Editor’s note: This is the second in a five-part series on inventory for horse farm and stable owners. Search under Articles>Stable Management for others in the series.
The word inventory is often used to describe a stable’s listing of assets, such as tack, hand tools and equipment. However, from an accounting standpoint, an inventory is a record of expendable supplies that are used within one year. However, you should do an annual listing of both types of inventory for accounting as well as insurance and tax purposes.
Regardless of the inventory listing you’re keeping, an electronic tracking system is probably better than a paper record, said Oklahoma State University Regents Professor Phil Kenkel, PhD.
But, in his opinion, a spreadsheet is not the ideal platform for tracking inventory.
“There are many simple accounting programs like Quicken and Quick Books that allow the user to easily enter the business transaction and the program does the inventory calculations automatically,” he said.
Sticking to the accounting definition of inventory, those items normally used within a year (such as hay, feed or medications), the inventory record needs to include a unique and consistent item description, the date of purchase, the number of units and the total price.
“If the items were uniquely identified, then the record would include the identification code,” he said.
For example, a stable that also sells tack as a side venture has to record the sale of those items. If a saddle is sold, then the price and item code is included for each saddle. The item code should include the manufacturer name, the serial number on the saddle or a unique code that the stable created for the saddle when they first purchased it.
Consistency is key with inventory record keeping. Each item that is recorded into an inventory list must be identified.
“A common problem in business inventory, even when it is computerized, is confusion over the item description,” Kenkel said.
For example, if one person records hay as simply “hay” and another employee enters it as “grass hay” and a third person identifies it as “timothy,” the records of sales and purchases soon become confused. The best way to avoid this is to limit the number of people recording the inventory and creating a shared definition for the items included.