No inventory, less overhead, and fewer people grinding it out. If you are a coach, then you are special.
Yes, I’m trying to flatter you, but really, you and your business are different when it comes to accounting. You don’t have to deal with a lot of things that ecommerce, software, and some traditional businesses do.
Everything about your coaching business is distilled and concentrated. Although it seems simple, this can actually lead to complacency. You and your bookkeeper can end up creating meaningless reports that don’t serve you or your business at all.
By knowing what bookkeeping for coaches should actually look like, you can manage your business more effectively and help it grow.
Here’s what coaches should review with their bookkeeper each and every month to get the most out of their accounting.
3 Simple Questions to Answer for Your Bookkeeper
Your bookkeeper works based on the information you provide for them. Misunderstandings can lead to wasted time, energy, and fees for both of you. Run through these three simple questions each month to get your numbers 100% correct.
- Are there any unsettled payments?
- Do all your bank account statements correspond with each other, including PayPal and Stripe?
- Does anything look off, such as an unexpectedly high or low expense?
Now that you’re on the same page, let’s see what you and your bookkeeper should pay attention to each month to keep your books in check.
Bookkeeping for Coaches: 4 Ways to Review Your Finances
Who Hasn’t Paid?
Getting paid is the single most important thing for you and your business.
Never let overdue invoices fester. They will end up rotting like a forgotten sandwich in a school backpack.
To keep your cash flow healthy, pay attention to:
- Are there any unpaid invoices past due?
- Are there any invoices that you forgot to send out?
- Do all your invoices have the right information on your payment methods? In other words, have you let your clients know how they can pay you?
Digging through your inbox searching for clients who haven’t paid and following up with them can eat up a lot of your time.
The solution? Advance payments.
Paperbell eliminates the need to go back and forth with awkward emails nudging clients and makes sure that you get paid. As a payment-first platform, it only lets your clients book their first session with you if they’ve already settled the payment for your package.
Say goodbye to dreaded email threads where you’re “just checking in on the payment” for services you’ve already delivered.
With Paperbell, you can also set up payment plans with multiple installments or subscriptions for your clients. In this case, they will need to settle their next payment due first before they book their next session with you.
Getting paid drives your cash flow, which is the lifeblood of any business. As a coach, this should be fairly simple, especially if you make sure you get paid in advance. Here’s what you need to run through each month:
- Cash in: What’s the sum of your incoming payments this month?
- Cash out: What’s the sum of your expenses this month?
- How does my cash balance look? Am I cash flow positive?
- Are there any big upcoming cash outlays? For example, taxes due or asset purchases?
Review your cash flow retrospectively, and create a projection for the next month to make sure you can cover all your upcoming expenses.
The difference between a coaching business and a hobby is profit.
Profit is simply revenue minus expenses. Ideally, your expenses are further broken down into funds allocated for:
- Client acquisition,
- Serving existing clients,
- And business development.
This allows you to budget and track your different activities to ensure you aren’t over or under-spending in one area.
Go through your profit and loss sheet line by line with your bookkeeper to see:
- What is the overall profit this month? How is profit trending?
- What changed from last month that increased or decreased profit?
- Is it clear where revenue and expenses come from?
- Are we on budget with expenses?
- Are there any unexpected expenses?
- Are any expenses too high or any important expenses too low?
- Are there any opportunities to increase revenue or decrease costs?
Allocate your profit where it has the most impact to stay cash flow positive and grow your business year on year.
Your Balance Sheet
Often considered the most boring financial statement, the balance sheet is sometimes overlooked by business owners and bookkeepers alike. However, your balance sheet has hidden gems that can lead to valuable insights.
Walk through your balance sheet to review:
- Your assets, such as your cash in the bank, money that people owe you, your computer, or your trademarks
- Your liabilities, such as money you owe people or business loans
- Any opportunities, for example, to save on the interest of your business loan
This will give you a comprehensive view of what your business is worth beyond the daily cash moving in and out.
Free Bookkeeping Tools
For coaches starting out Wave Accounting is a great option. It has basic functionality, and it’s free. Ditch the spreadsheets and get your bookkeeping in the cloud with financial statements generated automatically.
Debtor Daddy is free with 25 invoices a month (after that, it escalates pretty quickly). If you don’t use advance payments, you can use it to automatically follow up with clients who haven’t paid you.
Best Bookkeeping Tools for Coaches
Xero is a cloud-based accounting software known for its user-friendly interface that both accountants and small businesses love. It has invoicing, expense tracking, bank reconciliation, and financial reporting tools.
You can also use Xero to collaborate with your accountant in real time. It’s highly scalable, so it can grow with your business without you having to eventually switch to another solution.
It also has better features for managing foreign currency than other accounting software options, so Xero is a great choice if you’re planning to go international.
Bonus tip: I reached out to Xero’s team during their free trial to ask for a discount and they gave me one. It was easier than trying random discount codes.
FreshBooks is another great alternative that’s designed with freelancers and small businesses in mind. It simplifies invoicing, expense tracking, and time management for solopreneurs.
It’s easy to get used to and the automation features come in especially handy to minimize your time spent on accounting or reporting to your bookkeeper.
These four simple strategies can make bookkeeping for coaches much more streamlined. Follow them to make better business decisions and keep more of your money in the business.If you want to make sure all your payments and business processes run smoothly in the background, try Paperbell. This all-in-one client management software will make sure your coaching contracts, schedule, and client info are kept in check while you’re changing lives. Try Paperbell now, free with your first client.
This is a guest post. Learn more about writing for us here.
Editor’s Note: This post was originally published in August 2020 and has since been updated for accuracy.