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Creating Your First Equine Business Budget
Equine Accounting
Wednesday 20th of July 2011 11:18 AM

When you decided to start your equine business, you may have been overcome with excitement to finally get to pursue your passion and share it with others. No longer would you have to work for someone else at a job you may have only taken out of necessity. Now you could spend every single day doing what you love and for the most part that is probably true. However, as many equine business owners have found, suddenly their fun pursuit has some additional strings attached. Budgeting and financial management must now be added to the pursuit, which for most of us, wasn’t part of the passion for creating the business in the first place. Quite often the business was started on a shoestring, so it especially critical to have a sound budget and plan for managing finances.

Here are a few pointers to get started:

Carefully consider how you are spending your money. A budget works if it reveals to you the ways in which you're overspending and the ways in which you're under-spending.

A budget should show where you want to be financially. Ask yourself what areas you feel are truly vital for the growth of your equine business and what it will take as you gain more customers and strive to maintain your level of quality.

Budgets are a work in progress. A budget for the following year is merely a guideline. When things go unexpectedly, adjust your budget and work from your new guidelines.

Don’t make it complicated. Don’t make your budget so complicated that it is no longer a helpful tool to use. Make your budget comprehensive, but not to such a level of detail that it is difficult to work with.

Seek help when you need it. If you are overwhelmed or stuck on your budget creation, seek the advice of a professional. A bookkeeper can save you time and headaches when creating a budget. You will be better off in the long run by having an expert help you set up your budget and eyeball the numbers.


Improve Profitability with EQ Bookkeeping
Equine Accounting
Friday 8th of July 2011 07:14 AM

If you have read any of the articles I’ve written for this magazine, you likely know I always write about business-related issues pertaining to the Arabian industry.  This month I was asked to write about my business, EQ Bookkeeping, and the services we provide.  I have never written about myself, so this is a new adventure for me.

 

EQ Bookkeeping provides accounting services solely to the equine industry.  While the services we provide are vast, the primary functions are day-to-day accounting, tax preparation services, and consulting.  What does this mean? 

Shouldn’t that be obvious? 

Well, maybe not.  Recently, I was chatting with a judge from the Region 13 show, Brian Ferguson, and he asked me if EQ Bookkeeping tracked farm expenses.  I said yes.  He asked if it managed cash flow.  I said yes.  Then he asked me what hardware requirements it had.  I was initially confused, and then I realized he thought EQ Bookkeeping was computer software.  I was quick to point out that we aren’t a software program, we are people.

It was at that moment I realized that what I thought was obvious, wasn’t obvious to all. 

So what is EQ Bookkeeping?

We are an accounting firm.  We have a staff of accountants who work only with horse business owners.  Our clientele includes breeders, trainers, farm owners, veterinarians, farriers, and other horse related businesses, including the shows themselves.

What does EQ Bookkeeping do?

Our services are wide-ranging and flexible.  We don’t do exactly the same thing for all of our clients.  For some of them, we do EVERYTHING:

·         we pay their bills

·         invoice their customers

·         collect money from customers who haven’t paid 

·         process payroll and file payroll taxes

·         manage cash flow

·         create budgets

·         give advice about purchases

·         help secure financing money

·         prepare income tax returns at year end

·         give tax related advice. 

We also negotiate with vendors for better pricing, analyze operations and provide recommendations for more profitable changes.   For others, we only provide some of these services.

However, our goal, and THE most important thing we do, is to help the business owner make more money! 

Believe it or not, horse businesses can be profitable! And our goal is to help them get there.

After explaining this to people, the next question I am always asked is: How do you do that?

And I always answer “It’s simple.”  At least it is for us.  The typical business owner sees accounting as an annoying necessity that has to be done at the end of the year to determine how much tax needs to be paid (or how much of a refund they will be getting.)  Accounting is really a daily process of business tracking to provide factual data that can be used to make all business decisions.  Thus accounting is THE most powerful management tool.

Why is this important and why do people hire us?

