As the name implies, cash flow is the amount of money that flows both in and out of your business every month. Every company aims to have positive cash flow, which means having more money coming in than going out. This is important because it allows you to pay your employees their monthly wages and allows you to cover all of your other operating expenses.
The operating costs of a gym can often be substantial. You must consider how much it costs to rent your space, lease your equipment, pay your employee wages, market your services and pay your software subscriptions. Without all of these expenses, your business wouldn't be able to run correctly.
It may seem like a challenge to keep a positive cash flow with all of these expensive costs, but by following a few easy tips, you can optimize your cash flow and experience greater success.
1. Automate your payment and billing process
Managing and collecting membership fees can be a complicated process. Each member has different payment frequencies, payment methods, and membership fee amounts.
Finding a way to automate the collection process can save you a substantial amount of time while helping to ensure a constant inflow of cash throughout the year. Automatic membership collection also gives you better revenue forecasting abilities based on the new subscription and churn data reflected in your system in real-time.
The best way to automate your payment system is by using a specialized gym or fitness-based software like Mindbody. This program allows gyms to handle all of their payments through a centralized payment system making tracking and reporting a much simpler process.
2. Lease your equipment instead of buying it
The amount of equipment that a traditional gym requires can be extremely expensive, and purchasing all of this equipment at once can significantly impact your cash flow. Since workout trends and technological advancements impact which equipment is popular at any given time, it can be much better to lease it, saving you money in the long run and improving your cash flow.
If you decide to purchase all of your gym accessories, consider financing instead of paying for it all at once. This will keep more money in your bank account and improve your overall financial situation.
3. Offer discounts for annual payments
Everyone loves a deal, and your potential members are no different! A great way to encourage members to join your gym is to offer them a discount to pay all of their yearly fees upfront as one lump sum payment. This helps secure all payments and is a great idea to draw in new business, especially if your gym is still new.
You will, however, need to track the payments as deferred revenue, but it is still extra cash in your account to use for your business if the necessity arises.
4. Charge membership fees at the start of the month
For most businesses, the majority of expenses come due during the middle and end of the month. Charging all of your memberships right at the beginning of the month means that you will start with a higher positive cash flow. You also decrease the amount of time between when you have to pay your expenses and when you get paid.
5. Always keep your books up to date
This may seem like an obvious tip, but many businesses fall behind in their bookkeeping procedures. They, therefore, don't have access to accurate and up-to-date information at any given time. Keeping your books current is key to improving your cash flow as it provides visibility on your upcoming expenses.
It also allows you to keep track of your vendor invoices to have a clear idea of when they are coming due. Many vendors charge interest on late payments, which is something that you want to avoid to keep money in your business instead of putting it frivolously into someone else's.
6. Forecast your cash flow
Forecasting is essential for all aspects of your business, but it can be especially helpful when looking into the future health of your cash flow. Forecasting cash flow allows you to predict what your gym’s situation will look like in the future. From this estimation, you can put a plan in place for slower months, giving you the opportunity to be more proactive than reactive.
Managing your gym's cash flow can help you control your expenses and ensure that you always have sufficient income coming in to cover them. With a bit of planning and some helpful tips, managing your cash flow doesn't have to be an overwhelming task.
If you want to find out more ways to optimize your fitness-based business and improve your cash flow, the team of professionals at Enkel can help. We know how important it is to have a detailed perspective of your business, and we can provide you with the assistance you need to enable it to run smoothly. You can contact us today for more information.
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