Agriculture is an industry marked by unique financial risks—ranging from fluctuating commodity prices to seasonal labor challenges and complex inventory management. For farmers and agribusinesses, mitigating these risks is critical to maintaining profitability and sustainability. One of the most effective ways to manage financial risk is through robust internal controls.
What Are Internal Controls?
Internal controls are the policies, procedures, and practices designed to safeguard assets, ensure accurate financial reporting, and promote operational efficiency. They provide a framework that helps farms prevent errors, fraud, and financial mismanagement.
Why Agriculture Needs Strong Internal Controls
Farms face specific challenges that can increase financial vulnerability:
- Multiple revenue streams and inventory types (crops, livestock, equipment) complicate tracking.
- Seasonal and temporary labor can lead to inconsistent adherence to procedures.
- Family-run operations often have overlapping roles, reducing segregation of duties.
- Cash transactions at farm stands or markets may lack formal controls.
Without effective controls, farms risk asset loss, inaccurate financial records, and regulatory noncompliance.
Key Internal Controls to Consider for Your Farm
- Segregation of Duties
Separate responsibilities so no single individual controls all aspects of a financial transaction. For example, the person authorizing payments should not reconcile bank statements. - Inventory Controls
Implement systems to track inventory accurately, from planting through harvest or from livestock birth to sale, reducing loss and theft. - Cash Handling Procedures
Establish clear policies for managing cash transactions, including issuing receipts and depositing funds promptly, especially for farm stand sales. - Bank Reconciliations
Perform regular reconciliations of bank statements with accounting records to detect discrepancies quickly. - Use of Technology and Cybersecurity
Utilize accounting software with strong security features, including password protection, two-factor authentication, and regular backups. - Documented Policies and Training
Maintain written procedures for financial tasks and provide training to all employees, including seasonal workers, to ensure consistent compliance. - Succession Planning Controls
Create clear structures for financial responsibilities during ownership transitions to maintain continuity and control.
The Benefits of Strong Internal Controls
Implementing these controls helps farms:
- Reduce risk of fraud and theft
- Ensure accurate and timely financial information
- Improve operational efficiency
- Build trust with lenders and investors
- Support regulatory compliance
How De Boer, Baumann & Company Can Help
De Boer, Baumann & Company has extensive experience supporting agricultural clients in developing and strengthening internal controls tailored to their operations. We work with you to identify vulnerabilities, design practical controls, and implement processes that protect your farm’s financial health and support sustainable growth.
If you want to safeguard your farm’s finances and reduce risk, our team is here to help you build a robust internal control framework.