By Mike Jesowshek, Special AFS Contributor
You’ve finally made the decision to open your own fitness studio. Congratulations! By now you have probably spent a bunch of time looking into locations, studio build out, equipment, staff, and so much more. Now is such a busy and exciting time for you. But if you are like many new fitness studio owners, you likely haven’t given much thought to bookkeeping.
You’re not alone. It is easy to get caught up in the exciting aspects of fitness, and forget about the boring job of keeping up with the finances. However, it is critical for any new fitness studio owner to understand the importance of bookkeeping, especially in the beginning, if you want to be successful.
Here are five tips as you start this bookkeeping journey as a fitness studio owner.
Open a Separate Bank Account
When you start a new business it might be easy to just pay for all the startup costs and expenses out of your personal account and then figure it out later. However, this can be sloppy and cause a lot of confusion and possible misreporting down the road. As a new business owner, it is vital to open a separate bank account for your business. This will allow you to have a clean record of business items and make sure there is no commingling of funds with your personal account.
Utilize Cloud Technology
We are no longer in the 90’s - upgrade your accounting system to the cloud. Our favorite cloud bookkeeping software is Xero. Not only does moving to the cloud give you access to your financial data at anytime, anywhere, it also allows for easily collaboration with your accountant or other parties that need access to your books. You’ll never have to worry about backing up a file, or making sure you have the right computer with you. Another beautiful thing about cloud software is easy integration with other applications and software, helping to ensure all of your financial information is consistent and available.
Ditch the Paper and Cash
As you are moving to the cloud and becoming a modern day company, now is the time to also ditch the paper. There is no reason to hold on to paper receipts for years when you can simply take a picture of it and upload it online for storage. There is even software like Hubdoc and Receipt Bank that allows you to upload receipts directly into your accounting software. Ditching the paper allows for a much cleaner, easy-to-find, bookkeeping environment. But regardless of how you decide to retain your receipts, be sure to keep any receipt over $75 (unless it is meals and entertainment, then upload every receipt regardless of the amount).
When you own a business, you want to make sure you have everything documented with a trail, in the event of an IRS audit. For that reason, we tell our clients to avoid cash transactions as much as possible. Cash is hard to track and can lead to a lot of questions if you were to get audited by the IRS. In the rare event that cash is your only payment option, be sure to get a receipt so you can properly document the business expense.
Keep Your Books Current
Having good bookkeeping is not just important for tax time, but it can help you run your business more effectively throughout the year. You may not know it yet, but having a good grasp on your business activity now will help you make better decisions for your fitness studio in the future. However, in order to be able to make those decisions, your bookkeeping has to be up to date. We recommend doing your bookkeeping on a weekly or monthly basis to avoid getting too far behind.
Plan for Expenses and Taxes
As you are performing your weekly or monthly bookkeeping sessions, be sure to plan for future expenses and taxes. Create budgets and projections so you can better understand your studio’s cash flow to plan for future expenditures. Now that you are self-employed, it is also important to understand that YOU are now responsible for paying the IRS and State taxes, not someone else. When you are doing your budgeting and projections, factor in cash that will need to be used to help pay for your personal taxes, now that you are the boss.
It's critical for any new fitness studio owner to understand the importance of bookkeeping, especially in the beginning, if you want to be successful.
BONUS TIP: Outsource Your Bookkeeping, But Be Careful
Whether you have a financial background or not, your time is likely better spent managing and growing your fitness studio. There are professionals that can take the entire financial side of the business out of your hands so you can allocate your time effectively. Here are some outsource options:
International Outsource: There are tons of individuals in India and the Philippines that perform outsourced bookkeeping for U.S. based businesses. You typically get everything setup on your end, and then give someone overseas access to do the regular reconciliations. The benefits of using international accounting sources is that they are generally inexpensive. The down fall is that it is sometimes hard to communicate with them due to language or time barriers, and you may run into security issues. Often times, you will find that your international bookkeeper may not completely understand your industry, which means you may need to do adjustments and cleanup after the fact.
Friend or Family Member: Everyone has a friend or family member that knows something about finance and bookkeeping. Whether that’s from balancing their own checkbook or having a career in the accounting field. The nice thing about a friend or family member is that you can usually trust them with access to your financial data. The down fall is that sometimes you might not want a friend or family member knowing all about your financials. If you do hire a friend or family member, just be sure to verify they are qualified. As with an overseas bookkeeper, if the individual does not fully understand the fitness industry or is not experienced in bookkeeping, you may need to make adjustments after the fact.
CPA or Accounting Firm: Whether it is your current CPA or another U.S.-based accounting firm you found, this is the best outsource option. You can trust that your financial data will be in good hands and handled by a qualified professional. The down side with this option is it will likely be more expensive than the first two options, but at least you know the individual or company specializes in that type of work. My recommendation to you, if you go this route, is to find a firm that focuses on your specific industry, and do not be afraid to step out of your box and work with someone who isn’t local. Sometimes the most talented individuals are not in your back yard, but they might be a quick e-mail or phone call away!
To wrap it up, my goal is to help bring awareness to fitness studio owners such as yourself the importance of bookkeeping, while helping you tackle it a bit easier. If you are a fitness studio with business loans or investors, or are looking to get loans and/or investors, it is vital to have well maintained books prepared by a professional to ensure a smooth process. If you are interested in learning more about the topics above or any other bookkeeping related items, send me a message, I would be more than happy to chat. And again, congratulations on your new fitness studio!
AFS Members! Save 10% from Jetro & Associates on their Monthly Plan for Bookkeeping and Taxes!
Mike Jesowshek, CPA is the founder of the accounting firm JETRO and Associates. He has a strong passion for both fitness professionals and technology. He helps provide a digital accounting, bookkeeping, and tax solution for studio and gym owners who are looking to take it to the next level by utilizing modern, cutting edge technology.