Saturday, June 26, 2010

Equine Accounting: These are the days of our lives...

In this era of Facebook, Twitter and YouTube, people document a lot of information about their lives - where they are, what they think and who they know. Documentation for business purposes is far less common but some might argue (particularly the IRS) far more necessary. What types of documentation does your business need and for what purpose?
Written Documents:
1. Contracts: boarding, training, leasing, sales, etc. To avoid any confusion or disagreement after the fact, you should document all of the terms of the arrangement in a contract. If it is a contract that you will use on a regular basis, such as a boarding contract at a boarding barn, you should have an attorney that specializes in equine law review the contract periodically.
2. Receipts: for all business expenses. When you get the receipt, take the time to write notes on the back regarding what the business purpose of the expense was - e.g. lunch with Sparky's owner, Chris, to discuss her show schedule this year. By tax season of the following year, you may not remember anything about the business purpose for the receipt so make a note when it happens. If you cannot document the business purpose of the expense, it may be disallowed by the IRS.
3. Daily Journal: Find some way to keep a daily journal of relevant business activity and ideas. All the information doesn't have to be included in one source document but there are a lot of pieces of information you need to include.
Let's use one day at a boarding and lesson barn as an example. Your day sheets should include the time of the lesson, the name of each student and the horse they are assigned, the name of the instructor, any management notes (use a different bridle, payment owed from last week, etc.), instructor notes after the lesson and payment information (paid with check # 123 for $45). There should be instructor notes for each rider every week. In one legal case, the lack of instructor notes was used by the plaintiff's attorney to attempt to prove negligence by the instructor.
Your day sheets will also be used for internal control purposes to track that each student has paid for their lesson and that all checks have been deposited to the bank.
You should also track daily farm activities and note any unusual occurrences. Document your order from the feed and grain store, the farrier's visit (who was shod, what customers owe you for holding their horse, etc). Make extensive notes about any activity that could possibly have legal/medical repercussions such as a bale of hay falling from the loft onto an employee, a horse demonstrating symptoms that could be the beginning of colic, etc.
4. Travel log: For any auto travel related to business, the IRS requires that you keep contemporaneous records which should preferably include the date, the business purpose (who and why) and the beginning and ending readings on the odometer. Remember that trips to the Post Office to mail marketing materials, the office supply store to buy file folders and other business related auto travel are all deductible.

Photo/Video Documents:
1. Marketing documents: Take photos/video of happy students, training horses going well, whatever your marketing focus - visually document your successes and use it in your marketing materials. If you are a clinician and want to expand your target market, create a DVD of one of your clinics, with snippets from various riders and send it to the appropriate potential clients.
2. Client relations: Use your happy student photos as Christmas presents for students or parents of students.
3. Insurance documents: Photograph the tree that fell on the fence BEFORE you begin to remove it. Take a photo of your boarder's horse after he is released from being cast in his stall to document his injuries (or lack of them).
4. Sales videos: enlarge the geographic market for your sales horse by posting the videos on You Tube and various equine sales websites.

When in doubt, write it down or take a picture of it! Your business will probably benefit from the information