Running the financial side of a business isn’t easy. Let’s be honest, if it was - there probably wouldn’t be any need for us accountants!
That said, we see a lot of common mistakes made by hair and beauty salons that can be easily eradicated.
Here’s a list of some frequent financial errors and misconceptions we tend to see from salons. Could these issues be holding your business back too?
Setting the wrong KPIs
Setting KPIs for your salon is a fantastic step towards financial control, but it’s important to make sure you’re gathering the right information.
If you’re choosing to monitor how many hours you spend in the salon, or how many times the phone rings, your KPIs are not necessarily linked in any way to the profitability of your business.
It’s far more important to track the number of customers you serve each month, or the amount of money you’re pulling in per member of staff.
As part of our management accounts service, we’ll help you set the most appropriate and insightful KPIs for your salon.
Misunderstanding profit and loss
Do you sit down with your accountant once a year and listen to them explain how much you’ve made in the last 12 months? Do you look at the bottom line of your profit and loss statement without really understanding what all the figures mean?
If so, you’re certainly not alone. But this old-school approach to accounting is getting a little outdated.
By switching to a modern, more pro-active accountant (preferably one who understands how salons work), you’ll get more practical advice throughout the year, and learn how to make the most of the figures at your fingertips.
Getting pricing wrong
However busy your salon, and however many products you sell, you won’t make a penny unless your pricing strategy is right. You simply have to build profitability into your salon at every possible opportunity.
Making your salon more profitable could come from increasing your prices or cutting your costs (or in an ideal world, both) - but if your margins are too small, it can’t come simply from increasing volumes alone.
Paying more tax than necessary
How efficient is your tax planning? For many salons, the answer is ‘What tax planning?’ - but paying a little more attention in this area can reap financial rewards for your business.
Whether it’s through setting aside tax as you go (and therefore earning interest on the money in a separate account), reviewing how you pay yourself or reassessing your tax-deductible expenses, you may be able to make significant savings.
Do these sound like your salon's financial mistakes? Talk to us today about how we can help minimise your tax liability, and bring numerous other financial benefits to your beauty salon.