If you are a horse business owner, you don’t have time to sit in an office crunching numbers.  You didn’t get into an equine business to do accounting.  Your time is better spent working with horses and riders (doing revenue producing activities.)  Not to mention the vast majority of you HATE accounting so you put it off until absolutely necessary. 

It is important for you to know that putting off accounting can be detrimental to your business.  Here are just some examples of how not doing accounting routinely and understanding the numbers had a huge negative effect on a business.  (I will try not to get too “accountant like” in these examples.)

1)      It was October 2009 and a breeder in Florida needed a new tractor to mow the hay field.  He really didn’t think he could afford it at the moment, because he knew he needed to save his cash for his estimated tax payment due in January.  He decided to put off the tractor purchase until spring and rent one in the interim.  However, if he had bought the tractor in 2009, he would have been eligible to accelerate the depreciation and actually lowered his tax payment in January.  He would have known this had he spoken to his tax professional.  He could have afforded to get the tractor when he needed it.  He also wouldn’t have wasted his cash on equipment rental.

2)      A trainer was charging $0.55 per mile for hauling to/from shows.    He had analyzed the cost of fuel and knew the money he was receiving was covering the fuel cost.  What he didn’t take into account was repairs or wear and tear on the truck and trailer.  When we did a complete analysis, we found he needed to be charging $0.67 per mile just to cover his costs.  Because of this oversight, he lost $3,267 in 2010.  And when the trailer needed a $2,500 repair, he had difficulty funding the repair cost.

These are only a couple of examples…I could give you many more. 

The last of the major services we provide is collections.  Yes, we call on your clients to collect the money they owe to you.  It is very difficult for you to be the “bad guy” and collect money.  It puts you in an adversarial position with your client, which is not productive and causes difficulties for you to do work with them and their horses.  It is easier for us, an unbiased third party, to contact them on your behalf and they typically will pay us faster.  Since we are an accounting firm, and not a collections agency, we don’t have the negative stigma associated with collections.  We are simply the accountant trying to do accounting.

Earlier this year, we added a new equine mobile veterinary client who came to us with $48,000 in invoices that were over 90 days past due.  Within 45 days, we collected $28,000 and within 90 days we had collected over $45,000.  Collections is about having a system, and it is very difficult for equine business owners to manage a collections system when they are working with horses in the barn. 

How do we actually do the work?

We are very technology driven.  We don’t use any fancy equine accounting software.  We simply use QuickBooks.  It allows us to manage all of the accounting functions including segmenting revenue and costs by show, location or other differentiator.  We host a QuickBooks file for all of our clients and provide on-line access for easy retrieval of financial information. 

We receive detailed transaction information online from our customer’s bank or credit institutions and pay their bills using online bill pay from their bank.

We receive other information, like show closeout sheets, in a variety of ways.  Some of our clients like to fax, some like to email and others upload the scanned documents into our online shared Dropbox.  There are also a few who still like to send information via postal mail. 

We communicate via phone, email and text messaging.  We understand that those in the equine world don’t work 8am to 5pm so we are available evenings and weekends (usually from our barns.)

Now that you know what EQ Bookkeeping does and how we do it, there is only one remaining question:  How much does it cost?

By far, the reason most equine business owners are afraid to call us is because they think they will never be able to afford our services.  They have the perception that it will be cost prohibitive.  They think “I pay my tax accountant $150 per hour and it takes 8 hours each week to do my own accounting, so this will cost me nearly $5,000 per month.”

There are two things wrong with this assumption.  First, we don’t charge $150 per hour.  Second, accounting is all that we do and we are very efficient at it; so what may take you 8 hours per week, takes us much less. 

So how much does it cost?  The answer is “it depends.”  We analyze each client’s needs individually and provide a free quote in advance so you know what to expect.  Our smallest client pays $250 per month for basic service  and our largest client pays $2,000 per month for all of the services we offer. 

EQ Bookkeeping is a business I started to fund our family hobby and has grown into a business filling a huge need in the equine industry.  We love being able to bring accounting structure and order to a world where chaos is the norm. 

