For your personal training business to succeed, it needs to be profitable. This requires tracking your finances to make intelligent decisions in the future.
How do you know if your business is making a profit if you don't track your finances?
The trouble is that many personal trainers need help knowing where to begin. But don't panic, as we have got you covered. Read on to discover how to track the finances of your fitness business.
Maintain Three Key Business DocumentsThree essential yet imperative financial documents will help you to keep track of the flow of money within your business:
• Your Balance Sheet
• Your Cash Flow Statement
• Your Income Statement
Your Balance Sheet is a document that lists the liabilities and assets your business has from the time you started. By reviewing your balance sheet, you will quickly understand your fitness company's financial capabilities and strengths.
Your Cash Flow Statement will help you to stay on top of the money coming in and out of your business during any specific period. Firstly, this helps to make sure you time your payments effectively. You want to avoid paying out before you have money coming in. Secondly, this document is critical in helping you to understand why you don't have much money in the bank even though your business appears to be turning a profit.
Your Income Statement, which is also known as a Profit and Loss statement, lists your revenue minus your expenses. It shows the profit and loss you have made over a specified time.
How do you track the money coming in and out of your business?Now that you understand the three key documents that can help you to keep tabs on the financial health of your business, let's take a look at some of the methods you can use to keep track of the money coming in and out:
#1. Open a Dedicated Business Bank AccountOne of small business owners' most significant mistakes is mixing their personal and professional finances. This is a recipe for disaster. First, it makes bookkeeping incredibly difficult, resulting in you paying more taxes than you need to.
Plus, it becomes tough to determine just how profitable your business is when you have other incomings and outgoings in the picture.
With a separate bank account for business purposes, you'll have your dashboard and statements to see what you're earning and spending easily. Also, you may be entitled to some financial perks by opening a business bank account, so it's worth keeping this in mind.
A note to sole traders; if having a business bank account might be an early step in your personal training venture, do the best you can to have two separate accounts for your personal and business money management.
#2. Choose Your Accounting SystemOnce you have opened a dedicated business bank account, you need to choose an accounting system. This will dictate how transactions are recorded. There are two main options available to you:
• Accrual accounting
• Cash accounting
Cash accounting recognizes funds as you receive them, so you'll count your income once a client has actually paid you rather than when the invoice is sent to them.
Accrual accounting tracks transactions in real-time, even if you still need to execute them. So, if the work has been done or is pending as per a contract, this is reflected in your accounting efforts, even if you still need to be paid. The same goes for expenses you have but still need to pay.
Many small fitness businesses find it easier to get started with cash accounting. However, you might want to switch to accrual accounting as your fitness business grows.
While accrual accounting may seem intimidating and complicated, it does provide a more accurate image of your company's financial health when compared with cash accounting.
#3. Create a Spreadsheet for Your ExpensesYou don't need complicated software to track your business expenses. Something as simple as Google Sheets or Microsoft Excel will suffice.
All you need to do is create columns for different types of expenses. Then, input your costs as you go and have a running total in the final column.
If you use a cloud solution, like Google Sheets, your progress will save automatically, and more than one person can work on the spreadsheet simultaneously.
#4. Use Accounting SoftwareWhile you don't need complicated software to track your expenses, employing accounting software still makes sense.
Accounting software will do all of the hard work for you, automating processes such as report generation and eliminating human error.
You will also be able to add notes and attachments with transactions, set alerts and reminders, and spot financial trends so that you can make intelligent business decisions.
There are lots of different accounting tools available today, so take the time to assess your options carefully and choose a platform that fits your business mold.
#5. Backup Your Financial DocumentsOur final advice is to create copies of your financial documents and record-keeping. No matter how secure or reliable you think your system is, there is always the risk that something could go wrong.
If you lose all of your financial tracking and documentation, you'll have a massive headache figuring out where you are from a financial standpoint.
You can use OneDrive, Dropbox, Google Drive, or any other type of cloud-based folder to store your data. However, creating copies on your computer's hard drive, on an external drive, or on multiple cloud-based platforms is a good idea.