You did not become a gym owner to keep up with receipts, track expenses and balance bank accounts. You may not even like the bigger picture financial stuff like reviewing financial statements and KPI’s (Key Performance Indicators). However, like it or not, your finances and the maintenance of them is a major part of your business. So, I want to give you a few tips to make the whole process simpler for you. < Note: This is not an exhaustive list – check back for more detailed articles about the nuts and bolts of bookkeeping for your gym >
TIP #1 – KEEP YOUR BUSINESS & PERSONAL FINANCES SEPARATE
This is probably one of the most abused principles out there, especially for single-owner companies. Even if you are the only owner and a one-person show, you and your gym are completely separate entities and thus your finances should NOT be co-mingled.
Your company should pay you a salary as compensation for the work that you do and you should also get profit distributions quarterly or annually (assuming you made a profit). Your company should not pay for swim lessons for you kids, a birthday present for your spouse, or a new TV for your house. On the flip side, you should not be paying gym expenses out of your personal account. If your business needs the money (and it’s coming from you personally), you should set up a loan (with market interest rates) or consider the money a capital contribution.
This issue is amplified if you have a partner, partners, investors, or a 3rd party loan. In this scenario, if you use company funds to pay for your personal expense, you are essentially stealing from your partners or investors. Even if that was not the intent, this can lead to major distrust and potential legal problems.
Fix: Make sure this is not an issue for you by setting up a business checking account with a debit card so you can keep everything separate from this point on.
TIP #2 – K.I.S.S (KEEP IT SUPER SIMPLE)
I could go into great detail about how to keep it simple but that would be weird. Keeping it simple will help you save time and give you better control over your financial operations. Here are a few ways to keep it simple:
- Batch your work – set up your payroll and bills so that you only have to do them twice a month. Also, if you have any bills that are auto-drafted from your account, move the payment dates to coincide with one of your selected payment dates. If possible, set up the recurring payments from your members to come in at these times as well. Now you have money coming in and going out at set periods throughout the month and you don’t have to worry about it every week (or every day). The 10th and 25th of the month work really well, by the way.
- Automate As Much As You Can – forget spreadsheets, or even desktop accounting systems. Online accounting systems, such as Quickbooks Online, pull transactions directly from your bank, greatly reducing data entry and forgotten expenses. They can also store invoices and receipts electronically so you don’t have to keep up with so much paper.
- Minimize Your Chart Of Accounts – So, now that you have an accounting system, don’t go overboard. Often times, in an attempt to be analytical, gym owners create an account for every single revenue or expense. This makes the financial statements longer than necessary and increases the chance of inconsistently categorizing items over time. Your chart of accounts should be simple enough that you are able to use them year-to-year yet specific enough to provide useful financial data. < Check back for a blog post with a sample chart of accounts for gyms >
TIP #3 – KEEP YOUR RECEIPTS
In case you ever get audited, you have to be able to justify all of your expenses and revenues. For expenses, you must have the actual receipts – you can’t rely on bank and credit card statements – and if you use cash, a receipt is the only thing that shows what you purchased. I used to be guilty of just using my credit card statements but now we keep all of our documentation. That doesn’t mean we have filing cabinets all over the place. There are several great cloud-based receipt and document organizing solutions out there. Some of them even sync to most accounting systems and will automatically match to the expenses from the bank feed.
Check out: Hubdoc or Receipt-Bank to make the gathering, storage & processing of bills, receipts and invoices as easy and cost effective as possible.
TIP #4 – SET YOUR MEMBERS UP ON RECURRING BILLING
When we first opened our gym in 2008, we only accepted cash and checks. We didn’t have a CRM (customer relationship management) system and we couldn’t process credit card payments. So, I had a spreadsheet with all of our members and I would try to keep it current. Then, a few times a month, I would open up our payment binder and see who all had paid. In theory, the system works but in real life, not so much. I can’t tell you how much money we lost those first few years – yep, it took us almost 2 years to learn the hard way. Since then we have been using Zen Planner and all of our members get drafted the same amount each month and we can easily run a report that tells us if somebody didn’t pay (typically due to an expired credit card). So we are making more money and have more time to do everything else!
TIP #5 – MONITOR AND PRIORITIZE CASH FLOW & PROFIT
I’ve heard a lot of gym owners talk about their business and most of the time I hear questions like, “how many square feet is your facility” or “how many members do you have?”. Those questions are fun to talk about but they don’t really mean much. What’s important to your business is cash flow and profit.
Cash flow is important because it allows you to operate from a position of power and allows you to remain proactive. When you have a negative cash flow or your bank account gets low, it makes you very reactionary and you may make decisions that are not in the best interest of you gym long-term (i.e. lowering prices, not having a business coach, taking bad clients, etc.).
Profit is ultimately why you are in business. Until you are making profit, you don’t have a business, you have a job.
In order to consistently have positive cash flow and a profit, you have to consciously work for it. You have to set it up so that you receive your revenue in time to pay your expenses. You also need to make sure that your expenses do not exceed your revenues. Even then, you are just breaking even. So determine how much profit you want and pay yourself first. Twice a month send a set percentage of your revenues to a separate bank account that you use only for profit. If you want to make a 10% profit but are currently losing money, then just start at 1% and increase it every month or quarter as you are able to increase revenue or decrease expenses.
So there’s 5+ tips to getting a healthy business. If you have any questions or want to know more, you can email me at: email@example.com.