Equestrian Professional s Horse Business Challenge. Member s Support Program Workbook. Steps 1-3

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1 Equestrian Professional s Horse Business Challenge Member s Support Program Workbook Steps 1-3

2 STEP 1 Get Your Books Ready for Year-end Step 1: Complete our bookkeeping checklist and get your books ready for year-end. Here is a list of these tasks from (our recent tip of the week)with check boxes. As you complete each task, check the box. I a task is not applicable to your business write NA in the box. If you are participating in our one-on-one Support Program please turn in your checklist and write down any questions you may have on the bottom of the page. Please include the number of the task. 1. Make sure your employee and vendor information is complete. You need the current address, social security numbers, or company tax identification numbers for the W-2's and 1099's that you need for tax reporting. Tip: Put a note in with the next payroll or vendor check asking to update any new information. 2. Start thinking about any special items you will need to record such as 401(k), Health Savings Account (HAS) contributions, bonuses, or fringe benefits. Fringe benefits can also be noncash items such as a company car or free board for an employee's horse. Remember these items must be recorded prior to Dec. 31 to appear on the W-2 form for the employee. Tip: Talk with an accountant now to see what benefits must be recorded on the W-2. If you are in a country outside the USA, file the appropriate forms for your country. 3. If you pay estimated taxes, you should be calculating what you need to pay and have that amount set aside. Tip: Look at your tax payment from the previous year and ask your accountant if you have questions. 4. Start now to put together a list of fixed assets you purchased during the year. You'll need the date of purchase, the amount, and whether or not you financed the purchase. Remember that horses qualify as a fixed asset if purchased as a sales animal. You'll also need this information for depreciation. Tip: QuickBooks allows you to scan receipts and attach to your account so that you don't need to hunt for them at the end of the year! 5. Did you dispose/sell of any assets? Did you sell a trailer or a horse? Did you junk a computer? You'll need this information as well for tax purposes. Many local jurisdictions charge a personal property tax. Tip: Keeping your list current will keep you from overpaying taxes. 6. Review your current Accounts Receivable report to assess any problem accounts. Now is the time to address issues with customers with trouble accounts. Tip: offer a payment plan that will get the balance cleared before the end of the year.

3 7. Create an estimate of your income for the 4 th quarter so that you can assess whether your business will have a net loss or profit. If a profit, you might consider a purchase that will have a tax advantage for your business. If a loss, now is the time to actively make plans to address it! Tip: Use your yearend numbers to create a budget for the next year. This takes care of two business needs in one step...and gets your started for a budget for next year! 8. If you've been running your books out of a "shoebox," now is the time to actively consider upgrading to a financial software system - not in December! Doing the work now will allow you time to get everything in place so that you are ready on January 1 st to start your new system. Tip: Start your books at the end of December for invoicing in January so that you give yourself time to work out the kinks. Any questions? Write them below and we will comment on them when we review your list.

4 STEP 2 - Create a Budget Step 2: Create a budget. Below you will find step by step instructions on how to create budgets using both the tools on the Equestrian Professional Website as well as how to create a budget using QuickBooks Desktop and Online versions. Please pick whichever budgeting tool works best for you. If you have completed Step 1 of the checklist, you should have the Profit & Loss done for the first three quarters of the year (through Sept.) and have completed an estimate of your activity for the 4 th quarter, so that you have a basic idea of what your 2015 yearend should look like. You can use these figures to create your budget for Tools on the Equestrian Professional Website You can use our online budget calculator or our budgets in the download library. If you are participating in the one on one support program, the download library budgets are probably your best bet because they will be easy to add to your Dropbox folder. Equestrian Professional s Download Library has several Budget Planners you can use. Here is the list available to you: Horse Business Budget Example This example shows you a sample of what a budget will look like. This is handy if you ve never done a budget before. Look at the set up more than the actual numbers. Everyone s business is different. Horse Business Budget Yearly Budget with Cost of Goods Sold Prefilled Categories. This online calculator is for business owners that want to save time by using our pre filled categories. Horse Business Budget Yearly Budget with Cost of Goods Sold Editable Categories and Horse Business Planner Simple (No COGS) These online calculators are for business owners that want you to set their own categories. Horse Business Budget Planner Simple (No COGS) This downloadable spreadsheet can be used by most businesses that don t need to track Cost of Goods Sold (COGS) in their business. It is a clean copy with no pre filled accounts. The form does have the formulas set up so that it creates totals in each column. Horse Training & Boarding Business Budget With COGS This downloadable spreadsheet is best for businesses that use COGS i.e. boarding stables. Use this budget sheet for complex businesses that have a variety of services. The accounts are pre filled to make the form easier to use. We recommend that you go to the download library and download the Excel spreadsheets. Once you ve done that, save the file on your computer. Then use that form as the template to create your budgets. You can save different scenarios to see how changes to your line items will affect your budget. Another tip for you! To use these budgets, start with your completed Profit & Loss Statement, along with your estimate of your 4th qtr. income and expense from Step 1. Choose the type of budget that best fits your needs.

