Category Archives for "Bookkeeping"

The Ultimate Cheat Sheet on Growing Your Fitness Studio or Gym

By Mike Jesowshek, CPA | Bookkeeping , General Business

Every business must have a constant eye on growth. If your company is not growing, it is losing key opportunities and longevity. Yet, growth does not always come from increased sales. In many cases, it’s important to take an inside look at how you are operating, what costs you have, and how you can better manage day-to-day operations. To stimulate growth in your business – no matter the sector – focus in on these key areas specifically. It could mean improving your company’s ability to compete at a higher level.

Using KPIs to Guide Growth and Budgeting

Key Performance Indicators (KPIs) help you know how your company is performing. They should be used as a compass and guiding point for every decision you make within the company. KPIs such as profit, cost, sales by region, customer lifetime value, and product defects are just some of the areas to focus on. To achieve clarity here, you need an efficient way of managing all of this data. Cloud computing makes it possible along with implemented automation. These metrics can provide you with key opportunities for:

• Growth
• Cost-cutting
• Better employee management
• Better customer management
• Scaling limitations and much more

Use KPIs to help guide every one of your company’s decisions about growth from this point out. Invest the time in learning what these figures are to get started.

Real-Time Cloud Accounting and Improving the Books

A good place to focus attention is on your accounting. Here’s what to look for:

• Are you in the cloud yet? This provides the most effective and efficient way to manage your business’s books.
• Real-time access means you can pull up reports and profit margins to get a clear understanding of opportunities.
• Put more attention into accuracy and bottom lines. If you are not working with a professional service to improve your accounting clarity, what every dollar means, it is time to do so.

Use Reviews and Social Proof to Convert More Clients

Social proof and reviews are insights into what your customers are thinking, expecting, and desiring. They provide an opportunity for you to get more info on what your customers want. Social proof indicates that someone “says” your product or service is good. That means other people are going to flock toward this. Learn what reviews are out there. Amplify your marketing to focus on them. Build strong customer relationships through this process.

Shoring Up Cash Flow by Reducing Costs and Boosting Efficiency

Next, take a look at your efficiency. Using your KPIs, you can provide more insight into key areas of cost. For example, spend the time examining the various costs your company has and work to reduce them. Then, find more efficient methods to improve production, employee productivity, and customer service.

Extend Market Reach by Honing in on Your Target Market or Expand Your Reach

Establish who is your target market. Instead of marketing to the masses, reach people where they are. For example, if you are targeting Millennials as your ideal client, marketing on social media and connecting digitally is essential. For seniors, television and local ads still reign as ideal.

At the same time, consider the value and potential possible if you expand into other markets. Carefully consider other markets that fit your product perhaps in a different way. For example, if you are marketing just to Millennials right now, consider how your product or service could impact the up and coming younger generation. Do you need to make modifications? Should you use different marketing to capture the early lead in this generation?

Provide More Services to Existing Customers

Expand through your existing customers. Perhaps one of the best ways for today’s company to increase sales without having to expand on services or customer acquisition costs is to focus on increasing sales to existing customers. What else can you offer? There are several solutions here:

• Offer more products and services you already provide to existing customers. For example, introduce them to a secondary service you provide that they have yet to purchase.
• Build relationships with complementary service providers and market those services to your existing customers.
• Build on your existing products and services to provide more comprehensive options. Grow the company by expanding what you offer.

In these situations, the goal is clearly to get more money from existing customers. Provide them with quality, value, and opportunity to achieve these key opportunities.

Understand Which Products Are “Losers” and Should Go

Do you have “loser” products? These are products that never really capture enough sales to make them a profit point for you. It’s important to target these products with careful insight. To grow your business’s bottom line, you need to know how effective every product is. Are you putting a lot of money into marketing a product that only has a very limited customer base? Does it yield a very small profit margin? Determine if you have these products in your lineup and then work to eliminate them, improve them, make them less expensive, or pull at least some of your marketing and labor hours away from them.

Get Better Control Over Employee Costs and Reduce Turnover

How much do you spend on managing your employees? From payroll to taxes to human resources, there are many costs that go into managing your employees. Reducing those costs is always a good thing. Automation and software can help you to reduce your human resource department to create massive savings that you could put toward scaling. The key here is to ensure you are using the most up-to-date resources and tools available.

