Accounting: Why Dance, Yoga, and Fitness Studios Should Care

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Audit Risk painted on street

Accounting. Ugh! To many, it is like going to the dentist. You know you need to, but it’s no joy, and easy to put off. Times are stressful enough growing your business, keeping customers happy, and juggling your personal life. You don’t want to be bothered with those niggling debits and credits. But, the ramifications of neglecting bookkeeping and accounting for small businesses can be ugly.

Why Should I Care?

Good information

An accounting infrastructure provides a standardized system for tracking what your business owns, owes, earns, and spends. Financial statements generated from this system provide key measures on the financial health of your business and how it is performing. Knowing this is vital to optimally running your business, and can be very empowering! Not producing this information timely and accurately can lead to faulty conclusions and undesired outcomes. Furthermore, don’t close the door to a wealth of data that can shed incredible insights on your business.

Third parties

An effective gym or studio accounting system allows you to convey the state of your business to appropriate parties. This includes prospective lenders and investors, as well as internal parties such as existing investors or a Board. Frequently, these parties will require your financial statements to be audited by an accounting firm (businesses with aspirations to go public someday will require an audit). If your books are in disarray or are otherwise not in an ‘auditable’ state, the process to get them to that point can be extremely burdensome and expensive. So, it pays in this regard as well to have your records tip top.

Tax compliance

The IRS has differing rules for select expenditures. For example, certain meals and entertainment expenses are not deductible for tax purposes. As such, your accounting system should properly segregate deductible and non-deductible expenses.

What Should I Do?

Embrace it!

First and foremost, slay your fears and ingrain accounting into the fabric of your business. Assign someone responsibility for this process. This can be you, someone within your company or an external accountant. Ensure that whoever is assigned possesses a fundamental understanding of accounting and will work with you on making it work.

Set up your infrastructure

For starters, using software for gym membership management, dance studio management, and yoga studios is key to keeping organized. Our favorites are:

These programs integrate well to help you maintain records of your incoming and outgoing funds on a general ledger accounting system. Ensure that the accounts and reports set up are appropriate for your business. Many software programs, such as QuickBooks, offer desktop or cloud versions that provide simple, user-friendly frameworks.

Perform monthly essentials

Complete the following within the first week following each month end. Get them on the calendar and stick to them! Or simply hire an accountant and cut your work on this by 90%.

  • Record all of your company’s financial activity (what you spend, and what you collect) in your accounting system.
  • Reconcile your bank activity with your books. This goes for credit cards as well. It is common that transactions recorded in your books may not have yet hit your accounts, and vise versa. Also, unapproved charges or withdrawals can be quickly identified through this process.
  • Invoice your clients. Unleashing an invoice long after the fact can inhibit payment and perhaps even strain the business relationship with your clients.
  • From your accounting system, produce and review a balance sheet, income statement, and statement of cash flows. These reports provide high-level indicators of the financial health and performance of your business. Therefore, they should be integral elements of operating your business.

You’ve got this

While grasping comprehension of every down and dirty detail of accounting is not critical, recognizing the importance of it to your business is. If your books are behind, know that at some point you will need to catch up. Especially if your business is growing, putting this on the back burner is delaying agony.

With that being said, don’t let fear or doomsday scenarios be what spurs action. Rather, embrace it for the power of what it provides, obtain the proper guidance and work toward a solid system.

Who knows, maybe someday those debits and credits will seem like a cakewalk compared to going to the dentist. Either way, your business will be better off!

 

Tim Hari is a CPA with extensive experiences in public accounting and senior operational finance roles within the professional services industry. Tim provides accounting and consulting services for professional services firms and startups. He can be reached at timothy.hari@gmail.com.

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