5 Here is the completed Horse Business Budget Example. You can see that the form also allows you to see your profit margins along the bottom. These formulas are part of the form you can download from Equestrian Professional s Download Library. Now, let s go through the steps to complete the Horse Business Budget Planner Simple.

6 The yellow section is for your company s name. The blue section is for your Income accounts. Use account names that work for your business. Examples would be Lessons, Training, Sales, Commissions, Breeding, or Equine Massage. Name the categories that best suit your business and think about how detailed you really want to go. You could do a broad income category of Lessons, but you could also do: Lessons ½ hr. group lesson ½ hr. private lesson 1 hr. private lesson Decide what information you want your books to give you. If unsure, start out with broad categories and then see how you want to break it out later. Remember, what you decide to use is how you will need to record the information going forward. So, in this example, if you use designations for lessons, you ll need to make sure you record that income by lesson types so that it can be categorized correctly. The pink and blue sections are for your expenses. Choose names that make sense to you. This isn t a complete list, it shows you some examples of what you could use. Employer SS & MC is the Employer s portion of Social Security & Medicare taxes that are paid on employee s wages. This is an expense that you need to calculate if you have staff. Another useful tool to estimate the true cost of employees is the Payroll Calculator in the Calculator & Tools section. As you can see by the above example, an employee at $10 per hour for 25 hours a week

7 doesn t cost the business $250. The actual cost with the employer portion of SS and MC, plus the other payroll expenses (FUTA, SUTA, and Work Comp), actually cost the business $ per week. You can use this calculator to work on the figures you need for your budget for payroll. Once you put in all your income and expenses, the Budget Planner will calculate the totals for each line and column. Here s the sample showing you how the form creates the totals across for each line, and populates the bottom as well. Once you get the budget where you want it, you can print a copy for your records.

8 Here s a word of caution when using Excel Spreadsheets make sure you are careful about changing formulas in the cells. Remember that you should only be accessing the cells within the columns and not the total or ending columns. If you put a hard number in those spaces, you ll remove the formula that is set up to calculate totals. Doing a Budget in Quickbooks Using A New Account in QuickBooks If 2016 will be the first time you ve used QuickBooks (QB s) for your financial records, use these instructions for setting up your very first budget: On the main screen, in the grey bar along the top, go to Company > Planning & Budgeting > Setup Budgets For our purposes, we ll be setting up a Profit & Loss budget, which is what most businesses will use. Select 2016 as the year you want the budget created for.

9 On this next screen, chose the best situation for you. If you are using the Class Tracking and want your budget to reflect classes, select this button. For our example, we ll select no additional criteria. The next decision is whether to create a budget from scratch or from previous year s data. Since this is a brand new file, you don t have data in your QuickBooks file, so chose Create Budget from Scratch. Or, if you have a QB s file but don t want to use the current data, select this option as well. (For those having a current QB file that you want to use the data, don t follow these instructions beyond this point because there is a special tip for you later in the instructions that will make your budget creation much easier!) QB s will populate the accounts using your Chart of Accounts listing. So create all your income and expense accounts first. Don t worry, you can always add (adjust your budget) later as well.

