Idaho. "But farm financial management has gotten much more complex. Margins are too tight to not understand cost of production and the need to optimize financial decisions."

Wittman is board chairman and former CEO and CFO (chief financial officer) of his fifth-generation farm operation. Five family principals manage their diverse crop, cattle and timber enterprises. Wittman's current role is to focus on business succession for the farm. He also provides financial and family business consulting for other family-farm businesses.

"Many farm owners, whether they have large or small operations, do their own bookkeeping. That may not be the wisest approach if they lack the specific skills needed to achieve excellence in this area. They may need a specialist to optimize decisions in financial arenas," he explained.


Wittman promotes the idea that production agriculture is well served by a family business structure. His family has taken steps to preserve its legacy with a mix of relatives and nonfamily employees who have the appropriate technical and professional backgrounds for specific jobs. They also are in the midst of transitioning farm ownership to younger family members.

"We don't just hire family because they have the right last name, though," he added. "We work to balance governance of the business by looking at who supports our value and business culture, is a best fit for certain positions and has the skill set to do certain jobs."

Among the other key principals of the family farm: One person is responsible for crop production, conservation and equipment service; one handles the managed recreation program and cattle enterprise; another oversees the human resource, finance, marketing and administrative functions; and the other is in charge of precision agriculture and safety.

"Every farm needs to structure according to its needs," Wittman said. "But, farms from small to large can often benefit from services of someone who knows [the] financial ins and outs of the farm."


Steve Allard, executive vice president and chief credit officer, Farm Credit Mid-America, agrees one of the most common knowledge gaps farmers have is in finance.

"With measures like profit margins, liquidity and equity considerations, even the smallest operations have complex financial considerations to weigh," he said. "It is truly nearly impossible to master all of the skills that modern farming demands."

As part of his consulting work, Wittman teaches management accounting to farmers. He is surprised that even the most sophisticated farmers may not know their cost of production.

"They may know a fictional cost of production," he added. "But to know your true cost, you need a solid understanding of several technical concepts, such as the difference between tax and accrual net income, book versus economic depreciation and commodity revenue versus cost recovery. You may have to hire someone who is trained and can provide the right information to get an accurate cost of production, a critical foundation for marketing and cost management."


The first step in selecting a CFO is understanding the field of finance well enough to ask the right questions. "You can't delegate what you can't define," Wittman said.

He recommends farmers expand their knowledge through farm financial seminars and courses to get enough background to understand what qualifications would meet their farm's unique needs. Farmers also can get involved with peer groups and seek assistance from advisory boards on how to strengthen competence in their business in this area.

"Farming is a business. You are responsible for finding the appropriate skill sets for your team," he said. "Once you establish the deliverables, you can advertise for the right person and have enough working knowledge to ask the right questions during an interview."

Allard advocates that a CFO can fill the knowledge gaps a farmer may not have the time or the interest to master. This obviously includes managing a business's finances to ensure it can meet its goals. But, he also advises farmers pay as much attention to soft skills as to education and experience. Find an individual you trust who works well with your family and team.


Of course, not every farm may be in a financial position to hire its own CFO. Wittman said that is a legitimate challenge. Getting the right expertise may cost more than one farmer can afford. On his website (, he has a generic CFO job description along with a farm-management proficiency test that can help guide decisions about filling a CFO role. Hourly fees within the industry generally range from $200 to $400 per hour.

"Look at options outside of the box. A CFO has to be a person who will respect your confidentiality and provide more than tax accounting services," he suggests. "If you can only afford $50,000 per year of a $150,000 CFO's salary, for example, get together with other farmers and consider each hiring a percent of that person's time. That way, you all can access top talent."

Allard said another option is to consider hiring a fee-based accountant and gradually transition that person to a more permanent CFO role. "It takes finesse to understand how to plan appropriately," he said. "A CFO can take a neutral view of how your operation is performing and provide recommendations for investments and ways to cut back on expenditures. A good adviser hones in on problem areas and helps plan for your goals that are years down the road."


Whether you hire a CFO or not, Steve Allard offers advice on what to include in a financial plan:

-- Establish goals and objectives. It's impossible to plan without them. Not all goals will be financial. Some will be personal, such as amount of time off per year or retirement.

-- Create projected cash-flows and compare to established financial goals. Also, compare projected cash-flows with historical performance. Are projected cash-flows reasonable, and do they meet financial goals?

-- Establish investment strategies. What assets will need to be replaced? Where will profits be invested? Defined short- and long-term objectives may change over time.

-- Develop risk-management/risk-mitigation strategies. What steps can be taken to best manage the risks associated with the operation? Examples of risk-mitigation tools include crop insurance and fixed interest rate financing. You can't mitigate all risks, but it's essential to understand how to best mitigate the ones you can.

-- Develop a contingency plan. What do you do if the original plan doesn't work? In agriculture, many factors are out of farmers' control, and plans rarely work as expected. A contingency plan is critical when it's clear changes to the original plan are required.

-- Have an implementation plan. Implementation is often one of the most challenging steps for short- and long-term plans. A written implementation plan can be motivating and provide a road map for those moments of doubt about when and what to implement. A good plan also spells out roles for all involved.