David Dodds is on a mission to transform how agricultural businesses are managed and is recruiting accountants around the world to deliver his vision.
Dodds is the CEO of New Zealand-based farming app developer Figured. In contrast to most farming financial systems, Figured is not just about keeping the accounts. “We’re about adviser-led conversations to improve the performance of the agricultural community,” Dodds said at an event to launch Figured in the UK last week.
“People think farming is relatively simple, but it’s becoming an incredibly complicated business. Farmers need to be experts in more and more things: agronomy, soil analysis, animal welfare, health & safety… Farmers are good at things they can see and touch, but increasingly more of their work is less sensory than planning and analytical. That’s quite a substantial change.”
There’s a worldwide image of farmers as strong, independent people who can go it alone, he told accountants at the London launch meeting: “We think they are going to need more specialist advisers around them. They need the support of a forward-looking trusted advisor for financial advice, planning and management. People like you will help this industry transform.”
Having achieved a 50% share in its home market since Figured launched three years ago, the company expanded to Australia and then broke into America at the beginning of 2018.
The UK is next on the Figured plan for world domination. Working hand-in-hand with Xero, Figured has recruited a small group of pioneer users and is now rolling out the app to the wider UK market.
Uncertainty offers fertile ground
Rather than putting off Figured’s expansion plans, the UK’s unique circumstances were an attraction. Looking at some of the challenges facing British farmers, Dodd saw HMRC’s Making Tax Digital (MTD) project as a trigger. “MTD is forcing people to re-evaluate how they operate. That’s a macro force for change in accounting,” he said.
“Open banking is also landing at about the same time, forcing a rethink about the future of banking and for agriculture. Those things may not be live in other markets. If we miss out the UK, we will miss out on that change.”
Brexit was another factor: “Uncertainty is a time where there’s more focus on trying to understand the potential financial future. You need to have way to look at that. Those macro issues made things look interesting to us.”
The UK farming sector poses other challenges for agricultural software developers. Figured started in New Zealand, where its initial functionality focused on dairy and livestock farming. Breaking into North America required it to enhance the arable side of the application.
Each of these functional strands is handled by separate modules, or “trackers” in Figured-speak. That flexibility is well suited to farmers in the UK because of their increasingly diverse approaches, extending to tourism, property rentals and food processing.
“The UK is moving from farming to increasingly diversified activities. To make the business sustainable, it can no longer be a single industry,” Dodd said.
The Figured trackers can combine all these revenue streams or report on the performance of multiple farms within a group in a consistent way. Part of that formula comes from the close links between Figured and Xero.
Agricultural accounting ecosystem
“There’s an ecosystem building around Figured and Xero and agriculture. We see banks helping accounting practices adopt Figured and accountants talking to processors and linking them into Figured to get a data feed,” Dodd said.
Work is continuing to plug Figured into the Xero HQ practice app platform and pull data in from other sources including John Deere farm machinery so daily planting, fertilising and harvest data can go straight into the reporting system.
As part of its development roadmap for UK farms, Figured is building in specific tools to accommodate the specific VAT calculations, payments and refunds that apply to UK farms.
The VAT enhancements will be accompanied by a new production tracker that will be able to report by crop, field or any other unit and allocate expenses against it. The aim is to be able to generate a market-based balance sheet taking into account crops on hand, seasonality and the like to support top-down planning.
“It’s about allocations against costs. Then income will come next and reporting will be based on that. You will be able to do proper gross margin and break even analysis,” Dodd said. “If you know truly what is going on in farming operations, that can influence decision-making. We think that’s quite different from what you can see in other farming systems.”
It’s a heady message that begs the question whether UK farmers and their accountants can see beyond the basic compliance and reporting issues thrown up by the EU and MTD to embrace data-driven farm management.
Dodd responded that Figured has seen an evolution in this direction in its other territories: “Three years into the experiment in New Zealand we’re seeing a change. Initially accountants were drawn to Xero and Figured by compliance because that was the way the industry was going and we had a good solution. I never thought they would take an interest in planning, but that has really changed.”