Whether you’re a self-employed personal trainer or a gym owner, as a fitness professional, your job involves some accounting. In many respects, your fitness business functions just like any commercial business venture when it comes to accounting.
The fitness industry also necessitates some unique space requirements and expenses. The following tips apply to fitness professionals of all types at all levels, and should help you streamline your business accounting.
Keeping Track of Your Money
Any business owner or self-employed individual needs to keep detailed records of income and expenses. This means keeping copies of all receipts and invoices, as well as records of employment if you have employees on payroll. Fitness professionals have a unique set of costs that can legally be written off as business expenses. If you are a self-employed personal trainer who meets with clients in a larger gym space, you can claim a percentage of any fees you pay to use the space. If you train clients in their homes or in outdoor spaces, you may be able to claim travel expenses such as gas or car maintenance.
Any equipment you provide that is not provided by the gym, such as weights, mats, and regulation footwear, can also be claimed. Many fitness professionals make the majority of their income from membership or class fees. While a repeated billing model such as a monthly membership fee can be lucrative, it can also present challenges if a customer is late or fails to make a payment.
If you’ve invested time, space, or equipment expenses to prepare for a client who fails to show up, detailed record-keeping ensures you don’t lose anything extra at tax time and helps you to determine whether to take appropriate penalty action against a no-show client.
Using Accounting Software
Software and apps are great for keeping track of your members and keeping an organized schedule. As of 2017, a quick online search garners numerous downloadable applications designed specifically for gyms and fitness-related business models.
Many of these applications, like GymMaster, include functions for tracking your point of sale and billing information. It’s a good practice to keep both soft and hard copies of receipts and invoices. This ensures that if one version becomes lost or damaged, you still have a working record. Additionally, having your records in multiple formats makes it easier for you to reach out to customers through their preferred medium of communication, especially if you ever have a payment dispute.
How to Manage the Finances of Membership
Gym Memberships as Prepaid Assets
When your gym receives upfront payments for yearly and monthly memberships, it’s receiving payment before it has earned the revenue. In accounting terms, this makes those gym memberships prepaid assets, or funding for future use or services. You reduce the carrying value of those memberships on your balance sheet through amortization.
This makes tracking renewals and notifying customers of membership fees due exceptionally important. Monthly memberships are also prepaid assets because members can ask for pro-rated refunds for unused time unless you clearly state a different refund policy at the time of the contract. You can add “no refund” clauses, but you should usually return funds to dissatisfied customers if you want to avoid bad reviews and ratings.
Managing Membership Cash Flow
Not keeping your prepaid yearly membership fees separate can lead to cash-flow standstills that leave you scraping for pennies, and that goes double if unsatisfied customers demand refunds. To ensure you have funds available when customers ask for refunds, you should set membership payments aside in an unearned revenue account, then move amounts over monthly as customers use their time.
By keeping track of your revenue as it occurs, your business is more likely to have the cash flow necessary to handle monthly bills, such as rent and insurance, and to address maintenance and repair issues in a timely fashion.
Additional Revenue Streams
While membership fees generally cover several your gym’s financial requirements, additional revenue streams help bolster your bank account, especially in January, when individuals looking to meet their New Year’s fitness goals prepay for their new yearly memberships. To take advantage of all the seasonal traffic in your gym while boosting your bottom line, consider setting up a juice or smoothie bar, selling pre-bottled protein shakes and other healthy drinks, or offering complementary supplements for those doing weight training and cardio.
Another idea for generating additional revenue is charging new members an initiation fee, which is a one-time fee charged at the time of account setup that requires monthly payments to stay active. You could charge customers a $100 fee that covers a lifetime initiation, but still charge a $20 monthly fee the customer can pay yearly or as they go.
Remember that initiation fees count as deferred income and must be entered as such for accounting purposes. While operating a gym can be challenging, it also has numerous rewards. Keeping cash flow running smoothly helps take some of the stress and worry out of managing your business while providing clients with a stable, reliable place to learn and continue healthy habits.
Hiring a Professional
For self-employed individuals, the decision to hire a professional accountant is usually driven by the monetary cost versus the time saved. If you are personally responsible for all the time, income, and supplies related to your business, doing your own taxes should be a relatively minor time investment.
For gym owners or personal trainers who have employees, hiring a professional accountant is a great way to simplify the tax-filing process and get the most out of your claim. Depending on the nature of your business, you may be able to claim a percentage of the accounting fee as a business expense.
Accounting for fitness professionals is straightforward as long as you understand your expenses and utilize apps and accounting help when needed. Building a good relationship with clients is also a good way to regulate your income and prevent the hassle and confusion of late membership or class fees.