Bookkeeping 101: Managing Cash In Your Business, Pt. 1

Cash Flow is the financial life blood of your business.  It’s important to have a very good understanding of how much money you have at a given time as well as a firm grasp on how much and when money is coming in and going out every month.

One of the three major financial reports is the Cash Flow Statement.  This report is beneficial & I will cover it soon, but I think that the “Cash Sheet” is a better day-to-day tool for managing your cash flow.

The “Cash Sheet” is a report that you can keep up with daily or weekly to know exactly how much money you have available.  See, two of the biggest financial mistakes I see business owners make relate to cash management.  First, they don’t have a system for paying bills.  Second, they use their bank balance as a guide to making decisions.

There may not be a perfect system for paying bills but I have found that paying bills twice a month works really well.  That means picking 2 days roughly 15 days apart and only paying bills on those days.  It also helps to get your automatic drafts to come out on those days as well.  For example, your two days could be the 5th and the 20th or the 15th and 25th.  The benefits of this systems are: (1) You save time only paying bills twice a month rather than throughout the week/month (If you read Tim Ferriss’ “4 Hour Work Week”, this is what he refers to as batching).  (2) You can see how and when cash moves in and out of your business.  Cash comes in through deposits and accumulates.  Then cash goes back out as you pay your expenses.  It’s similar to an ocean tide…you see the high tide and low tide twice a month.

Getting this system set up takes a little bit of work on the front end but it’s well worth it in the long run.  Some things you need to do are communicate with your employees and vendors and anybody else who may be effected by the change.  Let them know about your new system and when to expect payments.  If you have any automatic drafts, you will need to change those.  You will have to stay disciplined and not cave in anytime a vendor requests payment.

Your bank account should not be used to make financial decisions mainly because it may not tell the whole truth.  Your bank account might show that you have plenty of money to pay your bills but it doesn’t show you that you have a bank draft and uncleared checks.  This is where the “Cash Sheet” comes in really handy.  It tracks the actual cash that you have available plus shows you what drafts you have coming up.

So, what is a “Cash Sheet”.  There are different formats that you can use but here’s the one I made for my gym.  Feel free to steal it or adjust it to fit your liking.  If you are in fact following the twice a month system mentioned above, you could probably make this a weekly report that you update every Monday.

Grab my cash sheet here.

If you need any help setting up your cash sheet or managing your cash flow, reply to this message and let’s chat.

Here’s that link again:



Working Hard Or Getting Better

Earlier today I was talking to a member at our gym.  He asked me, “Why are y’all programming these watered-down workouts.  Are y’all trying to appeal to the soccer moms?”  First, I explained a bit of the rationale behind our programming – such as being in the first week of a new cycle and focusing on basic movement limitations we noticed during the last training cycle – which didn’t get through to him.  So then, I asked him, “Do you just want to work hard, or do you want to actually get better?”

We see this a lot with athletes.  They want to work hard…if they aren’t laying in a puddle of sweat and tears after a workout, then it wasn’t a great workout.  They are willing to “crush it” every time they come in the gym but when we ask them to spend time on shoulder and hip mobility so that they can move safer and more efficiently (aka: get better) – they don’t seem to have the time or energy.

As frustrating as this can be for a coach and gym owner, we do the same thing in business.  We work harder and put in longer hours to improve our business but we still don’t do the things that matter…the tasks that will actually make your business better.  We will try the newest marketing trends, spend hours programming workouts, updating social media, bookkeeping, sending emails, newsletters, cleaning, etc. but don’t spend the time to develop systems and train employees, network or get great at 1-2 marketing channels that will bring in new clients over and over.

I am not saying that programming, bookkeeping and emails are not important or that hard work is not required.  (For the record, bookkeeping is very important & I’d love help you out with it).  There are definitely tons of tasks that must get done and a lot of hard work that must go into a well-run gym.  The point is that often times we focus on putting in more effort rather than doing the things that will actually make your business more successful.

So, are you guilty of working harder without getting better?  I know I still am from time-to-time!  What can you do to get better this week?

balance sheet

Gym Bookkeeping 101: The Balance Sheet

The Balance Sheet is the first of The Big 3 Financial Statements that we’ll cover (The Income Statement and Statement of Cash Flows are the other two).  An easy way to remember the Balance Sheet is to think of it as the “O’s” report.  It reports what you Own (Assets), what you Owe (Liabilities), and what’s left Over (Equity/Retained Earnings).  The formula for the balance sheet is:

Assets = Liabilities + Equity

As the name implies, the formula must balance so if you have $50,300 in assets, the sum of your liabilities and equity must also be $50,300.

