Bookkeeping for Hairdressers: How to Track Revenue and Expenses

Running a hair salon requires more than styling skills and creative flair. To keep a salon profitable and sustainable, it’s essential to have an organized system for bookkeeping for hairdressers. Properly tracking revenue and expenses not only helps you understand your business’s financial health but also simplifies tax preparation, ensures accurate payroll, and supports informed decision-making. In this guide, we’ll walk you through how to track income and expenses effectively, with practical tips tailored for hair salon owners and managers.

Why Bookkeeping Matters for Hairdressers

Many hairdressers start their businesses focusing on services and clients but overlook bookkeeping until financial issues arise. Without a clear system, it’s easy to miss revenue streams, lose track of expenses, or struggle during tax season.

Accurate bookkeeping allows you to:

• Measure profitability of individual services and product sales.
  
• Identify cost-saving opportunities.
  
• Manage cash flow efficiently.
  
• Ensure compliance with tax and employment regulations.
  
• Make strategic decisions for growth and expansion.

For more insights on salon-specific bookkeeping practices, check our bookkeeping for beauty salon page.

Step 1: Choose the Right Accounting or POS Software

The foundation of effective bookkeeping is choosing software that suits your salon’s operations. Many hair salons use cloud-based accounting software integrated with point-of-sale (POS) systems, which simplifies tracking both services and retail product sales.

When selecting software, consider the following:

• Integration: Your POS should sync with accounting software to automatically record sales, refunds, and deposits.
  
• Revenue Tracking: Look for features that allow you to categorize income by services, products, gift cards, and deposits.
  
• Reporting: Ensure your software generates profit and loss statements, balance sheets, and cash flow reports for quick insights.

Using software designed for salons reduces manual entry errors and saves time.

Step 2: Track All Revenue Streams

Hair salons have multiple sources of income beyond just haircuts or styling. Tracking these accurately is essential for understanding your business performance and preparing for taxes.

Services

Income from haircuts, coloring, treatments, and styling should be logged individually. Consider subcategories for each type of service to identify which ones are most profitable.

Product Sales

Retail products like shampoos, conditioners, and styling tools contribute to overall revenue. Track product sales separately from service income to evaluate product performance and manage inventory effectively.

Gift Cards and Vouchers

Revenue from gift cards or vouchers should be recorded when sold. Keep track of redemptions separately to prevent discrepancies in reporting.

Deposits

Salons often take deposits for appointments or packages. Record deposits separately until they are applied to services or products.

Tracking all revenue streams systematically ensures that your books accurately reflect your salon’s financial reality and improves decision-making for pricing and promotions.

Step 3: Record and Categorize Expenses

Just as important as tracking revenue is logging your expenses. Every business cost should be recorded and categorized appropriately. Common hair salon expenses include:

• Supplies: Hair products, towels, styling tools, and other service-related items.
  
• Utilities: Electricity, water, internet, and phone services.
  
• Rent: Monthly salon space rent or lease payments.
  
• Marketing: Advertising, social media campaigns, and promotional materials.
  
• Insurance: Liability, property, and worker’s compensation coverage.
  
• Payroll: Salaries, wages, and commissions for stylists and support staff.
  
• Miscellaneous Costs: Cleaning services, software subscriptions, and office supplies.

Properly categorizing expenses allows you to analyze spending patterns and identify areas where you can reduce costs or improve efficiency.

Step 4: Manage Inventory Efficiently

Inventory management is a key component of bookkeeping for hairdressers, especially if your salon sells retail products. Poor inventory tracking can lead to overstocking, stockouts, and lost revenue.

Tips for managing inventory:

• Conduct regular stock counts to reconcile with software records.
  
• Track both products used in services (back bar products) and products sold retail.
  
• Assign cost values to each product to calculate the cost of goods sold (COGS) accurately.
  
• Set alerts for low-stock items to avoid running out of popular products.

Effective inventory tracking helps maintain healthy cash flow and ensures accurate reporting of profits.

Step 5: Track Payroll and Commissions

Many salons operate on a mix of base pay and commissions. Accurate payroll tracking is essential to keep staff satisfied and avoid compliance issues.

Best practices for payroll tracking:

• Record hours worked and commissions earned for each stylist.
  
• Deduct taxes, superannuation, or retirement contributions accurately.
  
• Automate payroll where possible to reduce errors.
  
• Keep records of all payments for verification during audits or tax preparation.

Reliable payroll management ensures employees are paid correctly and reduces the risk of disputes.

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Step 6: Reconcile Bank Statements Regularly

Reconciling your bank statements with your bookkeeping records is crucial for maintaining accurate financial records. This process helps identify errors, detect fraud, and verify deposits or withdrawals.

Steps to reconcile accounts:

1. Compare all bank transactions with your software entries.
   
2. Investigate any discrepancies promptly.
   
3. Adjust your bookkeeping records to match actual bank activity.

Performing reconciliation monthly keeps your financial statements accurate and up to date.

Step 7: Monitor Cash Flow

Cash flow management is vital for hair salons, as income may fluctuate depending on seasons, promotions, or client schedules. Monitoring cash flow helps you prepare for slow periods and avoid financial stress.

Cash flow tips:

• Generate monthly cash flow statements using your accounting software.
  
• Identify high-expense periods and adjust budgets accordingly.
  
• Maintain a reserve fund for unexpected costs.
  
• Track payment patterns to anticipate potential shortfalls.

By keeping a close eye on cash flow, you ensure your salon can cover operational expenses and continue growing.

Step 8: Prepare for Taxes and End-of-Year Reports

Proper bookkeeping makes tax preparation and end-of-year reporting much simpler. Accurate records help you maximize deductions, reduce errors, and maintain compliance.

Tips for tax preparation:

• Keep detailed records of all income and expenses.
  
• Categorize expenses correctly to avoid missed deductions.
  
• Retain receipts and invoices for verification purposes.
  
• Generate profit and loss statements and balance sheets ahead of filing deadlines.

For additional guidance, consult professionals who specialize in salon bookkeeping or visit our Contact us page for personalized support.

Practical Tips for Hairdressers New to Bookkeeping

• Start Simple: Begin with basic revenue and expense tracking, then expand categories as needed.
  
• Automate Entries: Use software to automate recurring transactions and reports.
  
• Consistency is Key: Record all transactions promptly to prevent backlog and errors.
  
• Train Staff: Ensure employees follow procedures for cash handling, product sales, and deposits.
  
• Seek Professional Advice: Partner with a bookkeeper experienced in the salon industry for best results.

Following these tips will help even first-time salon owners maintain accurate financial records and make informed business decisions.

Conclusion

Implementing effective bookkeeping for hairdressers is essential for running a profitable and sustainable salon. By tracking all revenue streams, recording expenses accurately, managing inventory, handling payroll correctly, reconciling bank statements, and monitoring cash flow, hair salon owners can achieve financial clarity and business growth.

Organized bookkeeping not only simplifies tax time but also allows you to make strategic decisions with confidence. For more tips and insights on managing your salon finances, visit our bookkeeping for beauty salon page or stay updated with new articles on our Blog.