Bookkeeping: Getting Started Tips

Are you a small horse program or barn? Maybe you just instruct or train as a hobby, or to support a few friends and family, but you have dreams and aspirations of growing and doing it full time someday - maybe not (that's okay).

Either way, the revenue you bring in teaching lessons is taxable and reportable (sorry). The good news is, with start up and operating costs being so high in the industry and many farms and ranches being zoned for agriculture, there are a lot of incentives and benefits a good accountant can find for you to ensure you are maximizing the impact your business is making while minimizing the impact to your bottom dollar.

Before you really get going, it is important you set up a few habits. These will help you track the information you will need to take advantage of those benefits.

Start keeping (or asking for) receipts right away.

If you ever get audited (not uncommon if your place of business is zoned for agriculture) you will need support for all of the costs you claim in your business. Yes, this means everything. Ask your farrier/vet/chiropractor for a receipt. If they don’t have one, pay with checks or via a payment app so that you have an trail of the payment/cost.

I keep all of my digital receipts in a folder in my email that I can easily find and I keep an envelope of receipts on my desk to take pictures of and upload to a folder on Google Drive so I don't have to hold on to a ton of paper. 

Block off time at least once a month for bookkeeping.

Set aside some time regularly to enter your transactions. However long you think it will take, it will probably take longer. Just schedule the time and get it done or do it more frequently so it’s not such a burden on your time all at once. It’s not worth the hassle to wrangle all of the materials together during tax season. When you don't do this you have a high chance of missing out on tax incentives and breaks because you don’t have the proper support to record all of the transactions you had during the year.

During this time I typically: 

• Make sure all of my email receipts are in the right folder

• Take pictures of my physical receipts and upload them to my receipt folder on Google Drive

• Add my transactions for the month into QuickBooks or a Sheets/Excel file. (In QuickBooks you can generate invoices for clients who need or want them and you can attach the pictures of your receipts to their corresponding transactions, however there is a monthly fee. Early on, Sheets/Excel will probably work just fine. There will be a templated file in the Equestripreneur Community membership that you can use to get started). Remember to include all of your cost/expense and revenue transactions. 

Do you travel? Keep track of how many miles you are traveling for work.

There are tax deductions you can take that are based on the number of miles you are driving - but don’t guesstimate. If you get audited you may find yourself losing out on the benefits of these tax breaks when you can’t produce the proper documentation and having to pay back the difference.

Here’s how I do it:

• When I travel to a new place (a new student, to pick up hay or grain, to the vet, etc.) I map it to find the distance I will be driving round trip.

• When I do the drive I mark it on my notes app.

• When I do my once a month bookkeeping update I add them all to a running list with a total at the bottom that tells me how many miles I’m driving for my business.

This allows me to multiply it against the current rate to maximize on the business travel deductions when tax season rolls around. If you have more complex tracking needs pertaining to travel, for example several horses you’re splitting the costs between for a show or a run to the vet, take a look at the StablePro app. It is great for things like that and takes all of the guesswork and complexity out of the process for you.

Distinguish between Start Up Expenses and Operating Expenses

This is a big one and here’s why. The IRS permits deductions of up to $5,000 EACH for startup and organizational expenses in the year your business begins, provided your total startup costs are less than $50,000. Expenses beyond this limit can be amortized over 15 years. We all know that the start up costs for a new horse business are pretty high. When margins are slim early on that $10,000 potential in deductions will make a huge impact on your bottom line.

So, what is a start up cost versus an operating cost? Well, the things you need to run the day-to-day of your business are operating costs: hay and grain, farrier visits, etc. Things that you need to start and expand your business are start up costs: tack, gear for students/clients, even things like new blankets and fly masks for a new lesson horse (by the way, horses can be amortized over a period of several years, like a truck or trailer, so they are treated a little bit differently than these things).

Make payments easy, for you to keep track of and for your clients to pay by having App payment options.

I know that much of the equine industry still operates off of cash and checks. While that’s all well and good, it can make it harder for you to keep track of, and prove, your costs and revenue at the end of the year. If you use cash/checks, make sure you have some sort of record of it so that you can get the credits and deductions you deserve as a result of the transaction (an invoice, receipt, etc). If you want to make it even easier on yourself and your customers (who probably aren't carrying around cash or checks on a regular basis), consider setting up alternative forms of payment for your business. Apps like Venmo, Cash App, Square/Stripe, and PayPal can all make this process easier: 

• Transactions are automatically tracked for you within these apps and oftentimes you can do a data export for a set time (like the last month or calendar year) and simply pull all of your transactions at once for input into your bookkeeping method of choice. (Don’t forget to record transaction fees when you do your bookkeeping! They will count as an operating expense when calculating taxes.)

• Your customers will appreciate all of the options to pay before, or at, time of service (depending on how your equine business is set up). It gives them the chance to select the method that is easiest for them.

If you do decide to set up apps for your business, I recommend creating separate accounts for the business, as opposed to using your personal accounts, to make tracking easier for you.

Tip: When I first started teaching I had trouble keeping track of cash payments for lessons. Ultimately what served me was inputting all of my lessons into my calendar app on my phone (doing this helped me on so many levels beyond tracking payment - quickly getting a glance at my schedule, figuring out horse/rider pairings ahead of time by looking at my full list of students for the day, being mindful of where I had free space in my calendar for other projects, etc). When I got paid in cash I updated the name of the appointment(s) in my calendar associated with the payment to say CASH at the end. At the end of the month I would simply review my calendar, add up all of the cash paid lessons for the month, multiply that by my lesson cost, and voila - I had the total of all of the cash revenue I made for that month. You could also keep track in your notes app, which is likely easier with smaller programs.

So, have you set up processes to keep track of your bookkeeping throughout the year? Found other helpful tips and tricks through the course of running your business that would be helpful for the community? Share your tips, or let me know which of the above you will be adopting, in the comments below!

Hugs and Happy Riding,

Kristin

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If you have questions, want help with your business operations, or want to learn more about the Equestripreneur Community, don’t hesitate to reach out. 

Equestripreneur offers coaching and community for equine business owners like you!

Learn more about author Kristin Bowers.

Blog posts from Equestripreneur are not meant to replace individual professional advice, which will best inform personal circumstances.