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 Taking Care of
Business
By Shevon McBride
A school owner’s guide to smart financial practices
Teaching, planning, choreographing, directing—with so much to
do, who has time to think about the business side of owning a
studio? All of these tasks can be overwhelming and consuming,
but studio owners should— and must—ensure that the business
aspects of running a school are given the same attention as
the creative or artistic elements.
If you are to be successful in the dance studio world, the
business and artistic sides of your school must go hand in
hand. Choreographing the perfect performance piece, purchasing
that new stereo system, and making sure the books are in
balance are all part of making your business run smoothly. As
the studio owner, it is your responsibility to be aware of the
transactions that take place on a daily basis. You should be
the one who oversees the checks and balances that result in a
smoothly functioning business—one that operates without any
surprises.
ESSENTIAL PRACTICES
Several important business practices need to be given top
priority in your studio: cash, receivables, payables, and
payroll. Without consideration and some knowledge of these
practices, you could be putting yourself and your business at
risk. You can hire the right people to perform these
activities; however, you must be informed enough to be able to
put checks and balances into action. Like fine-tuning a
performance piece, it takes a keen eye. Just like you make and
adjust the technique and the choreography for a dance, you
must be able to make and keep the studio’s behind-the-scenes
practices running smoothly as well. If one component is out of
balance, over time it can put the rest of the business into a
slow downward spiral. It only makes sense to protect the one
thing you have worked so hard to build.
In order to establish good business practices and be
compatible with today’s technology, a computer with adequate
software that is designed for the dance studio is a must. This
software is the soul of the studio’s database. It holds all
the information about the students, staff, recitals, costumes,
music, reports, charges, income, and sales. It needs to be
compatible with small-business financial software, such as
QuickBooks. These two programs establish a good base for the
checks-and-balances system that keeps your business running
smoothly. Using an old-fashioned pen, paper, and ledger system
is still a workable plan, too. Whether you use cutting-edge
technology or yesteryear’s tools, any system will work as long
as you, not only your employees, are monitoring it for
accuracy and accountability.
THE THREE Cs
The “three Cs”—meaning cash, checks, and credit cards
pertaining to balances, receipts, and disbursements— are some
of the most important elements of the financial stability of a
business. The business practice objective is to safeguard and
properly
account for the receipt, holding, and disbursement of the
three Cs; therefore, you should set up a specific, accurate
system to monitor all those transactions.
First, establish a written internal controls system that
ensures that cash receipts and disbursements are conducted
with appropriate procedures. For example, a three-copy receipt
book would be used for cash income.
The top copy would go to the customer, the second would be
attached to the cash on hand (if it is not posted
immediately), and the third would remain in the receipt book
as a backup and final balance system.
Second, signature authority should be adopted and reviewed
annually for check writing. You should authorize one person to
sign checks (in addition to yourself, of course). This person
will then be able to handle bill payments or other
disbursements of funds. Once you have decided who will have
this responsibility (usually the office manager or secretary),
you need to put into practice a review of any signed checks
before they are disbursed. This enables you to know, at all
times, where the funds are going with your approval. This also
keeps your employees honest with their procedures.
And the third C: credit cards. You need a credit card system
that is user friendly and compatible with all of your software
systems. It should be a consistent and secure system that
works easily with all of your financial components with a
daily management review. With the three Cs in working order,
your studio will be a successful business that will support
your artistic endeavors.
ACCOUNTS RECEIVABLE
In most businesses, the money going out sometimes seems to
move faster than the money coming in, which means that it is
essential that money be received in a timely fashion. The
money coming in is called “accounts receivable.” The accounts
receivable must be properly re corded
and promptly collected. Establish a written system to invoice
customers promptly, in a consistent manner, while being
diligent in following up and collecting past due accounts.
Parents need to be aware of their financial commitments before
signing up their children for classes, so there must be no
surprises regarding the cost of tuition, costumes, pictures,
recital fees, and so on. They also need to be aware of your
policies on how they can make payments on these various
financial obligations for the entire year. The policies should
include how much is to be paid, and when, throughout the year.
With the policies and information in hand from the start,
parents can put a budget plan into action and you can
establish a studio budget that reflects how funds are coming
in as well as being disbursed. The policies also decrease the
number of past-due accounts, because the parents have
firsthand information.
There will always be some parents who will consistently be
late or will not hold up their financial commitment to your
studio. This is where you once again have to keep the checks
and balances going to make sure that the receivables come in
as anticipated; without them the studio can’t sustain itself
financially. The timely, consistent review and reconciliation
of receivables is of utmost importance to your school’s
financial health. By taking the time to review the receivables
you will see clearly whether funds are coming in as they
should and how much money is readily available for
disbursement toward bills, expansions, travel, mortgage, rent,
or any other financial obligations.
ACCOUNTS PAYABLE
The flip side of accounts receivable is the accounts
payable component of your business, which includes
utilities, mortgages, rent, and other expenses. Without the
accounts receivable in balance, you cannot make payments to
your financial obligations and have a successful business. A
segregation of duties should be established in a written
control system that provides payments and disbursements within
a dollar amount. In other words, you need to develop a budget
in accordance with the amount of money you receive monthly.
This eliminates any unwanted surprises and also allows you to
plan for that long-wanted purchase. A money cushion should
also be readily available for emergencies; you never can
anticipate when repairs will be needed.
If your studio handles merchandise such as leotards, tights,
and shoes, an accurate and consistent system of ensuring that
all merchandise is properly inspected and recorded should also
be put in place. Payments to the vendors you purchase your
merchandise from should be made in a timely manner under the
terms of the transaction. Being accurate, consistent, and
timely with your accounts payable helps all the pieces of the
puzzle fit in place for the success of your studio. It also
establishes good credit ratings and business standings for you
with all the companies you deal with in your workplace.
PAYROLL: NO MORE HEADACHES
Payroll can be one of the biggest expenses and headaches for
some studio owners. A good business practice objective is to
conduct payroll operations accurately and in compliance
with state and federal laws. Establish a written controls
system that
separates payroll preparation from the general ledger functio n
and other payroll functions, such as hiring, timekeeping, and
distribution of checks. Financial software is helpful in
maintaining accurate, up-to-date payroll records. It also
offers a system that ensures the accurate and timely
collection of payroll information such as timecards,
attendance records, and funding sources.
A distribution of pay should be established that ensures
proper payment of employees, through direct deposit or by
check, based on submitted documentation. To keep everyone
happy—your employees, your accountant, and the federal
government—you must make certain that all regulatory
requirements and other employer responsibilities are met.
Establish a written system that enables proper collection and
timely remittance of payroll taxes and other withholdings for
retirement and insurance programs, as well as all federal and
state reporting requirements. Being aware of your obligations,
even if you do not fully understand them, can ultimately save
your business from unwanted fines and fees.
Checks and balances are the key to a successful and profitable
studio. You might not know everything there is to know about
the business of running a studio (and if you do, it’s a
definite bonus), but you should know enough about the basics
to keep informed and on top of your business. Become
acquainted with all policies, procedures, reports, and
passwords so that you can monitor all the business- related
activities that take place in your studio. Remember, no one
will take care of the day-to-day activities with the same
concern that you will—or consider them as important as you do.
Make it your business to take care of your business.
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