Here is an example of a Balance Sheet as of 6/30/2016 from a training gym:

   Bank Accounts:            $20,000
Accounts Receivable:  $ 1,800
Fixed Assets
Gym Equipment:          $25,000
   Office FF&E:                  $  3,500
Total Assets                      $50,300*

Accounts Payable:        $ 2,200
Current Loans Due:      $ 5,800
   Equipment Loan:           $18,000
Total Liabilities                 $26,000

Retained Earnings:      $16,000
   Net Income:                 $  8,300
Total Equity                     $24,300
Total Liabilities & Equity  $50,300*


Assets (what you own) are what you use to run your business.  They are listed on the balance sheet in order of their liquidity (how easily they can be converted into cash).  So, all of the current assets are listed first and the non-current assets are listed next.
Current Assets – have a life-span of 1 year or less, meaning they can easily be converted to
cash.  Examples include cash, accounts receivable and inventory.
Fixed Assets – are non-current assets that have a life-span of longer than one year & will not be turned into cash
within the next year.  Examples include gym equipment, computers, buildings, goodwill (your

Liabilities (what you owe) are your financial obligations to outside parties.  Liabilities are also listed according to liquidity.
Current Liability – your bills that must be paid within one year.  Examples include accounts
payable, short-term loans and the current portion due of long-term debt.
Long-term Liability – debts and other financial obligations which are due in over one year.  The
main example for gyms would be a loan.

Equity (what’s left over) represents your company’s total net worth.  It is the sum of your initial investment plus or minus retained earnings.

That’s great but what does my Balance Sheet tell me?

First off, it’s important to remember that the Balance Sheet gives you a snap-shot of your company’s financial position at a specific point in time.

By analyzing the balance sheet, you can determine your ability to pay your bills, your operational efficiency and the net worth of your company.

One of my favorite ratios to use from the Balance Sheet is the Current Ratio (aka working capital ratio).  The Current Ratio indicates whether your company has enough short-term assets to cover your short-term debt.  If it doesn’t, indicated by a low Current Ratio (below 1), you may have a tough time paying all of your bills in the coming weeks or months.  On the flip side, a high Current Ratio isn’t necessarily a good thing either as it could indicate that money is tied up in inventory or receivables are not being collected.

There is definitely more analysis that can be done with the balance sheet but the first step is understanding the basics.  Feel free to contact me if you have any questions on the balance sheet.


The Profit And The 3 P’s

One of my favorite shows on TV is “The Profit” w/ Marcus Lemonis. If you haven’t seen it, it’s kind-of like “Shark Tank” but he only deals with one business per episode and it shows the different stages of the transaction (if there is one). Marcus has a simple way to evaluate each business. He uses the 3 P’s: People, Process, and Products.

A process is a systemized way of dealing with all aspects of your business. For gym owners, do you have a system for generating new leads, sales, programming, training, selling products, cleaning, hiring and training staff, processing membership payments, accounting, analyzing your numbers? Processes allow your business to grow and allow you to work on bigger picture tasks (and occasionally take a vacation).

Marcus only buys companies that he can scale up or grow (a lot). If you don’t have systems/processes in place, your business don’t have the ability to grow. Now, if the systems were perfect, then the business might not need Marcus so it’s rare that you see perfect systems on the show. That’s actually where he makes a lot of his money. He comes into a business with good people and a good product but not great systems and he sets up great systems that change the profit of the business.
Your processes should always be evaluated and improved upon so don’t think it has to be perfect from the start – just think, “What would Marcus do?”

Products are what businesses sell. For gyms and trainers, this is your training and nutrition services, apparel, equipment, supplements, etc. Ideally you deliver a good, if not great core product. You won’t keep customers very long and Marcus won’t invest in your business if you have a crappy product. Now, that doesn’t mean that there can’t be improvements to your product or to your product line…but it always starts with have a great core product.

People include the ownership and employees in your company. Everybody is important but the owners are the most important in this context. They started the company – they had the initial vision – they should be the one’s steering the ship forward towards prosperity. And ultimately, they own the company so they call the shots. Employees are very important as well, but it’s easier to get rid of a bad employee than it is to get rid of a bad owner (by the way, being a bad owner doesn’t make them a bad person – they just may not have the right skill set to run a company).

According to Marcus, this is the most important of the 3 P’s. You can’t fix a bad owner that is not willing to change. You – the owner – are the leader of your business. You will either move it forward or be what’s holding it back.

So, analyze your 3 P’s today. Can you improve your 3 P’s?

If you need help improving your 3 P’s, shoot me an email and we can chat.


Pay Yourself First

Paying yourself first is not a new concept.  Financial gurus have promoted this theory for years, but mostly on a personal finance level.  For instance, you should automatically put 10% of your paycheck into savings or retirement.  This great advice doesn’t apply just to individuals though.  It may be even more important for your business.

As a gym owner, you get paid based on the profit that your gym makes.  Now, you probably take a salary for the day-to-day work you do, but if you ever want to step away and just be an owner, then you need a solid profit.  The problem is that most gym owners look at profit as what’s left over at the end of the month, quarter or year (if there’s anything left).  Well, just like you should do with your personal finances, you should put a set percentage of your revenue in savings each month BEFORE you spend it all.  This guarantees you a profit and forces you to “Budget”.  Doing this will improve the health of your business across the board.  It will give you a cushion (or help you build your war chest) and it will allow you to issue profit distributions every quarter, which will make you happier and encourage you to keep improving.

But as wonderful as it can be for your business, most people will not do it.


Because it takes work & it takes will-power.  It will make you evaluate all of your expenses – including your salary, your coaches and staff and all of your other “necessities”.

But, if you do it, your business will be stronger.  You will make more money in the long-run, your business will be healthier, and your life will be better.

For more information, check out the book, Profit First by Mike Michalowicz or email me and I can help you get started paying yourself first.


5 Bookkeeping Tips For Gym Owners

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 >


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.


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 >


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.


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!


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: