Big Bookkeeping Clean-Up: A Yoga Studio Success Story

Running a yoga studio is all about creating a peaceful and organized space for your clients. However, when it comes to managing your finances, things can quickly get overwhelming - this was the case for a yoga studio whose books were two years behind. They had started by doing their own bookkeeping but soon found it challenging to keep up and didn't fully understand how to use QuickBooks Online effectively. They hadn’t filed their taxes for the last two years and needed to get their books in order to do so. Here’s how we worked together and turned their bookkeeping chaos into financial clarity.

The Challenges We Faced

1. Misclassified Deposits

The studio had been coding their deposits directly to their sales income account. While this might seem like a straightforward approach, it posed a significant problem. By lumping all deposits together, they couldn’t break down their sales by type. This lack of detail meant they couldn’t track which classes or products were performing well and which weren’t.

Having detailed sales data allows you to analyze and understand the different streams of revenue. For example, knowing how much income comes from group classes versus private sessions or how much comes from selling yoga mats versus branded sweatshirts. This insight helps you make informed decisions about where to focus your marketing efforts and how to allocate resources efficiently.

2. Unreconciled Bank and Credit Card Accounts

For over 18 months, none of their bank or credit card accounts had been reconciled. Reconciling accounts is essential for verifying that your financial records match your bank statements.

Without regular reconciliations, it’s easy for errors and discrepancies to go unnoticed. This can lead to inaccurate financial statements, making it difficult to track cash flow and understand the true financial health of your business. Reconciling accounts helps catch mistakes, identify fraudulent transactions, and ensure that your financial data is reliable.

3. Incorrect Loan Payment Tracking

Their loan payments were being applied directly to the loan balance without breaking down the payments into principal and interest.

Tracking interest expenses separately from the principal is crucial for understanding the true cost of a loan. It allows you to see how much you’re paying in interest over time and can help you make decisions about refinancing or paying off loans early. Accurate tracking of loan payments ensures that your financial records reflect the true state of your liabilities and expenses, and allows you to deduct the interest expense on your taxes.

The Clean-Up Process

1. Reclassifying Deposits

I went through all the deposits from the past two years and used sales receipts to break them down by type of sale. This provided the studio with a detailed view of their income streams, making it easier to analyze performance and make strategic decisions.

2. Reconciling Accounts

I reconciled 18 months of bank and credit card statements. This helped me identify and correct discrepancies, ensuring that their financial records were accurate and up-to-date. As a result, the studio could confidently understand their cash flow and financial position.

3. Correcting Loan Payments

I adjusted the loan payments to accurately reflect the principal and interest components. This correction provided a clear picture of their loan balances and interest expenses, essential for financial planning and decision-making.

Deliverables and Results

The project included reclassifying all sales data, reconciling bank and credit card accounts, and correctly recording loan payments. I also provided the studio with organized, easy-to-understand financial reports that they were able to immediately hand off to their tax preparer.

Thanks to a focused and efficient approach, we completed the project in less time than initially planned. The studio now has up-to-date, accurate books and a clear financial picture, enabling them to file their taxes and make informed business decisions moving forward.

If you’re feeling overwhelmed by your bookkeeping, don’t worry - you’re not alone, and help is available. Reach out today to see how I can bring order to your financial chaos and help you get back to focusing on what you do best!