The end of the financial year can be overwhelming for salon, spa and clinic owners. Being a busy salon owner myself, I understand how hard it can be to stay on top of everything, especially when you are working in the business and have only limited time to work on it.
Receipts get lost, money goes missing, bills become outstanding, supplier accounts are maxed out. Over time, the responsibility of managing the accounting side becomes so overwhelming that you outsource the one thing I personally feel every salon owner should be doing themselves: managing your finances.
This includes end of day cash up, managing your accounts, paying the bills and allocating expenses. Every day you should be focusing on what makes you money, but also what saves you money too.
With the end of the financial year fast approaching, different feelings may arise when you hear the word “tax time”. Uncertainty, stress and overwhelm are a common theme for salon, spa and clinic owners.
However, we’re going to help you overcome those old feelings. Here are 5 tips to help you manage your finances in preparation for the end of the financial year so you can start to feel cool, calm and collected come tax time.
1. Connect your salon software with your accounting software
Connecting your salon software to your accounting software will save you time and give you a better understanding of your business’s profit and loss. If you use Kitomba Salon and Spa Software, you can connect Kitomba to your daily feed in Xero to be able to monitor your end of day money more easily and streamline your processes.
A little tip: you should be checking your profit and loss weekly!
2. Download the Xero app onto your phone
Every time you make a purchase, take a photo of your receipt and upload it into Xero. It takes only five minutes, but it will save hours and hours of pain come tax time. Also, the receipt can be allocated to the bank feed transaction so everything is accounted for if you’re ever audited.
3. Allocate your expenses weekly
When you let all your expense allocations pile up, it’s hard to remember what you purchased for $47, four months ago. Allocating weekly also gives you the opportunity to ensure no double payments are coming out of your account, and will reduce your stress levels come tax time.
4. Pay your tax weekly
Some people recommend a tax saving account, but for me personally, if I see the money there I like to spend it. I pay my tax and superannuation weekly so that come tax time, I’m not hit with tens of thousands of dollars of tax debt that I can’t afford to pay.
5. Claim your business expenses to pay less tax
At tax time, you need to pay tax on your profit, which is your income minus the business expenses you can claim. That means that the more expenses you can claim, the less tax you have to pay. But don’t be afraid to run a profit!
I was told for years not to run a profit so I could save on tax, but I could never get a loan, and I still felt like I had no money! Plus, if you ever need to sell your business – on paper it’s worth nothing unless you can demonstrate profitability.
6. Bonus tip
Here’s one more bonus piece of advice. Years ago I was a struggling salon owner, trying to keep my head afloat and my tax in order. I was spending money without really thinking about my purchases.
Now, before every single purchase, I ask myself if it’s a need or a want. Do I need to purchase this for my business to make a profit? If the answer is no, then you don’t need it. Remember to ask yourself before every purchase, trust me, this will transform your finances!
By implementing these 5 simple tips, you will save time, money and hopefully start feeling more empowered when it comes to your finances.
If you want to learn more about using Kitomba to make your end of financial year less stressful, read how to use Kitomba for the end of the financial year.
- Are you being paid what you’re worth?
- How to take the stress out of the end of the financial year
- Small changes that can have a big impact on your finances
Editor’s note: This blog was originally published on 23 March 2020 and has been updated for relevance and comprehensiveness.