Too often, gym owners make critical decisions without all the facts, which leads to unnecessary stress and financial challenges. In this post, we’ll introduce two key accounting reports to understand your cash flow and profits. This topic is important because many business owners think collecting money is the same as making a profit, but that’s not the case.
Are You Bringing In Money Without Making a Profit?
You’re making regular deposits, and your bank account is growing. So business must be good, right? The short answer is not always. If your cost of operating is high, you can collect all the money owed to you but still not be making a profit. It’s only when your income surpasses your cost of operations, including the cost of goods and services sold, that you are running a profitable business.
“Cost of goods and services sold” is key here because considering the basics like your physical building, payroll and utilities is not enough to give you an accurate picture of profit or losses.)
Are You Running a Profitable Business That’s Short on Cash?
On the other hand, even if you’re making a profit, you might find you’re too short on funds to spend the money you want. This situation can hold you back from business and investment opportunities.
The easiest and most dependable way to avoid letting your business fall into either of the above scenarios is to monitor your cash flow report and profit-and-loss (P&L) statement.
A P&L statement shows you all your basic expenses as well as the true costs of providing your services and selling your retail merchandise. Unfortunately, sometimes this report can show losses instead of profits, as we explained above.
Cash Flow Reporting
A cash flow statement is a report that documents your cash moving in and out of the business. Tracking cash flow with this report helps ensure you’ll be able to cover all expenses.
Your operational reports and metrics are also critical for being informed and making sound decisions. To learn which operational reports and metrics to use and what they tell you, stay tuned for our free Gym Owner’s Finance Guide which will be published soon!
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