Understanding Salon Cash Flow
Cash flow is essential for the sustainable running of your business. Every day, you receive cash from clients. And every day, you use cash to pay bills, buy products, and pay your staff and yourself.
If more money is coming in than going out then your business is doing well. However, it’s more complicated than that, because the timing of the money flow is also important. For example, you don’t want to be caught short when it’s time to pay your rent.
How to Cope with Cash Flow
Write out all your usual monthly expenses: for example, rent, lights and water, salaries, insurance, purchasing products, tea and coffee, loan payments, taxes, and other regular expenses.
Write down occasional expenses you will need to pay: these might be buying chairs or equipment, attending education, and so on.
Now, estimate your monthly income from the salon – taking into account that some months are quieter than others.
And finally, take a look at how these expenses balance out. If you have more expenses than income, you will always be short of cash and struggling, so you must find ways to cut down your expenses and increase your income.
Take a look at your expenses and income every month as this will help you to make sure you are on track and also give you an idea of the trends in your business – are you getting busier, or are you losing clients and revenue. Picking problems up early will allow you to investigate the reasons, and solve the problems, before they become too big for you to cope with.
Cash Flow Tip: Selling salon gift vouchers is a great way to bring in extra cash in months where you need it – however you must remember that down the line, when clients use the gift vouchers, you will end up spending the product and time that they paid for when they bought the voucher. So these costs will then need to be factored in and updated.
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