The whole purpose for establishing an enterprise is to obtain income in terms of dividends which are shares of profits, but principally to maximise long-term owner’s wealth, which is the appreciation of the market value of your shares or looked from a different angle the growth of your net assets. To start the business, finance is required and sourced at the least cost, hence different sources are looked into, such as debt or owner’s equity or a mix, in such a way that the weighted cost of capital is low.  During the period of the business, short-term funding will also be needed to meet the medium and short term needs, and similarly from different sources  such as bank loans & overdrafts, leasing finance etc.   There are complex decisions we need to make during the business, short-term decisions such as whether we produce one product more than the other, how we need to manage costs, how to price etc., as well as long-term business decisions such as whether or not we buy a new equipment or invest in other agricultural products etc. for which we invest over a long period in the midst of uncertainty. It is very clear from the above that financial management is key to business. Survey after survey indicate that poor financial management is the number one cause for business failure, including businesses in the agricultural sector.

Financial Management is critical in all sectors and that includes in the agricultural sectors. The Agricultural sector around the world has enjoyed state subsidies; while such could be argued to be necessary because of the nature of the product ‘food’ a basic need’ but farmers have struggled to engage proper financial management practices even beyond the subsidies.


Many organisations take the role of financial management, and indeed the role of the finance staff as merely production of financial statements. There is overemphasis on financial reporting followed by external auditing. We cannot underplay financial reporting as it is needed for compliance and for communication with shareholders and capital providers. Auditing is critical especially for bigger organisations, public institutions, banks and deposit takers, where assurance is critical, and I believe that is also important for the agricultural businesses as a means to safeguard assets. However, the overemphasis on financial reporting has given greater emphasis on financial operations (financial accounting and procedures), and we often look at the Chartered Accountants as mechanics of financial operations and judge their competence in producing a good set of financial statements.  It has become common to refer to these professionals as ‘bin counters’, mainly because parts or inputs during the Western industrial age, were put in bins in the mass production lines, and accountants were counting the number of inputs as part of their financial operations. In the pursuit of this great work, we miss even greater work that gives that properly positions the role of Financial Management in business.

As can be seen from the introduction, business is about money, and money is needed to start and continue the business, and any wrong money decisions lead to wrong business decisions and vice versa. We can easily conclude that finance is lifeblood of any business organisation, even non-profit organisations as there has to be ‘value for money’ in its operations and as a goal. The questions is often if the business managers and owners are aware of the importance of finance in a broader sense than merely financial accounting operations and reports. While Chartered Accountants have been referred to as ‘bin counters’ I would like to bring the analogy to farming and call them rather ‘bean counters’, and more than that, I should state that good Chartered Accountants when so allowed by their clients and employers, they are ‘bean growers’.  At RL Consulting, in our financial director outsourcing division, we emphasise the latter (growers) while not compromising the former (counters).  The proper role of Finance in organisations cannot be overemphasised. In the United States, the Sarbanes Oxley Act gives proper perspective in that the Chief Financial Officer (CFO) together with the Chief Executive Officer (CEO) can be imprisoned up to 21 years for their failures. Of the Executives, it the Finance Executive who is picked to be of greater fiduciary responsibility, and that on its own shows the expected role of the Finance function.  In a number of jurisdictions, South Africa being one, listed companies must have at least the CEO and the CFO as Executive board members.

The agricultural sector has to take on board the importance of finance regardless of the size of the ‘business owner’.  I purposely call a farmer a business owner, because that is what he actually is, and that is how he or she needs to understand himself / herself. We need to see incorporation of farming business (move from sole trade to companies), we need to see mergers and acquisitions, and we need to see share trading of farming companies, even here in Lesotho.  Financial management is the key catalyst to growth.


In the US, Accounting falls in the top 5 fastest growing consultancy services. In India, accountancy outsourcing is a growing opportunity. Indeed there is a link between the economic growth and sustainability and the accountancy service quality.  In our jurisdiction, Lesotho, the link may not be seen, and it is not so much that we do not have services of Chartered Accountants, but that we are not placing Finance in its proper position.  Finance Unit is not an equal of other other units it is the heart of the business. Finance is not a function but rather a cross functional function that cuts across and influences other units such a production, marketing, human resources etc. as for as long as the decisions those units make have a financial effect (which they do 110% of the times), the ‘veto’ power of the CFO is needed.  With the new role of the CFO and new fiduciary responsibilities, the board decisions have to be funnelled through decision processes and policies designed by the CFO.  In South Africa 65% of the listed companies are Chartered Accountants, in UK the it goes up to 75%, and more and more CFOs are being promoted to become CEOs. This is not a means of promoting Chartered Accountants, but rather talking about restructuring our own organisations to ensure that Finance plays a proper role as life blood for organisational success.

The organisations need to review their businesses and ensure that the Finance Function plays the rightful role. It is critical to have a Chartered Accountant at the helm of the Finance role and that the finance function plays a role of business partner or strategic partner rather merely counting the ‘beans’. The top of finance should concentrate more on strategic role where his or her inputs are on risk management, governance, strategic management, business performance management, investment decisions, cost restructuring, business processes restructuring , internal control reviews etc. rather than the production of financial statements. Businesses often employ the junior (lower qualified) accountants (as employees or their outsourced accountants), and that is good as they may be able to run financial operations, but do not expect that they can be involved as business partners as they may not have the appropriate training as yet, hence my emphasis on Chartered Accountants who can play that role well. It is critical that young chartered accountants should be ready to play that role and obtain appropriate experience, rather than look building money (high salaries), they rather build careers, even if salaries start low.

As a farmer, to be worried that the issues the formal financial function is not in place, where it is not in place.  The finance function in agriculture is as critical as in any business.


We will be going more distance on this topic of Finance, and we will be discussing important financial management techniques to help businesses to grow. We had to start with this element of finance because that is where it all begins, getting the right people in the right positions and roles. At RL Consulting, we often find resistance from clients when we do Finance Restructuring for them, and that is mainly coming from not understanding the new role of Finance if building successful businesses.

You need to remove the barriers that keeping a few records for Lesotho Revenue Authority and for requesting loans from the bank is if anything an inhibitor to growth. You need to set out a proper finance function, either physically in the business or outsourced to a capable firm. It makes you think, doesn’t it?


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