Accounting for Gyms

Gym finances can make or break a fitness business, especially for new gym owners who don’t have a background in business or finance. Many gym business owners start up out of their passion for fitness and helping people live healthy lives. Unfortunately, these skills don’t necessarily help with financial management. Gym owners need to take the time to ensure that the gym’s finances are in order to ensure that the business keeps running. 

How should you manage finances as a gym owner (especially if you don’t have a background in finance or business)? Making the effort to learn the processes and actively participate in managing the gym’s finances will set you up for success. Know your budget, stick to it, and keep track of all expenses and income. Finally, if accounting is too much for you to handle, hire a bookkeeper and/or tax professional to help. 

Educate Yourself

First and foremost, new gym owners should take the time to educate themselves on business finances. Understand the best practices for bookkeeping and managing finances. Since many gym owners have a background in fitness and not finance, this small step can make the world of difference once the gym is up and running.

There are hundreds of resources available for you to learn about business accounting. Check out score.org for free small business advice and education. Your town may also have a business council that offers educational tools. Bookkeeping can be relatively easy once you understand the basics and have a process in place. 

The Basics

There are a few categories of bookkeeping that are particularly important for business owners. Make sure you understand these basics when setting up the financial management practices at your gym. The big picture is to make sure your accounts are always balanced. Your accounts receivable should end up proportional to your sales/income and your accounts payable should match your bills and invoices. 

Cash Flow

The most fundamental aspect of running a healthy business is tracking the money that both comes in and goes out of the gym. Tracking money for immediate income (gear sales, automatic bank withdrawals) and purchases is easy, but other considerations can make your financial statements hard to put together at the end of the fiscal year. It’s your floating income and costs, your accounts receivable and payable, that you’ve got to put extra attention into tracking.

To help you better manage cash flow, read the following sections carefully. It will make the tax season so much easier for you.

Accounts Receivable

Your accounts receivable are any monies owed to you that you have not received yet. An example of this is monthly membership dues. If you are using automatic billing, you know when you will receive the dues and how much you will receive. 

Having a record of your accounts receivable allows you to easily track when someone owes you money. It is possible for cards to get declined or someone to be late on a payment. Since you have a record of all accounts receivable, you can easily reconcile this lost money. 

Accounts Payable

Accounts payable is the opposite of accounts receivable because it is the record of money that you owe to others. This includes your monthly bills like rent, utilities, and payroll. By keeping track of all the money you owe, it is easier to make sure all your bills and invoices are paid on time. 

Payroll

Payroll is the wages that you pay your employees and the necessary taxes that you withhold. It is extremely important to keep accurate payroll records when filing business taxes and providing your employees with their W2’s.

If you use independent contractors for to populate your gym with coaches and personal trainers, the money you pay them is not considered payroll. However, you should still keep a record of the money they are paid as a business expense.

Inventory

Many gyms sell merchandise and beverages for their members. While the profit margin on these items is usually small, it is still important to keep a record of your product inventories. You should keep track of how many items are sold and update the amounts when you purchase more to restock. 

Not only will you always know how many items you have on hand, but you can also track trends. It is helpful to know which beverage flavors are your members’ favorites and which apparel sizes sell out the fastest. While you hope to avoid it, theft is also a potential issue that can be quickly noticed when inventories are kept up to date. 

Keep Personal Finances & Business Finances Separate

New gym owners often make the mistake of using personal finances for initial purchases and fees when setting up their business. This is usually harmless enough at first, but it can cause confusion come tax season if the behavior continues. You should open a business checking account and credit card as soon as possible when starting your fitness business. 

All business expenses and purchases should go through your business credit card or checking accounts. Not only does this make budgeting easier, but it will also simplify filing taxes. If you use a personal account for any business-related expenses, make sure you keep your receipts and record what the purchases were for. Ideally, your business account should reimburse your personal account to keep the gym’s books balanced. 

While many new business owners do not collect a salary when their gym first opens, you should be prepared for when your business allows it. Add yourself to the payroll and pay your wages from the business account to your personal account. Do not just use the business income as your personal paycheck. 

Additionally, you may need a loan to open your business. Apply for a business loan instead of a personal loan. Banks have different rates and stipulations for personal versus business loans. 

Check-In Regularly with Accounting Software

Once you have your business and personal finances separated, you will be able to easily keep track of your business expenses and income. Checking in on your finances is vital for keeping everything balanced in the business. 

You should be checking in on your finances and business budget at least quarterly, but you can also check in more frequently. The best way to stay on top of accounting is to do it regularly. These periodic audits will allow you to catch any issues before a larger problem arises. Keeping records is only helpful if you know how to read them and analyze the information.

Good accounting software or financial reporting systems make this so much easier and less painful to do. Gymdesk’s reporting feature allows you to see your most important gym cash flow numbers, at a glance or in detail.

Know Your Budget Inside and Out

Setting a budget for your gym expenses is imperative to make sure that you are spending your money wisely. It can be very easy to think you are making plenty of income and not spending that much when you aren’t tracking the actual numbers. 

However, making a budget is not enough. You must be frequently checking in and adjusting your budget as necessary. Knowing your numbers is the best way to ensure that your finances stay in order. 

When creating and managing your budget, do your best to account for all potential expenses. This can include payroll, marketing/advertising, outsourcing, merchandise, events, maintenance, and more. It is always better to overestimate your expenses and underestimate your income. 

Realistically, even the best-planned budget will run into unexpected expenses or emergencies. By including this in your budget or keeping an emergency fund available, you will be able to handle these situations without affecting your overall budget. 

Keep Everything Digital

Thanks to our modern world of online transactions and paperless banking, it is very easy to keep your finances digital. The benefit of this is that you can easily find and transfer information from different accounts and documents. Some accounting software can even import and organize all your transactions for you. 

There are a couple of options you can use for receipts or documents that you cannot receive digitally. For tax purposes, you can just keep these organized in a file until you prepare your taxes. An easier method is to scan and upload these receipts and documents. That makes them easier to include in your budget and other financial documents. 

Use Gym Management Software

When it comes to gym memberships, drop-in fees, and merchandise purchases, it can be hard to keep track of all your income sources. By using gym management software, like Gymdesk, you can easily access all of this information.

Additionally, Gymdesk allows you to set up automatic charges for membership dues. If there are any issues with payment methods, you will be notified immediately. This saves you the time and effort of confirming every member’s payments each month. 

Hire a Professional

If business finances are just not your forte, the best thing you can do for your business is to hire a professional. Bookkeepers and tax professionals can often be hired for hourly or contract work. These experts will be able to quickly and effectively manage your business finances and give you the analysis you need. 

You will still need to have a system in place for tracking your expenses and income, but the bookkeeper or tax professional can usually advise on the best systems to use. The time saved by outsourcing your accounting can be better used on other gym tasks or personal activities. 

Conclusion

Gym accounting doesn’t have to be difficult, but it can be confusing if you are not accustomed to the systems. The basics include setting a budget and checking it regularly, keeping business and personal finances separate, maintaining a record of financial transactions (ideally digitally), and hiring a professional to ensure everything is done correctly. Seeking out education and advice from professionals can allow any gym owner to confidently manage their gym’s finances.