We want horse business owners to focus on what they know best, horses, and let us focus on the day-to-day accounting.

Jennifer Foster, President of EQ Bookkeeping LLC, www.eqbookkeeping.com



Does Your Equine Business Stand a Chance of Succeeding?
Equine Accounting
Friday 24th of June 2011 07:51 AM

I’m sure you have seen them -- dozens of empty storefronts in strip malls that were once occupied by small businesses. As I drive by, I often wonder what happened. Was the rent too high? Poor management? No demand for the business’s products or services? Or was the business doomed from the start by not preparing a break-even analysis before launching full speed ahead? Although you cannot tell for sure if your equine business is going to be profitable, you can certainly research the financial soundness of your idea and the best way to do that is through break-even analysis.

Break-even analysis allows you to determine the business income necessary to pay all your business expenses. At the break-even point, a business doesn't make any money, but also doesn't lose any money. In general, you want to know a business's break-even point because it represents a sales level you must surpass to make money. You'll have to make educated guesses about your expenses and revenues. You should do some serious research, including an analysis of your market, to determine your projected sales volume and your anticipated expenses. You’ll need to estimate your fixed costs and sales revenues and then calculate your average gross profit for each sale and average gross profit percentage. Once you’ve done that, simply divide your estimated annual fixed costs by your gross profit percentage to determine the amount of sales revenue you'll need to bring in just to break even.

If you can easily bring in more than the amount of sales revenue you'll need to meet your expenses, then your equine business is in good shape. If your break-even point is higher than your expected revenues, you'll need to decide whether certain aspects of your plan can be changed to create an achievable break-even point. If that’s not possible, then you should reconsider starting your equine business. It’s better to learn this ahead of time instead of becoming an empty stable later on.


WHIA Networking Expo Set – And I Am Excited to be Part of a Panel “Making Your Equine Business Profitable”
Equine Accounting
Wednesday 8th of June 2011 11:17 AM

We are very excited here at EQ Bookkeeping! The Women’s Horse Industry Association’s Networking Expo is set to take place in Nashville, TN on October 6-8th, and I get to take part in a panel on Saturday, October 8, on making your business profitable.

 

I have been fortunate to attend and participate for the past three years, and I am still amazed at the wonderful group of women successfully working in an industry that is predominantly male.  I have met some wonderful people and am looking forward to seeing them in Nashville this year, as well as making some new friends.  I am also excited to see what fun and educational stuff WHIA has planned for this year.

 

As you probably already know, as a horse lover and enthusiast, I formed EQ Bookkeeping to provide equine business owners with the financial support they need to operate a profitable horse business. We provides day-to-day accounting, consulting, and tax preparation services to breeders, trainers, riding stable operators, farriers, veterinarians and other equine related businesses.  EQ Bookkeeping services clients throughout the United States and worldwide.

 

Want additional information about the WHOA Networking Expo, please visit www.womenshorseindustry.com or call 615-730-7833. I look forward to seeing many of you there!


Maximize Deductions and Jail Time
Equine Accounting
Wednesday 1st of June 2011 11:31 AM

Tax season has just come to a close and there are probably some tax preparers out there enjoying their Caribbean getaway with all the cash they made. These preparers may have offered clients a bargain price on their returns and promised lots of tax savings. This can certainly sound tempting to a fledging small business owner, including those in the equine business who want the savings and don’t know taxes. In fact, one Midwest tax preparer convinced his home business-based client to go ahead and write off his entire home. Not a good move when it’s commonly known that the Home Office deduction is closely scrutinized by the IRS. 

The Treasury Department conducted a study in 2008 to gauge the quality of tax preparation providers. Staff members of The Treasury made anonymous visits to 28 tax preparation specialists. The results were frightening: 61% were wrong, with two thirds errant due to misinterpretation of the tax code, and the final third of those through intentional misconduct. In the past four years, the IRS has initiated more than 850 investigations into tax preparers nationwide, and more than 600 cases were recommended for prosecution. 

