Do you really need an accountant for your gym business if you use Xero?
So, you have cloud accounting software in your gym business, your bank (or gym management software) feeds into the accounting software and the software makes suggestions for where to reconcile the bank. Therefore you feel like an accountant is a waste of money and confused about what they can offer to your business.
Masses of information is available online via websites such as Xero guides and HMRC website, if you have the time, you think you can do it yourself. Why would you need an accountant then?
It is a fair question as when you are starting out, you will be looking to save money. Plus, you assume the software does all the work, so what is the accountant actually doing? Seeing the value might be a lot harder than seeing the value in a Facebook ad campaign or purchasing a new piece of equipment to dazzle the members.
If you ask other gym owners if you should have an accountant you will get a mixed bag of “No, it is easy, just a few clicks of a button” and “Yes, my accountant saved me hundreds in tax alone”.
So, as an accountant, I wanted to go through the reasons why your accounting software does not do everything you think it will and reasons why Xero alone is not the solution for you.
Why your gym business needs an accountant:
1. Risk – you don’t know what you don’t know. Taxes are complicated and sometimes can appear a bit grey, so it takes years of learning and maintaining to do this well. Your mistakes are likely to be costly.
2. Time – How much is your time worth to your business? For every hour that you are working on your accounts, you are not working on your business.
3. Stress – Do you enjoy keeping the accounts up to date and then worrying that you haven’t done it right? You may spend an hour a week completing the accounts but then spend an additional hour worrying that it isn’t quite right.
4. Complication – Accountancy is still complex, whilst the software is always learning, it can learn the incorrect thing if you make a mistake. This can be complicated and costly to unravel.
5. Strategic advice – the accountant will be able to provide strategic advice on your future goals and identify opportunities to make more profit. Often when you are too close to the business it is difficult to see.
6. Tax planning – with tax most of the benefits come from forward planning – how to extract funds from the business, how to reduce your tax bill, how to plan for the future with pensions and inheritance tax. It is impossible for you to do this, as you don’t know what you don’t know.
7. Cost – an accountant is unlikely to sign off accounts that they have not prepared, so if you would like an accountant to submit your accounts, they will charge for the checking of the information.
I know an experienced gym owner who completed their own accounts and assumed as they had used an accounting system and that accounting system had suggested the entries that it was correct. When I questioned what stock they had, (as there were thousands of pounds on the balance sheet), they didn’t know how to respond, they said all they had was a few protein bars. The accounting system had made an assumption and the owner had agreed that assumption, it continued to make the same mistake. This led to a smaller loss being claimed than should have been.
Reasons why you think you don’t need an accountant for your gym business:
· Small gym – You have very basic transactions, only a few members and your bank feeds directly into your accounting system. Due to low member numbers you have the time to prepare the accounts with the help of the software guides. But even at low levels you can still make mistakes, do you know the difference between depreciation and capital allowances? Why does it matter where you code that drink you gave away to a member?
· Accounting background – you have either had some accounting training or held a junior accounting job – so you understand the basics of accounts. This will help you in the short term but did you really start your gym business to do accounts? Or did you start it for your love of fitness, weight lifting and helping people live longer lives?
· New business – this will mean you don’t have the complications of inputting opening balances into the accounting system, uploading suppliers and client details. However, do you know how to set up the chart of accounts to capture the costs in the right place? Have you considered if going VAT registered could be beneficial to you? Getting the right foundations from the start will mean less stress and time wasted as you grow.
· Gym management software – your gym uses gym management software so you won’t need to register all your clients into your accounting software. You will still need to ensure the transactions are coded correctly in the accounting system. I took over the accounts for one business that wasn’t correctly accounting for VAT as they didn’t separate out the products/services at 20% from those at 5%.
· Below VAT threshold – you do not have the added complication of VAT rules and what VAT percentage you should be charging on the different products/services you offer. Registering for VAT is not a bad thing, it shows your business is growing, plus it may be beneficial to register for VAT even if you haven’t hit the threshold. Think of the 20% tax you pay on all that fancy equipment.
· Online help – Xero provides help guides and videos and HMRC have a whole host of information you can use. If you have the time to learn, then this could be a way of bootstrapping at the start. But bear in mind that Xero is not a person who is looking at your particular situation. They are leaving the decisions up to you.
· MTD – Xero is set-up for making tax digital and shows you a VAT report. VAT payments and refunds can be automated. However, as I mentioned above, mistakes can still be made. Xero will show you the VAT report with the information you have entered, but if that is not correct the VAT report will never be correct.
· Risk – You may pick the wrong accountant. Deciding which accountant to work with is a serious decision, that I know you won’t take lightly. It is important to speak to the accountant and see if you speak the “same language”, that you feel comfortable with them and that they have experience to help you.
Here is why your gym business needs an accountant:
Not using an accountant can be likened to novice gym members going to your gym for the first time. They can work out the running machine on their own, they can copy the person before them, they can try to read the instructions provided. But unless they have an induction and on-going support they will not be able to do much more than that, at least not safely.
There are lots of things they don’t know, so they attend their induction and your team offers advice and guidance during the day. The member may then pay for PT sessions to help build a plan and learn techniques. Sure, they could watch you-tube videos until the early hours and work out how to do it themselves, but they will probably never quite reach their goals. Their lifting technique will never be quite right as it’s hard to judge yourself.
For these reasons I recommend that you take a practical approach to your gym accounts: do what you have TIME to do BEST and pay someone to do the REST. If money is tight and time is plenty, then do more of the bookkeeping yourself. Once your business reaches the point where your time is more profitably spent doing something (anything) other than bookkeeping then delegate that aspect as well.
Here are a few blogs that you can use now to start making decisions for your gym business:
Should you voluntarily register for VAT? https://southbourneaccountancy.co.uk/should-you-voluntarily-register-for-vat-for-your-fitness-center-gym/
5 common accounting mistakes that gym businesses make: https://southbourneaccountancy.co.uk/5-common-accounting-mistakes-that-could-hurt-your-gym-business/
7 signs that your business is leaking profit: https://southbourneaccountancy.co.uk/7-signs-that-your-business-is-leaking-profit/
A list of 32 ways to get value out of your business: https://southbourneaccountancy.co.uk/32-ways-to-maximise-extracting-value-from-your-business/