10 Using your Profit & Loss Report, populate the budget row numbers. Make sure the Budget in the top is for FY2016. Click OK as you go to save it, and then click Save when you are finished. Then, go back to the main page and review your new budget. To see it, go to the grey bar again, and click Reports > Budgets and Forecasts > Budget Overview and select the newly created budget (It should be FY2016 Profit & Loss by Account) Click next for the report layout, and then finish. QB s will create your new budget. You can also include your Profit Margin by customizing your report. If you go to Reports > Budgets & Forecast > Budget vs. Actual, QuickBooks allows you to customize your report. When you generate the report, it will give you the ability to modify the report (Cash or Accrual, display columns, date range, etc.) On this screen you can choose to add subcolumns that show % of Budget. This is how you can add your Profit Margin as a percentage to your report.

11 Congratulations You did it! Current QuickBooks Users For those that have been using QuickBooks to record your financial records, you have a bit more information available to you for use. Again, if you ve followed the steps in the Checklist, your Profit & Loss Report should be through 3 rd quarter, and you should have your estimate of 4 th qtr. ready (Step #7). Here s a great tip that will help you create your 2016 Budget using the information already available to you in your QuickBooks 2015 file. If you try to go in and set up a new budget for 2016 by using Last Year s Data, QuickBooks will actually pull information from Because to QB s, that is the data you are asking it to use. To get around this issue, what you have to do is change the clock on your computer to next year Depending on your computer, this is usually in the lower, right corner of your screen. Change it to 2016 for the next few steps. Now, when you tell QB s to pull from last year it uses 2015 data. Voila! Note: Since you are pulling data from 2015, you ll only get data up to the current period, so the remaining months will be blank. You ll be able to put those in once the data is populated in the budget. Use your estimate from Step #7. The beginning steps are the same. Go to Company > Planning & Budgeting > Set up Budgets. Choose the Profit & Loss budget type and the year 2016 and click Next. If you are using Class Tracking, click that button. For our example, we won t be using that. On the next screen, chose Create budget from previous year s actual data.

12 This will populate the budget using the figures from your current year s information. Remember, your 4 th qtr. months may be blank (my example shows it filled) and you ll need to enter those based on your 4 th qtr. estimates. You can change any figures manually that you want. Click Ok as you work, and click Save when you are finished. To see if the budget is set up as you wish, click Reports > Budgets and Forecasts > Budget Overview and select the newly created budget (It should be FY2016 Profit & Loss by Account) Click next for the report layout, and then finish. QB s will create your new 2016 budget. Now..head back to your computer s clock and reset it to Don t forget this step! Congratulations on setting up your first budget! You can also create a Budget vs. Actual report and see how you are doing throughout the year. You can customize the report so that you can see your profit margin as well. If you go to Reports > Budgets & Forecast > Budget vs. Actual, you can generate the report and it will give you the ability to modify the report (Cash or Accrual, display columns, date range, etc.). On this screen you can choose to add subcolumns that show % of Budget. This is how you can add your Profit Margin as a percentage to your report. QuickBooks Online Plus Version Only the Plus version of QBO has the ability to create a budget. If you are using Simple Start or Essentials, you can use the tools in Equestrian Professional s website to create a budget (instructions to follow). To create a budget in QuickBooks Online, you need to make sure your browser is set to allow pop ups from QBO. If not, you won t be able to use the service.

13 To start, go to the Gear and click to see the drop down menu. Under Setting, click on Company Settings. Click Advanced on the left side of the dialog box. Verify that the first month of your fiscal year is correct. If you are using a calendar year, it should be set to January. Click Done (blue button in the bottom right corner). Head back to the gear and open the drop down menu again. Under Tools, select Budgeting.