With statistics like these, it’s more important than ever for your equine business and you as an individual to choose your tax preparer with care. Find a trustworthy, reputable accountant to work with not only for taxes, but throughout the year to help with bookkeeping and tax planning. A cut-rate tax preparer may maximize your deductions, but you won’t be able to enjoy it when you are in jail.


Don't Delay on W-9's
Equine Accounting
Wednesday 18th of May 2011 11:00 AM

Outsourcing various duties of your equine business to independent contractors can save you a lot of time and money compared to doing it yourself or hiring full time staff. Making the decision to outsource is easy, but make sure you are aware of the IRS guidelines for paying freelancers.

You are required to report annual payments of $600 or more to individuals on IRS Form 1099-MISC, but before you do that, you need to have completed W-9s from your workers. The W-9 form is most commonly used with freelance employees who are responsible for paying their own taxes. This is one way for the IRS to keep track of what freelancers are making and to check the yearly W-9 numbers employers turn in versus what the freelancers claim they made.

The W-9 is an official request for identifying information for tax reporting purposes and should be resubmitted if the information it contains changes. The form does not have an expiration date, so updates are as needed. Don’t be left in a bind by not having your independent contractor’s information come tax preparation time for 1099s.  Require every independent contractor to submit a completed W-9 form to you before you pay them the first time. That way, you are assured of collecting the necessary information in a timely manner. It’s also a good idea for you to request a new W-9 be filled out each year to ensure accuracy.  My advice – do it now!  Don’t wait until the next tax season rolls around!


Call Now! Seriously??
Equine Accounting
Wednesday 4th of May 2011 11:00 AM

I was waiting at a stoplight on my way to a dentist appointment last week, deep in thought about whether the hygienist would be able to tell I had an Oreo for a snack when a bright yellow hand-written sign caught my eye. I assumed it would be one of the many “Cash for Gold” or “Pillowtop Mattresses – We Deliver” signs, which by the way….who thinks “Wow, great sign!  I should call now!” However, this sign was a first for me; it read “Outsource Your Bookkeeping 555-5555”. REALLY??? Now don’t get me wrong, I’m all for the entrepreneurial spirit, but is this really the way to instill confidence in your potential clientele??  And furthermore what sort of individual would think this is a good way to find a bookkeeper??

Bookkeeping is one of the most essential functions of your equine business and the accuracy of which can determine your success or failure. Three characteristics that instantly come to mind (and should come to mind) when thinking of a potential bookkeeper are professionalism, experience in the equine world and a good reputation. Now these aren’t the only qualities you should look for, but if a bookkeeper doesn’t have ALL of these things, then you should cross them off the list.

Let’s review the handwritten ad at the stoplight. Professionalism? None. My daughter’s sign for a lemonade stand had more thought and effort put into it than that! Experience? They could possibly know something about bookkeeping, but they sure don’t know anything about the business and standards. Good reputation? If they had one before, they certainly don’t now!

Don’t put your equine business’s financial future in the hands of a handwritten street sign advertiser. No legitimate, qualified and experienced bookkeeper or accountant would advertise that way. Do your research and find a true professional. Same goes for mattresses…but that’s just my opinion! 


Retirements Plans for Self-Employed Part 2
Equine Accounting
Wednesday 20th of April 2011 11:00 AM

Retirement Plans for Self-Employed Part 2

Last time we covered a couple of the options (401(k)s and IRAs) that your equine business should think about - retirement savings. All small business retirement plans can help you save a significant amount of money toward your retirement and provide tax advantages at the same time.  Best course of action is to know your options.

SIMPLE IRA

A SIMPLE plan is technically also an IRA but it is designed specifically for small businesses with 100 employees or less, and many equine businesses fall into this category.  The plan is funded by employer contributions and can also be funded by elective employee salary deferral.  Employer can make matching contributions between 1% and 3%. Maximum 2011 contribution is $11,500 with a catch-up contribution for those over 50 of an additional $2,500.

Advantages: Great way for you as the small business owner to save for your own retirement while also providing a way for your employees to save for their retirement as well. It’s easy to establish with low administrative costs.