Alongside this is the goal to reduce employee turnover. Don’t create a bad experience for your employees. Provide them with support. Be sure they have constant guidance and the ability to achieve your company’s goals. Retaining employees is essential. It costs much more to have to find, hire, train, and manage new employees than it does to keep well-performing, talented, or employees with potential on staff. Find that balance within your HR department for the best results.

Improve Customer Retention to Reduce Costs

It’s hard (and expensive) work to get new customers. Every dollar you spend on marketing and bringing in new customers and clients needs to be money well spent. While you cannot stop marketing, you should do what you can to improve customer retention. To do this, consider:

• Speak to customers one-on-one to ensure they are satisfied.
• Ask for feedback and respond to it routinely.
• Meet with customers to gather more insight. Conduct market research routinely.

Most importantly, listen to the negative. These are areas where you’ll be able to improve and grow specifically. Fixing a customer’s problem is also a surefire way to keep them as a lifelong customer. Are you doing what you can to improve customer retention?

Get a Clear Picture of Profit Margins of All Products and Services

How much does each product cost to make, buy, produce, market, and sell? Every service needs a clear understanding of the costs to acquire and provide that service to your customer base. These costs will change over time, especially as many companies see significant changes in production and logistics costs. You’ll need a method for monitoring these costs on an ongoing basis. That’s not always easy. With proper software and accounting tools, you should be able to gain insight into costs in real time or at least over the course of several months. This gives you the ability to know where to move prices, where to place your marketing dollars, and where to focus your efforts to scale your business.

What Steps Can You Take Now?

Business growth is always necessary, but there are many ways for your company to expand. Don’t always focus on just increasing sales and growing locations. Also look at ways to monitor the financials within your company. This will give you more leverage and power to achieve more of what you want long term.

5 Bookkeeping Tips for New Fitness Studio Owners

By Mike Jesowshek, CPA | Bookkeeping

Learn more about these tips on our article located posted on the Association of Fitness Studios blog.

https://member.afsfitness.com/content/5-bookkeeping-tips-new-fitness-studio-owners

When Business Meals and Entertainment Are Deductible

By Mike Jesowshek, CPA | Bookkeeping , Taxes

An often asked question is: are meals and entertainment deductible in the course of one’s business, and if so, under what circumstances? This type of expense requires you to comply with some pretty complicated qualifications, and if you can jump through the hoops, the expenses may be deductible in certain cases.

But before we go too far, know that unreimbursed meal expenses incurred while out of town overnight on business are always deductible but generally limited to 50% of the cost. The focus of this article is the deductibility of meals and attendance at events in the form of business entertainment.

The first hoop to jump through is meeting the “ordinary and necessary” requirement, which applies to all deductible expenses needed to carry on a business. Ordinary and necessary is broadly defined to mean customary or usual and appropriate or helpful.

The next hoop is meeting one of two tests: the “directly-related test” or the “associated-with test.”

• Directly-Related Test – In order to meet the directly-related test, the meal expense must be incurred in the active conduct of business and be for the taxpayer, business guest(s) and any spouse(s). Under the directly-related test, actual business discussions are required during the meal, and the taxpayer must show that he or she anticipated a specific business benefit from the meal, even if the benefit never materialized. Meetings or discussions that take place at sporting events, nightclubs, or cocktail parties – essentially, social events – wouldn’t meet this test.
• Associated-With Test – The associated-with test is somewhat more liberal, because it allows deductions for meal or entertainment expenses incurred the same day either directly preceding or following a substantial and bona fide business discussion. However, entertainment can still pass muster, even if it didn’t occur on the same day as the business meeting, if the facts and circumstances warranted a delay.

  Entertainment at shows, sporting events, night clubs, etc., can qualify under the associated-with test if its purpose is to get new business or encourage the furtherance of a business relationship. For meals, you or one of your employees must be present; otherwise, the expense is not deductible.

  If non-business guests are invited to an otherwise allowable “associated-with business” entertainment event, the expenses must be allocated between the business and nonbusiness guests. The expenses related to the non-business guests are nondeductible. However, the spouses of the taxpayer and of his or her business guests or associates are considered business guests for this purpose.

