Tax season is an annual struggle for small business owners. It’s even worse for fitness business owners, who are also managing their busiest time of year. From confusing payroll documents to a mosaic of complex deductions, filing can be a nightmare. But, with careful planning and regular organization, you can stay on top of these financial demands throughout the year, rather than scrambling to catch up in three short months. These are five things you can do to better manage your finances in the year ahead.
Stay on top of expenses
You’ll incur expenses weekly – evenly daily – throughout the year, and the last thing you want is a huge pile of unorganized receipts waiting to be filed for tax season. It’s easy to look at expenses as a small detail of your overall finances, but they play a big role in determining your cash flow, and they’re an essential component of your tax return.
Set aside time weekly or monthly to organize and categorize expenses. Even better, use an app or a combination of apps connected to your account that lets you scan and digitize expenses to file them immediately after they happen. This cuts down on hard-to-manage paper files, and it lets you categorize when the expense is fresh in your mind instead of when you’ve already forgotten it.
Go digital
There are plenty of apps and platforms out there to help you manage finances, and the time you save on paper filing, manual balancing and form completion will mean money back in your pocket. Like a virtual accountant these digital services are sure to help you throughout the year and especially during tax season.
Use an accounting software like QuickBooks to get everything from cash flow tracking to profit and loss reporting. It’s the easiest way to see what you’re making and spending at a glance. While most accounting software comes with expense tracking, you can use an a la carte option that scans, digitizes and categorizes receipts and invoices. And, if you employ several people, consider a payroll platform that takes the pain out of paychecks and payroll taxes and makes W-2s easier to manage.
Forecast cash flow
A balanced budget is a basic part of small business ownership, and with the addition of cash flow forecasting you can make financially sound decisions throughout the year. Cash flow problems are one of the top reasons small businesses like fitness studios fail – if you invest time in analyzing the cash balance patterns of your business, you can create predictive modeling that keeps you in the black.
For fitness business owners a big challenge is managing seasonality, which causes fluctuations in attendance and therefore revenue. But this challenge can actually be a great business tool, helping you plan for the busy season and quieter times. Along with proper bookkeeping, this forecast makes it possible to sustain positive cash flow by managing investments – in staff, marketing, new equipment and new classes – at the right time.
Know the deductions
Whether you manage your own taxes or you outsource them to a pro, it’s a good idea to familiarize yourself with small business tax deductions. From your studio’s rent and utilities to travel and supplies, owners can write off many of the payments they make in the course of business.
Section 179 is arguably the most useful deduction to know. Under this tax code, small businesses can write off the cost of equipment purchases up to $1,000,000 (in 2018). That means studio owners can write off the full cost of purchased or leased fitness equipment, along with other business equipment. Keep this is mind as you plan out upgrades and new equipment, as you’ll want to take advantage of the write-off in the upcoming tax season.
Schedule time for finances
It’s easy to think of book-keeping and record maintenance as an incidental of business – an “I’ll get to it tomorrow” task. But keeping a balanced budget is the most fundamental aspect of financial wellness, and it should be a routine part of your schedule.
A weekly or monthly check-in with your books, your accounting software or your actual accountant will keep you in the know, so you can make better decisions about the business moving forward. You can use the time to digitize and record receipts and categorize expenses, two easy tasks that will make life easy come tax season. You can also take a look at cash flow to see if there are opportunities for new investments.