Disadvantages: Relatively low contribution limits

SEP IRA

SEP stands for Simplified Employee Pension and is also a type of IRA like the SIMPLE. SEP plans are specifically designed for self-employed people and small business owners who typically employ fewer than 25 employees, again many equine businesses fall into this category. Maximum 2011 contribution is 25% of income or $49,000

Advantages: Contributions requirements are very flexible, with contributions being 100% tax deductible which grow tax deferred. Substantial contributions are allowed.

Disadvantages: No additional catch-up contribution allowed. No employee contributions, but employer must establish a separate SEP for each eligible employee with immediate vesting.

There is no “one” retirement plan that is best for everyone that is self employed. How much money your business makes, how many employees you have, how much money you would like to contribute to a plan, and many other factors will help you to determine which option is best for you. The important thing is to start saving and take advantage of tax savings right away.


Just Started an Equine Business? Think About Retirement!
Equine Accounting
Wednesday 6th of April 2011 11:39 AM

Part 1

When you are first striking out on your own and opening the equine business of your dreams, the last thing you might think about is retiring. Without an HR or Payroll department encouraging you to contribute to a plan, it’s easy to let that fall by the wayside. It’s more important than ever when you are self-employed to establish a savings plan, so you will be secure in retirement as well as take advantage of an important element of tax savings. In this two-part series, we will cover some plans available to the self-employed.

401(k)

Self employed individuals can set up a solo 401(k) for just themselves, or if they have employees then they can set up a traditional 401(k) plan to cover themselves and their employees. Maximum 2011 contribution is $16,500 with a catch-up contribution for those over 50 of an additional $5,500.

Advantages: Offering a 401(k) plan is great way to boost employee retention since they are so well known. Contributions are an above the line deduction where money grows tax-deferred.

Disadvantages: Administrative costs are much higher than other options like IRAs and SIMPLE IRAs.

IRA

There are two main types of IRAs: traditional and Roth. Traditional IRA contributions are deductible in the year the contribution is made as an above the line deduction while the money grows tax deferred.  Roth IRA contributions are not tax deductible, but money grows tax free within the account with no taxes due when distributions are made. Maximum 2011 contribution is $5,000 for both traditional and Roth for those under 50 and $6,000 for those 50+ years of age.

Advantages: Easy to establish, enjoy tax deductible contributions or tax deferred earnings depending on the type you choose.

Disadvantages: Not a plan you can offer your employees as a group with contribution matching, you can only make contributions to your own plan.

Next time we will cover more retirement plans such as SIMPLE IRAs and SEP IRAs available for the self-employed.

 


Health Tax Credit for Small Employers
Equine Accounting
Wednesday 23rd of March 2011 11:38 AM

Health Tax Credit for Small Employers

 

The massive healthcare legislation includes a tax credit for small employers, including equine businesses, who pay at least 50% of their employees’ health insurance premiums. Unlike most of the future healthcare bill provisions, this employer federal tax credit can be claimed for year 2010 tax returns due this spring. This new tax credit is reported on IRS Form 8941 – a one page tax form which requires completion of 7 different worksheets to accurately calculate the tax credit. You can review IRS Form 8941 with instructions at www.irs.gov.

 

“Small employers” who qualify for this 2010 income tax credit (including churches and section 501(C) (3) charitable organizations) must satisfy ALL of the following conditions:

 

  1. You paid at least 50% of the “single employee” premium cost for year 2010. Insurance costs are for primary health insurance and dental and vision insurance. Employer contributions to HSAs, HRAs and FSA medical accounts are not deemed insurance and thus are not eligible for the tax credit; AND
  2. You employed fewer than 25 “full-time equivalent” (FTE) employees during 2010; AND
  3. Your “average annual wages” paid to employees during 2010 were less than $50,000 per FTE employee, for this purpose “wages” are gross wages paid before any tax or retirement withholdings.

 

If you meet all three of these requirements, you may qualify for the tax credit. Form 8941 can be very confusing with all the calculations, so please contact your accounting firm or CPA for further information on how you can take advantage of this 2010 credit.


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