Still another hoop is the restriction for lavish expenses. Meal and entertainment expenses are deductible up to an amount not considered “lavish” (reasonable under the circumstances). Also, the taxpayer (or a representative of the taxpayer) must be present. The representative could be, for example, the taxpayer’s employee, an attorney or an independent contractor who performs significant services for the taxpayer.

The final hoop, which is as important as qualifying for the deduction, is meeting the substantiation requirements. You must be able to establish the amount spent, the time and place, the business purpose and the business relationship and names of the individuals involved. You should keep a diary, account book or similar records with this information and record the details within a short time of incurring the expenses – a timely kept record carries more weight in an IRS audit than one created months or years after the event occurred, when memory can be hazy. For expenses of $75 or more, documentary proof (receipts, etc.) is also required.

A final word: even after you have jumped through those hoops, in the majority of cases, only 50% of the qualified expenses are actually tax-deductible.

How to Identify When the Time Is Right to Bring an Accounting Pro Into the Fold

By Mike Jesowshek, CPA | Bookkeeping , General Business

Running your fitness studio or gym is a complicated affair with a wide range of different “moving parts” to concern yourself with, but many people don’t realize how many of them ultimately lead back to your finances until it’s far too late.

A large part of your ability to be successful in the long-term will ultimately come down to the rate at which you expand. Grow your fitness studio too quickly and you might spread yourself too thin. Grow too slowly and you’ll be passing up opportunities that are rightfully yours, leaving a lot of money on the table at the same time. Your control over your finances will dictate whether you’re able to strike that perfect balance the way you need to.

Marketing, paying vendors, paying employees, managing client relationships – all of it depends on the quality of your bookkeeping (or lack thereof). To that end, a large part of your success will ultimately come down to your ability to identify when the time is right to stop doing things yourself and bring a professional accounting provider into the fold. To do this, you’ll need to keep a few key things in mind.

The Warning Signs You Need to Know

As it does every year, Intuit recently released a survey outlining the state of small business accounting in the United States. The results are very telling in terms of when people should bring a financial professional into the fold – and what the consequences are of inaction.

Asset tracking, for example, is something that you may not immediately think impacts your bookkeeping, but it does in a fairly significant way. Ghost assets are fixed assets that have either been rendered unusable or are physically missing. However, “out of sight, out of mind” does not apply in this case – they still count toward a business’s tax and insurance liability, thus making it difficult to properly reconcile their books every year.

Of the people who responded to Intuit’s survey, 74% indicated that they didn’t understand this, and 49% said that they didn’t even know what ghost assets were in the first place. If you are among those numbers, congratulations on arriving at one of the biggest indicators that you need to bring a financial professional into your business (and also that you’ll likely want to conduct inventory on a regular schedule moving forward).

Other signs that the time is right to bring a accounting professional into the fold ultimately come down to the most pressing financial issues that most businesses face. 51% of people who responded to Intuit’s survey said that accounts receivable and collections were their most significant business challenge. 44% said that cash flow was always something they were concerned about, and getting a better handle on “money in vs. money out” was always a top priority.

Cash flow troubles, it is important to note, is the number one reason why most small businesses fail within the first four years of existence.

Other pressing issues included properly managing paperwork on a regular basis, accurately closing the books each month, and managing payroll. The major thing to understand is that a financial professional will be able to help with ALL of these things, taking the stress off your plate so that you can focus simply on running your business like you should be. If ANY of these things are ones that keep you awake every night, or you feel these issues are significantly affecting your ability to grow and evolve, guess what? It’s time to contact a professional to do as much of the heavy lifting as possible.

Never Underestimate the Power of Trust

Consider it from another perspective. Recently, small business owners responded to a survey outlining all of their most pressing accounting issues. The survey, conducted by Wasp Barcode Technologies, spoke to 393 small business leaders of nearly every organization size and industry that you can think of.

When asked to rank the professionals that they worked with on a regular basis in the order of importance, these business leaders overwhelmingly agreed that accounting experts were one of the single most valuable assets they had. They outranked attorneys, insurance agents, technology firms and even staffing services.

