Salon Accounting in the UK

Whether you’re running a salon in London, Glasgow or Belfast, you understand the challenges of salon accounting in the UK.

Although income tax rates will vary depending on whether your salon is located, the importance of maintaining your accounts and financial records stays the same.

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1. What is Salon Accounting?
2. How to Do Salon Accounting in the UK?
3. How to Keep Books for Your Salon?
4. Conclusion

What is Salon Accounting?

Salon accounting itself is different from “Management Accounting” and “Bookkeeping.”

Management accounting is what employees or financial professionals do when they put together information to explain the financial ins-and-outs of a business to its owners or management team.

Bookkeeping is all of the prep work that you do when you’re keping a day-to-day eye on your London salon’s finances and “balancing the books.”

Salon accounting uses all of your great bookkeeping work and takes a look at your overall revenue (all your income for a period) versus your salon expenses. Then, you can tell whether your salon is doing well and make any adjustments or plan for the future of the business.

Keeping accurate finaancial records right from the start can save you a lot of time, money (and stress) later on.

When you’re working on your salon’s accounts, it helps to be familiar with some key vocabulary:

• Creditors and Debtors: Often your suppliers, creditors are the people or companies you owe money to, whereas debtors are the ones who owe you money for goods and services.

• Cash Accounting: This is a method of accounting where you record transactions only once they’ve been paid for.

• Accrual Accounting: Unlike cash accounting, the accrual method lets you record everything as soon as it happens, whether or not a payment has been made yet.

• Equity, Assets and Liabilities: Assets represent the value of what you own as part of your salon business, whereas liabilities are debts that you owe to others. Equity is the amount that your assets would be worth if everything were sold and liabilities were deducted from the total.

• Chart of Accounts (COA): The record you maintain that gives you a breakdown of all of your business’s financial transactions within a given time period.

• PAYE: This stands for “Pay As You Earn” and are the deductions that an employer or pension provider takes out of each paycheck in order to pay income tax and National Insurance contributions.

• Tax Code: A number assigned by the government to help you determine how much income tax you will need to pay.

Some of the most common reports that people use when doing salon accounting are:

• Balance Sheets: Financial statements for your salon which show both the assets and any debts or liabilities.

• Income Statement and Cash Flow: Many UK salon owners will also refer to an income statement as a “Profit and Loss Statement”. It shows your income for a given period, after expenses are subtracted (this is called your business’s “Revenue”).

A salon’s cash flow is the information that shows where money goes, what it is spent on, and how much money comes in from different sources.

• Sales Tax and Payroll Tax: Sales tax is the amount that you’re required to pay the government as part of each transaction, and payroll tax is the percentage that you deduct from an employee’s pay to cover taxes.

• Payroll Report: The information that you’ll file either on or before the final payday of the year as part of your tax reporting.

How to Do Salon Accounting in the UK?

Be Sure to Register Your Salon as a Business

You can either register as a sole trader, a company or a partnership depending on the size and needs of your UK salon.

If your turnover (the total that you sell) is more than £85,000, you’ll need to register for VAT.

Make Sure to Set Up a Salon Bank Account

Keep your business accounts separate from your personal finances. This is important for a number of reasons.

First of all, it simply makes it easier to track all of the money being spent and coming into the account, which is important for bookkeeping.

Second, it looks much more professional and will make it easier for people (such as potential investors) to take your salon business seriously.

Finally, there are many banks that offer special accounts, credit cards and services just for small businesses. Having a separate account will help you to take advantage of these deals.

Choose the Right Bookkeeping Method

You can use either cash accounting or accrual accounting to record and track the finances in your salon, but make sure that you stick with one or the other and don’t mix them together (or things will quickly become confusing).

Above All, Stay Organized

You’ll need to be aware of any changes to tax laws (including whether you fit into a different tax code as your business grows), keep all of your payroll records and save copies of last year’s tax returns just in case.

How to Keep Books for Your Salon?

Keep Good Records and Back Things Up

Remember what we said about staying organized and saving receipts? It’s important that you keep digital copies and printed backups of all of your important financial documents and have a filing system in place so that you can find everything quickly.

You can use an app to photograph and scan any paper documents, then save them on a secure drive.

Try Accounting Software

This software can make it simpler to get your information ready for the tax season and also help you track your transactions throughout the year. You can record payments, invoices that are due and keep an eye on the money coming in.

When in Doubt, Consult an Accountant

Accountants can be a valuable resource when it comes to helping with complex paperwork or answering financial questions that you’re not sure about.

This can save you a lot of time and money in the long run (as well as valuable energy that you’d probably rather spend on running your awesome salon in Glasgow).

Conclusion

If you’re anything like me, you find it fun and rewarding to watch over your salon’s finances and see the progress you’ve made each year.

Although salon accounting in the UK does take a good deal of preparation and some strong organizational skills, having the right tools (like bookkeeping software) definitely makes the process more manageable.

Citations

Business accounting and finance
https://api.pageplace.de/preview/DT0400.978027372

Business accounting
https://books.google.com/books?hl=en&lr=&id=EJpMD

Accounting control systems and business strategy: an empirical analysis
https://www.sciencedirect.com/science/article/pii/036