All too often I meet with business owners whose only concern seems to be about keeping their finances straight for tax purposes. While this is a valid concern, it takes away from the importance of keeping good financial records for the purpose of growing their business.

One common line I hear a lot is "I just want to make sure I'm doing this right so I don't get in trouble with the IRS." While good bookkeeping is essential in making your business audit-proof, it is also paramount in determining whether your business fails or thrives.

Let's look at some examples of why this is true.

Multi-Service Businesses: Income and Expenses

Many equine businesses perform more than a single service for their clients. Oftentimes, a variety of activities are being offered such as any combination of training, lessons, boarding, coaching, leasing, judging, etc.

In these multi-service scenarios, it's easy to lose track (or never start keeping track) of the income and expenses from and determine if each service is resulting in actual profits or losses.

You may be making money overall, but what if one of these activities was actually COSTING you money to provide?

Do you want to be paying for Sally down the street to use one of your horses? As far as I know, most business owners are in it to make money to support themselves and their families, not pay for other people to experience the joys of the horse world.

Don't get me wrong, it's great to do nice things and be generous to those in need, but in order to grow our businesses, we need to keep track of the money coming and going out in a more systematic and analytical manner that helps us to earn profit and cut waste.

 Receivables Turnover

Do you spend countless hours creating invoices whether it's in a Word document or some other software, just to feel like you're never sure you've actually collected all payments due to you?

I've worked with many businesses who hadn't even realized they did not receive payments from clients for various months until we performed a bookkeeping cleanup.

One reason this can happen is due to the various payment methods being offered. When your finances are scattered across 6 different payment processing platforms: PayPal, Venmo, CashApp, cash, checks, ACH, Zelle, etc. things get confusing FAST. Especially when you are in the barn 24/7 and have no time to keep track. When someone tells you they paid you, sometimes you just decide you have no option other than to believe them.

This should never be the case. If your business is at this point, you owe it to yourself to hire someone to do the bookkeeping. Some of us are able to "do it all," but that doesn't mean we should stress ourselves to the grave trying.

When your receivables are being monitored correctly, it can help you see your turnover ratio and see where you can improve for having collections happen in a timely manner so you are able to have adequate cash flow for your expenses.

Vehicles and Equipment

Are you still footing the bill for taking your own vehicles, trailers, and equipment to shows and events for clients?

Many business owners don't realize there are several ways to make vehicle expenses deductions for their businesses, therefore saving cash.

If the vehicles and equipment are only used for business purposes, considered transferring the titles to the business's name and placing them on your books as fixed assets. You can use the depreciation each year as a deduction on your taxes.

If the vehicles are shared for business and personal use, there are ways to determine what percentage is business vs personal and deductions can be taken on your actual expenses on those vehicles (repairs, maintenance, gas, insurance, etc.). Or you can always track your mileage and take standard deductions on shared vehicles.

In the end, you're turning what had been recorded as "personal" expenses into "business" expenses to save you money.

Home Office

Do you pay out of your personal finances for your home or apartment expenses and various utilities? Does your tax professional ask you about the use of a home office for your business?

Tax professionals are essential to filing your taxes, but they don't always make it their business to ask you about additional items you could be saving with. This can be especially true if your tax pro is not well-versed in the equine business world.

Home office expenses are pretty common for most small businesses, but that doesn't mean everyone knows the rules surrounding them.

If you use a designated space in your home or apartment solely for your business administrative duties, you can deduct a portion of your home owner's insurance, mortgage interest, heating, cooling, electricity, furnishings, etc.

Be sure to always get the guidelines for doing so from your tax or bookkeeping professional. Once again, this is a conversion of non-deductible expenses out of your personal bank account into tax saving expenses to your business.

Extra money anyone?

Conclusion

The examples above are just the tip of the iceberg on scenarios that business owner's may not notice in the day to day operations of their businesses. In the hectic hustle and bustle of the barn, so many things can and do get missed that could either make or break your business.

Once you reach a certain point in your business's life, its growth will be stunted if measures are not taken to ensure every aspect has the correct professional to ensure things run smoothly. Just like a barn manager is eventually necessary to run daily boarder activity, so is a bookkeeper when the daily transactions become a full-time job.