This is how important tax professionals are: Business leaders know that much of what they’re trying to do each day, along with what they hope to be able to accomplish in the future, would be impossible without the stable foundation that only an accounting professional can provide.

When It Comes to Accounting, Knowledge Is Power

At the end of the day, it’s important to remember what may be the single most important piece of advice for small business owners when it comes to accounting: It is far, far cheaper to hire an accounting professional today before things get out of hand tomorrow.

Think about it this way: A large part of the reason why you got where you are today is because you took the initiative and started to do things for yourself. You have a “can do” attitude that just won’t quit, and you’ve built something incredibly successful from the ground up as a result. But there are certain situations where you cannot let pride get in the way of making the right decision, and accounting is absolutely one of them.

You already have a full-time job: running your fitness studio or gym. You don’t have the time to take on another one, let alone the expertise to guarantee that you’re making the best decisions at all times. Yet this is exactly what business accounting is – a heavily specialized, full-time job that requires a careful hand and attention to detail that is second to none.

Bringing in a professional sooner rather than later will not only help make sure that you have cleaner books and other records, it will also significantly reduce the chance that you’ll get hit with penalties for things like late taxes and allow you to be much, much more successful in the long term. These types of benefits, to say nothing of the peace of mind that only comes with knowing your accounting is taken care of, are things that you literally cannot put a price on.

10 Financial Questions to Ask When Starting a Fitness Studio

By Mike Jesowshek, CPA | Bookkeeping , General Business , Payroll , Taxes

Starting up your fitness studio or gym is an exciting time, but it is also a time with many questions. While it may seem initially very easy to open a studio and start training, the financial aspects of being successful are a bit more challenging. As you consider the process of starting up, work with a accountant to ensure you get your financial footing in place now. Ask these questions.

#1: What should be in a basic business plan?

A business plan should outline each detail of your fitness studio including who will run it, how much you’ll charge, and what you expect to earn. Putting time into creating a thorough business plan is important. Work with your team to ensure your plan is accurate and represents your business well.

#2: Who will you need to pay taxes to?

Your local jurisdiction and state have specific taxation requirements. Youmay have to pay taxes on sales, but also costs associated with payroll. Ensure your accountant not only talks to you about who you need to pay, but payment deadlines as well.

#3: What is a projected cash flow for the fitness studio?

How much cash does your company need to keep on hand? The key here is to be able to anticipate how much it will cost you to operate your fitness studio. Many companies should not expect to have positive cash flow for at least a year, often longer. Your professionals can help you decide what your cash flow projections are.

#4: How much of an investment do you need to put into your fitness studio right now?

Your financial team can help you project the cost of setting up your new studio. This will include costs related to establishing the physical business and paying for equipment. Your initial investment generally will be the highest amount put into the company by the founder.

#5: What is your break-even analysis?

This may be an important question to ask early on. How much do you need to make to break even? You’ll want to talk to your financial team about the timeline for this and what can be done to help ensure you break even as soon as possible.

#6: What liability insurance do you need?

While most tax professionals don’t offer recommendations here, having adequate policies to cover potential loss is important. Work with your team to ensure you have comprehensive protection to minimize risks against your company’s financial health.

#7: What will interest cost you?

Interest on loans is not something to overlook. You’ll want to ensure you have an accurate representation of how much you are paying in interest so you can make adjustments to pay off any borrowed debt sooner, make better decisions about borrowing, or factor in the cost.

#8: How will you manage payroll?

This is a very big component of starting up since it can be troublesome for most startups to actually know how to pay employees and meet all federal and state requirements. Working with a payroll provider is often the easiest option (and most financially secure since paying an employee to do this work tends to be more expensive).

#9: How can you reduce your taxes?

Tax professionals will work with you to determine if there are any routes to reducing taxation on your business including local incentives that may be available. You’ll also want to talk about projects taxes, investments that could reduce taxes, and having all possible deductions in place.

#10: What’s the right profit margin/industry benchmarks?

Working with a financial team often comes down to this question. How much should you charge to make the best profit possible while still ensuring your company can grow? It’s not a simple question, but having the right team by your side ensures it will be clarified as much as possible.