Do beauty pros need to do bookkeeping?

Yes! Unfortunately, it’s inevitable. But I get it, no one starts a business for the sole purpose of doing bookkeeping….well, except bookkeepers themselves. But hey, it’s absolutely necessary to get a proper bookkeeping system in place especially during the birth and nurturing stages of your beauty business. In time and if your profit allows, you may opt in to hire an accountant to perform your bookkeeping, but we’ll get into that another time. 

Remember, business may pick up faster than expected and that cute, color coded spreadsheet you got there just ain’t gonna cut it! Here’s why there’s no way around the B word.

It’s a requirement from the good old government. 

In order to file your annual tax return, your bookkeeping needs to be up to date. But bookkeeping isn’t only for the benefit of the government, it’s a serious secret weapon for the growth of your beauty biz! If you only decide to do the bare minimum to keep the government happy, you’ll be sadly missing out on some major benefits. 

What are these major benefits??

Bookkeeping, in my opinion, is a strategic sidekick that alerts you on matters negatively or positively impacting your business!

Bookkeeping can tell you if you’re overspending. And, more importantly, helps you figure out WHERE you’re overspending. So, why does this point matter? Well, if you only fulfill your bookkeeping tasks once annually, then you’re only giving yourself the opportunity to course correct once a year. That’s why doing your bookkeeping monthly is a MANDATORY MUST. You’re giving yourself more chances to correct those errors and better improve the success and performance trajectory of your business! 

It can tell you if your services are underpriced. Whoa! Now, that’s a big one. Here’s the 411 on the tell tale signs. If you underprice your services, it’s really hard to turn a profit. Keep in mind that if you feel like you’re working really hard and have nothing to show for it, it’s important to check your bookkeeping and see if your pricing is out of line with your expenses. 

It helps you identify if inflation is impacting your business. Are those beauty products and supplies costing more and more these days? One sure fire way this won’t get overlooked is keeping track of your bookkeeping. You can see the rate at which these charges are increasing due to inflation and know when it’s time to increase your service prices. 

It lets you know when you’re ready to hire another team member. It’s a good way to increase revenue and expand your business, but you’ll only know if your beauty biz is ready to handle this significant expense by managing your bookkeeping. How’s your profit this year? Did you meet the goal amount necessary to increase your spending?

It helps you figure out how much to pay in estimated taxes. Bookkeeping will allow you to keep track of your business profit, which is a key element in calculating how much to pay in estimated taxes. So, how do you calculate this? You’ll need to take 30% of your profit and set it aside – this will cover you for both your federal and state taxes. Hate math? Utilize my handy dandy estimated tax calculator for free. You’re welcome!

So I’ve got you convinced on why bookkeeping is a serious secret weapon for beauty professionals. What options are there?

Good old pen and paper: Which is as terrible and time consuming as it sounds. Beauty business owners get frustrated that taxes are so hard, when in reality their lives could be so much easier with better processes in place.

The cute, color-coded spreadsheets: I gotta say, it’s a good enough option for beauty businesses that don’t plan on growing. If you own an operation with less than 25-50 transactions each month, then spreadsheets are a free option. Download your transactions, type a category on each line, sort by category and then sum by group. Voila, something to give your accountant for your tax return.

Almighty software: If you want to keep an eye on profit and grow your business in a healthy and sustainable way, this is the only option. Once you have over 50 transactions each month, you need to be in an accounting software that automatically downloads your transactions and allows you to reconcile the bank accounts. It’s a huge time saver. Plus, it allows you to pull reports at any given time to know how your business is doing.

Over 80% of small businesses in the US use QuickBooks and there’s a reason why. But did you know that if you set up QuickBooks automatically, you’re going to miss out on its best features? Beauty businesses are not like other business models. The accounts you utilize should be customized so you can get the best reporting. That’s why my Beauty Bookkeeping course takes you through each step from sign up, set up, entering transactions, and reading reports. That way you actually understand what you’re doing and what your reports mean so you can pay yourself based on facts.