14 This will start the Budget Wizard in QBO. It helps you go through the steps to set up the Budget pages, where you provide the values for your budget. Follow along and answer the questions as they best fit your situation. Once you go through the interview and finish the questions, QBO will display a Budget page. How it looks will depend on the criteria you set up. Here is what the budget looks like when starting from scratch

15 Choose a budget line by highlighting it in the budget chart and entering the information in the bottom. You can choose to enter the information by month, quarter or year. If you have an item that is the same every month (like a loan payment), you can put in the first month and then choose Copy Across. QBO will use that figure for each month (see Equipment Rental line). Click the blue button Save & Next when finished and it will place the amounts in the chart above. Repeat the steps for each line item in your budget. When done, click the blue button Finished to complete your budget. Congratulations, you ve created your first budget in QuickBooks Online! Conclusion Above are the instructions for four different methods of tracking your budget so that you can use your books as a tool for making sound business decisions. Let s say you run a Budget vs. Actual Report at the end of the first quarter. And you notice that your income is below what you expected. Can you tell why? Was the weather bad and you were unable to teach as many lessons as you thought? Did you get a great deal on hay and purchased in bulk for a 20% cost savings. In both these cases, you can go back to your budget and make adjustments. Since you purchased the hay at such a savings, you know your hay costs will go down for the year. Adjust your

16 budget to show the savings. Since your lessons were lower, you may decide that you need to teach more, or maybe add a clinic. You can adjust the income section as well. The tools in Equestrian Professional s Calculators and Tools are available to you as a member. Use the Online Calculators to run What If scenarios or to pencil out the logistics of a new idea you have. Try it on paper first and see if the idea is beneficial to your business. If you are participating in the Horse Business Challenge Support Program, upload your new budget into the Dropbox that has been set up for you. We ll take a look and provide feedback. Keep up the good work!

17 STEP 3 Check Your Profit Margins Step 3: Check your profit margins in each segment of your business. In the equine industry, a majority of businesses don t offer just one service. If you are a training barn, you may have lessons, sales, leases, shows, and others. If you are a boarding facility, you may have board, hauling, clipping and clinics, etc. You should check your profit margins in each area of your business and identify both your top profit centers and the areas of your business that are not as financially secure. To start, watch the video in the Calculator & Tools section called Equine Business Profit Margin Calculator. This tool will give you some ideas on the best way to use this calculator and gives actual, real-life examples. Once you ve watched the video, enter your own numbers into Equestrian Professional s Horse Business Profit Calculator and then print or take a screenshot of your results to include in your workbook TIP: Our online calculator is also a great place to look at what-if scenarios that can help you solve and/or improve profitability issues. In fact, you will likely come back to this calculator when you begin looking at pricing strategies in Step 6.

18 In addition to the Equestrian Professional calculator, you may want to learn how to look at your profit margins in Quickbooks. Below are a series of steps to help you do that. QuickBooks Reporting If you use QuickBooks desktop versions, you can run customized reports to follow your profit margins. Once your budget is completed (see Checklist #2), go to Reports > Budgets & Forecasts > Budget vs. Actual to review how your business is currently performing against your projected budget. Here is a report out of QuickBooks that I have condensed (really condensed) so that you can see the income vs. expense. In this example, there is an uncategorized income for $6, Trust me this happens often! The deposit needs to be correctly identified. Once that is done, it will move up into the income row. In the above example, the net income through 10/26/15 shows a net profit of $20,

19 The Budget projected $17, The next column shows that the business is $2, and 112.4% of budget. To calculate your profit margin, take your Net Income ($20,169.35) and divide by the Total Income ($263,668.99) = 8% profit margin. If you use the Class Tracking, you can customize your report to filter for each Class you have set up in your system. An example would be if you were a boarding facility that offered 1 week summer camps. If you class your income and expenses per camp, you could see which camp was most successful (bigger profit margin) and this would give you information you could use to analyze your books. QuickBooks Online The only version of QBO that has budgeting is QBO Plus. Because of limitations in the Online version, the easiest way is to run a Budget vs. Actual report and download as an Excel spreadsheet to work with. You can create a formula in the spreadsheet to calculate your profit margin. Conclusion Following your profit margin closely will help you to evaluate your business and to make sure that you are monitoring how your business is doing. By being mindful of your current business situation, you can adjust and make decisions that will help your business be successful. Which ever process you used (Our calculator or Quickbooks) to examine your profit margins, please turn in a copy of your results to complete Step 3.