A financially healthy fitness club requires a healthy fiscal regimen rooted in discipline and routine. Like a personal trainer, an outsourced bookkeeping and controller services provider can give you the expertise and structure required to keep your finances in shape.
Here's a basic financial workout for fitness club owners.
An Exercise in Balance
The fitness club business model is predicated on multiple revenue streams that can include guest passes, swimming lessons, sports leagues, summer camps, and sales of snacks and branded merchandise; but annual memberships are a fitness club's lifeblood. Much of that membership revenue arrives around the beginning of the year, thanks to New Year's fitness resolutions. (An industry study found that 12% of an average fitness club's new membership signups occur during the first two weeks of January.) The balance is in knowing the value of earned cash on hand that is available to spend now versus the revenue that is deferred to a future period.
Fitness club owners will want to consider having both cash and accrual financial reports giving them the cash flow visibility needed for daily management while using the accrual-based reports to understand, and show others, the financial viability of their business.
The cash-basis accounting method records monies at the time it is spent or received. It seems at first glance that this is all you would need, right? Not so fast. Yes, cash accounting is better for understanding cash flows, but accrual financials help others outside the club better understand the financial viability of the club. For example, if a club owner is looking to obtain financing, it will be helpful to have accrual financials to show to a bank. These financials will provide a clearer understanding of a club’s margins and profitability.
Accrual accounting aligns with a deferred revenue model and records income during the month when you earn it, not the month when you receive it. At a gym, monthly dues that are prepaid in January are deferred revenue, earning 1/12th of that revenue each month. This also applies to prepaid expenses. If you pay a full annual insurance invoice in January, for example, you should allocate one-twelfth of that expense for each month throughout the rest of the year. Recording your revenue and expense in this manner reflects the true financial strength of the company.
Cash Flow Cardio
While the accrual method reflects income and debts more accurately, it may not give you a clear picture of your fitness club's cash balance at a given moment because of overdue invoices, membership renewals, locker rentals, etc. This is where strong cash flow reporting can help guide the owner(s) to make timely decisions based on the current cash situation.
Annual planning with a monthly budget, combined with a weekly cash flow forecast, is imperative. A Cash Flow Statement is a summary of the cash scheduled to come in and go out of the gym for a point of time. It helps the owner see how the gym is running, where the money comes from and where it goes. Using a Cash Flow Statement with a strong forecast and budget shows the spending capability within guidelines, all created to predict and protect the financial health of future months. In short, you need that January infusion of cash to get through the dog days of August so set a plan and watch the progress to ensure it is used wisely.
Plan Your Workout
Like any good regimen, it is important to make your plan and stick with it to see results. Following a structured plan that includes an annual forecast, monthly budget set up and review, combined with cash management, will assist when the unexpected arises. When your friend registers you for a 5K only three weeks away you know your training has you ready, the same is true with overcoming or embracing hurdles in business. Having a strong grasp on your club’s overall financial wellness will make you agile and quick to respond to unforeseen repairs as well as offers to sell, upgrade, or expand.
Set a schedule of managing your General Ledger either daily, weekly or monthly to get maximum value out of your accounting process. Accrual basis accounting is an advanced accounting principal. It requires more transactions, takes more time throughout the year and has specific tasks to complete before the month is closed. This also means it is more conducive to errors, particularly if you lack accounting experience. Following a standard month-end close regimen with a coordinating schedule ensures everyone understands when the data is accurate and ready for use. If you've never used accrual-based accounting, you should talk to a professional bookkeeping services provider or a CPA to ensure your plan is solid and will help your club get stronger.
Don’t Forget Your Spotter
Just as you wouldn’t bench press your max weight without a spotter, you don’t want to embark on managing your accounting needs without support. That support comes in multiple forms. A professional bookkeeping and controller services provider can scale with you as you grow and help you optimize bookkeeping tasks with the latest industry-specific software, in addition to providing their professional bookkeeping expertise. They can assist with implementing technology that brings efficiency to processes like accounts payable, payroll and commission reporting as well as integrations with customer relationship management systems. Super set these tasks, using an enhanced reporting software, and generate monthly financials that include key performance indicators such as changes in guest memberships, membership enhancement sales or customer satisfaction scores to pump up your management discussions. These enhanced month-end financials give you a holistic view of the health of your company with details you can understand.
Take the First Step Toward Fiscal Fitness
Like physical fitness, fiscal fitness is available to anyone who truly wants it, but it takes finding the right program, dedication to a routine and partnering with the right outsourced bookkeeping and controller services provider to give you the support you need. In short, January is a sprint — but the fiscal year is a marathon. An outsourced bookkeeping services provider can help you pace yourself to reach your goals quickly and efficiently.
At Supporting Strategies, our experienced, U.S.-based professionals use secure, best-of-breed technology and a proven process to provide a full suite of bookkeeping and controller services. Are you ready to learn how you can move your business forward? Contact Supporting Strategies today.
Lori Coleman, Director of Business Development, Supporting Strategies | 128 & South Shore, Providence, RI & Nassau County, provides bookkeeping and controller services to growing businesses.
This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal, and accounting advisors, and you should consult with a tax, legal and accounting professional before engaging in any transaction.
Supporting Strategies is not a CPA firm.