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When Outsourcing Makes Sense

Every spring Perry Hansen puts together a file on his Garden City, Kansas grain and livestock farm and ships the papers off to an outside accountant, who prepares the farm's tax returns. What may seem strange is, Hansen himself is a CPA with a B.S in Accounting. He's worked in a regional accounting firm and serves as controller for a western Kansas equipment dealership.

So why not handle the farm's taxes himself?

"It's good to have someone from the outside looking at our work to see if there's something we missed or if we could handle something differently," says Hansen. "It's good to have a security blanket to fall back on in case we have an audit."

Hansen is not alone. As farms grow, more operators see themselves as CEOs of a business and choose to relegate certain tasks to outside experts.

According to a Farm Futures survey, bookkeeping and marketing are the most common management tasks outsourced by farmers.

According to our survey production practices like herbicide and spraying applications, along with trucking, tend to get outsourced, probably in response to a lack of manpower or time during planting and harvesting.

Those who outsource production tend to be smaller, especially those outsourcing planting and pesticide application. According to our survey, manure handling and application is another popular outsourcing task.

"When you outsource tax or other accounting needs, you end up getting higher quality reports because of the expertise offered in those areas," says Paul Ellinger, University of Illinois ag economist. "Outsourcing will leave you with a better product and a better decision-making framework because you have an expert giving you that feedback."

The people who are happy to spend money for outside expertise realize that information is valuable, says Ellinger.

"Not only is it more efficient, in terms of hours in a day, but individual functions are being done at a higher level so better information ultimately comes back to the producer to make decisions. When they see themselves as businessmen, they realize, some of these functions are better suited to someone else."