Owning a salon or spa comes with handling multiple responsibilities, including (but not limited to!) servicing your clients, managing your employees, and making your business grow. However, one of the most important things you need - timely, accurate financial accounting records - tends to fall to the back burner while many of your other responsibilities take precedence. How can you possibly expect to juggle it all efficiently?
As if things weren't overwhelming enough already, at tax time, your annual tax accountant tells you how much you owe. Often, you're not prepared to hear this number - and if you filed for an extension, the timeframe between finding how much you owe and the time the money is due is greatly reduced.
If you're like many small business owners, your spa or salon (whether it be a hair, nail, tanning, or beauty salon) is a primary source of income. When these profits are such an important part of your life, it's helpful for you to be able to anticipate your tax liability.
For more than 50 years, CSI Accounting & Payroll has worked with salons and spas, so we know that it is essential that your bookkeeping and accounting services are organized, up-to-date, and handled on a monthly basis. This will avoid tax surprises and ensure that you always know where your business is and where it is going financially.
Follow these five tips to help increase your efficiency and organization - and hopefully relieve a bit of stress, too.
1. Simplify Your Credit Cards and Bank Accounts
We advise simplifying your wallet to only one business credit card and using only one business bank account. Doing this reduces the complexity and time spent with bookkeeping and bank reconciliation functions. Plus, if you ever choose to outsource your bookkeeping or accounting, this may factor into a lower service fee.
2. Use the Right Software
Your primary source of income is from your services, but you likely also receive money from products that you sell and chairs that you rent. Because of these different areas of income, you need daily, weekly, and monthly reports of sales by category. To do this, you're going to need a point-of-sale software that's backed by satisfied users.
3. Separate Your Business and Personal Finances
As a business that focuses more on lower-priced services with a higher quantity of customers, it's easy to lose track of expenses. You should keep track of every business receipt, slip, invoice, and even cash used to pay for a business expense.
When your business first started, you may have been fine to keep your finances in the same place. However, we advise separating your business and personal finances, especially if your business is growing. Nothing triggers a government audit faster than co-mingling funds.
When you need to move money between your personal and business accounts, consult an accountant first to learn the most tax advantageous ways to do so.
4. Outsource Your Payroll
Payroll is only a portion of your records, but it's important! You should use your point-of-sale software to track how your employees are paid (hourly, commission-based, or both), then compile this information each pay period. After that, you can have a payroll service take care of the rest.
You operate in a hands-on industry. Once your business has enough activity that running payroll takes up time, energy, and effort that you can't prioritize over other aspects of running your salon or spa, it's time to hire a payroll service.
A good, reputable payroll service provider will, in an accurate and timely manner:
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Pay your employees
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Pay your payroll taxes
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Prepare your W-2s
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Handle all weekly, monthly, quarterly, and annual compliance with the state and federal government
If you've been facing those pesky IRS penalty notices, a payroll service will stop them.
5. Go Beyond Bookkeeping
If you're doing your own bookkeeping, we suggest obtaining all of the knowledge and supplies you'll need as soon as possible. Ideally, a salon or spa should have everything in place before even opening their doors.
After that, establish a weekly routine of documenting all income and expenses on a specific day, turning it into a long-term habit. Don’t let months pass by without tracking expenses; being proactive means you'll have fewer obstacles to tackle in the long run.
However, at the end of the day, bookkeeping is largely just managing your records. Plus, most salon or spa owners end up outsourcing their taxes with an annual accountant during tax season. These are just the basics.
Monthly accounting brings bookkeeping and tax filing together, but it also includes:
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Year-round tax strategy to minimize what you owe in taxes
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Monthly financial statements to guide you
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Monthly bank and credit card reconciliation
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Monthly meetings with your accountant to get personalized advice
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Unlimited contact with your accountant at no extra cost
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Sales tax returns filed on time and accurately
When you outsource all of the items above with one service, you have time to do what you do best: manage and grow your business.
Bonus Tip: Combine Tips 4 & 5
A firm like CSI Accounting & Payroll can combine bookkeeping tips number four and five, conveniently and efficiently handling all of these services under one roof. You'll even get a discount for bundling accounting and payroll services!
In turn, you’ll be able to focus more on providing the best possible service for your clients. Don’t wait for mistakes to happen or opportunities to pass you by; outsource so you can concentrate on your bottom line.
Want to find out if CSI can be a good fit for your business? Click the button below for a free consultation. We would love to talk with you!
If you want to learn more about the benefits of monthly accounting, click the image below to read about the different types of advice that a monthly accountant can provide - all based on your books, financial statements, and conversations.
