Setting the books straight for hairdressers and salon owners
Visiting your local salon can mean so much more than a wash, cut and colour. Hairdressers often operate at the heart of their community, so it’s important they’re able to keep business operations running clean and tangle-free.
For women (and some men I know) a visit to the hairdresser is never a quick, transactional business activity – and nor should it be.
The hours spent are filled with conversation, covering an extremely broad range of topics.
As a bookkeeper and accountant, any conversation I have inevitably turns to business matters and how things are going.
These conversations can be amusing on the surface, but sometimes I’ll occasionally hear something that makes me worry. If you’ve ever wondered about any of the following bookkeeping issues, the below should help you set things straight.
“Our computer system crashed and we lost all our data!”
Oh no! Small business owners sometimes forget to back up their data each night, which can result in the loss of all data for the past days or weeks.
Some may assume that it’s possible to get by with a two-week hole in sales data.Your accountant will understand that computers can crash, but ignoring sales data for two weeks isn’t the ideal solution to your problem.
To avoid a situation where you’re tearing your hair out, I highly recommend considering an automatic, cloud-based data backup for all critical financial information.
“Tea, coffee, champagne anyone?”
I recently ‘cheated’ on my normal hairdresser as I couldn’t get into see her.
I’d found an alternative hairdresser that also advertised a free beverage with each cut. This is a common customer service practice among many barbers and hairdressers alike, and one I can really get behind.
But when I was never actually offered a drink during my scheduled session, rather than be upset by the experience it gave me cause to wonder if the drinks had already consumed out-of-hours.
This highlights an issue that can arise in any business when work supplies suddenly become personal supplies.
Even if you’ve over catered for clientele and decide to use the excess in a private staff celebration, be sure to check you’ve not mixed up your bookkeeping by doing so.
This also applies to other hairdressing supplies that might occasionally end up becoming personal property – that stock will need to be written off from the salon’s inventory.
“Hair dressing equipment is expensive! I bet I can claim some stuff around that, right?”
Hair dryers, hair straightners, curls, clips, combs, brushes, trolleys…it all adds up.
Some hairdressers and salon workers (and tattooists, for that matter) basically ‘rent’ space from the salon owner and provide their own tools and equipment.
That’s OK, but not if the salon owner is also claiming costs for the equipment they didn’t buy (and trying to do so will result in an awkward conversation with the accountant at EOFY).
On the other hand, salon owners can also make life more difficult for themselves by not claiming certain items.
For example, I recently visited a brand-new salon that was fitted out to the nines and ready for business.
But when we reviewed their very first BAS, there were hardly any expenses and no capital expenditures for the equipment and furniture they had bought.
None of the chairs, mirrors, nor the couch or reception desk had been entered into their accounting system.
Not only does this impact on GST but also on profit numbers. I’m happy to say that, once corrected, suddenly the BAS became a game changer for the salon owner.
“Client cancellation fees aren’t really ‘income’, right?”
Charging ‘no-show’ fees show that you place value on your time and expertise – not to mention your other important clients that have potentially missed out.
But I have heard of some salon owners who treat this as essentially free money that can be divvied up among staff at the end of the week.
It may be tempting to think this is the case, as no actual service was provided, but unfortunately no-show fees must still be collected as income.
GST still applies (if you are registered of course) and that no-show fee forms part of your income that you will be taxed on accordingly.
There’s simply no such thing as “free money” in business, and the same rules apply to any other kind of tip or gratuity.
Hairdressing is a true craft that takes years to master (you only need to look at my son’s homemade haircut to work that out). And so is the art of running a business.
As such, systems need to be set up right. If those systems fail, you need a back-up plan.
Winging it when it comes to recording income and expenses for the ATO is akin to having your accountant cut your hair.
So if in doubt, especially when starting out, invest your time and skills in your core business, and leave bookkeeping to the experts.
This article has been recently edited and updated after it was found to not meet the standards of our content policies.
We acknowledge these issues occurred due to an oversight in our editing of the author’s original words. As a result, MYOB would like to apologise to our readers and to the original author of this article.