November 06, 2015

Is your salon making these financial mistakes?

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Running the financial side of a business isnt easy. Lets be honest, if it was - there probably wouldnt 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.

Heres 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 its important to make sure youre gathering the right information.

If youre 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.

Its far more important to track the number of customers you serve each month, or the amount of money youre pulling in per member of staff.

As part of our management accounts service, well 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 youve 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, youre 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 But this old-school approach to accounting is getting a little outdated.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), youll 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 wont 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 cant 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 its 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.

Read our earlier blogs :

Hair and Beauty Salons: VAT for rent-a-chair models

Six habits of highly successful salons

Hair & Beauty salon owners Management accounts makeover

 

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