Editor’s note: Whether you have a private farm or a public stable, you need to keep an annual inventory of equipment that your equine business owns. This is the fourth in a series of five articles about inventory for your equine business. To read the other articles click on Articles>Stable Management in the top toolbar.
Equipment is a vital part of your stable. Whether it’s a tractor, truck, utility vehicle or the saddles and bridles used in your lesson program, equipment is necessary for your business to operate. Keeping a detailed, itemized list of all the equipment your equine business owns is imperative to the long-term health of your business.
From an accounting standpoint, equipment is considered a long-term asset and is not considered “inventory.” In the tax realm, inventory is something that is consumed or sold within one year. Instead, equipment is depreciated over some useful life.
“Something like the cost of hay is an expense within the year it is used, but the cost of something like a tractor or drag is spread over multiple years of useful life,” said Oklahoma State University Regents Professor Phil Kenkel, PhD.
Even though these items are not considered “inventory,” it’s crucial to keep an updated record of the equipment. Businesses do need to keep a record of equipment and long-term assets for depreciation purposes, the determination of your business’ net worth and for insurance.
“Long-term assets usually are specifically identified by some sort of serial number, manufacturer’s description or an identifying code created by the business,” Kenkel said.
An equipment listing can include individual identifying numbers such as bar codes used in supermarkets or big-box stores. Or you can create an identifying system. For example, it might be a combination of the year the item was purchased a brief description: 2016-JD-Utility.
Spreadsheets are one option for keeping track of equipment, but not always the most efficient or effective. A user-friendly equipment management software system is the best solution for your business. These programs automate a lot of the background work, including depreciation calculations, freeing up your time to focus on the horses and clients in your care.
To get started, ask a local cooperative extension agent or an accountant for advice.
Also, make sure to store copies of any records away from your equine business in case of natural disaster, fire or theft.