Beauty and the Balance Sheet: Sole Proprietorship Accounting Tips for Glampreneurs

Accounting isn’t as fun as facials or fresh fades, but it doesn’t have to be a headache. Here are four sole proprietorship accounting hacks for salon and spa bosses like you.

Accounting Tips for Small Business Owners

1. Don’t mix lipstick and ledger lines.

They tell you not to mix business and pleasure while dating. The same goes for your finances. 

When your business and personal finances get muddled together, it’s harder to do your taxes. So keep your business wallet in its own metaphorical bag. Tips for sole proprietorship accounting for the beauty industry:

• Don’t use your personal cards and accounts for business expenses.
• Open dedicated business checking, savings, and credit accounts. Make all your business purchases through those accounts, and send client payments there, too.
• Give yourself a regular paycheck or “owner’s draw” by transferring funds from your business account to your personal account.

2. Keep tabs on every dollar and dip.

Whether it’s money coming in or money going out, gloss over nothing. Accurate financial records are a must for filing taxes correctly, claiming eligible sole proprietorship tax deductions, assessing your profitability, and making informed spending decisions.

From simple spreadsheets to accounting software, there are lots of ways to follow the funds. But no matter what you do, don’t forget to track these essentials:

• All client payments (income) from services, product sales, and even gift certificate redemptions.
  • Now’s a good time to set aside 25-35 percent of every payment. That money will cover your income taxes.
• All the money you spend on your business (expenses), including:
  • Supplies, like the beauty products you use on clients.
  • Retail products you sell.
  • Rent for your workspace.
  • Small business insurance costs, including your general and professional liability coverage from WellnessPro!
  • Professional licenses, business permits, and certificates.
  • Continuing education costs, including courses and trade shows.
  • Marketing and advertising costs.
  • Software, like your booking system, and other subscriptions.
  • Business internet and phone expenses.
  • Any bank fees to your business accounts.

When tracking income and expenses, it’s not enough to input the details in your spreadsheet or software. Like someone in a bad relationship, you’ve got to keep those receipts. And because accurate recordkeeping is so essential to sole proprietorship accounting, don’t rely on the paper print-outs your mom still has in the metal filing cabinet in the garage. Snap photos or scan receipts and store them online so they don’t get lost.

3. Accounting for the beauty industry should be beautiful, too. Keep it cute and categorized.

Chaos isn’t chic (or functional). So tidy up those tabs. Organizing your records will make it easier to file taxes and prove you did it right, in case you ever get audited.

To make your beauty salon bookkeeping as functional as it is fabulous, aim to:

• Create a system for naming and organizing your digital files. Be consistent.
• Back up your digital records on the cloud or an external hard drive.
• Keep your records for at least seven years (ideally, forever on the cloud).

4. Get professional help.

You wouldn’t tell your clients to apply their own eyelash extensions. Getting professional help with your taxes from a bookkeeper or accountant is just as wise. 

If you’re committed to doing your own bookkeeping and accounting, we aren’t here to stop you. But you deserve to know the benefits of going pro. An accountant for a sole proprietorship can assist you with tax planning and even give you financial strategy tips. Better yet, someone experienced in accounting for the beauty industry may offer more tailored insights. Come tax season, and they can also help you file your returns correctly, avoiding potentially costly mistakes.

Risk Management and Accounting for the Beauty Industry: The Pros Know Best

Taxes and sole proprietorship accounting aren’t the only places where it pays to hire a pro. Slips, snips, and uh-ohs need professional protection in the form of health and wellness business insurance.

Think of general and professional liability insurance as your business’s setting spray, putting things back in place after they get messy. Whether it’s a slip on a freshly mopped floor or an allergic reaction to a product, accidents can happen. Having insurance means you can focus on blending contours, not budgets, if something goes sideways. Learn more about how to protect the beauty your business has built.