Bookkeeping Basics for Salon Owners

Bookkeeping is a crucial aspect of a business for a salon owner. Bookkeeping helps to maintain accurate and up-to-date financial records by tracking income and expenses day-to-day, providing a clear financial picture to make informed business decisions. 

Quality bookkeeping ensures compliance with tax regulations and financial reporting requirements - contributing to TAX SAVINGS and preventing you from over paying or under paying at tax time.

Understanding key principles and concepts is crucial to maintaining accurate financial records and making informed decisions. Here are some bookkeeping basics:

Chart of Accounts

A systematic and comprehensive list of all accounts used to categorize and organize financial transactions. This includes accounts for revenue, expenses, assets, liabilities, and equity.

The Accounting Equation

  • Assets: Resources owned by the business or individual.

  • Liabilities: Debts and obligations owed by the business or individual.

  • Equity: The owner’s or shareholders’ interest in the business’s assets.

Financial Statements

  • Profit and Loss (P&L): A financial report summarizing and detailing your salon’s revenue and expenses over a specific period, to determine net income or net loss. This report shows your salon’s profitability and is often used to track financial performance over time.

  • Balance Sheet: A report providing an overview and snapshot of your salon’s financial positions, showing assets, liabilities, and equity at a given point in time. This report is useful for understanding your salon’s financial position and determining its overall value.

  • Cash Flow Statement: A financial report that tracks the amount of cash and cash equivalents entering (inflows) and leaving (outflows) the salon. This report assesses your salon’s liquidity and cash flow, and operating activities, which are important factors in determining your salon’s financial health.

Overall, bookkeeping is vital in hair salon for its role in maintaining financial stability and supporting sound business operations. Bookkeeping is a fundamental aspect of managing finances for businesses and individuals.

If you need to outsource your bookkeeping to industry-specific bookkeepers, get a free estimate and we would love to support you and your salon.

Salon & SpaLindsey SryockComment