In short

Salon and spa bookkeeping starts from the point-of-sale daily summary. Each day is split into service revenue, retail revenue, sales tax collected and card tips owed to staff, then matched to the processor deposit net of fees. Booth rent is recorded as income per renter, gift card and package sales are held as a liability until redeemed, and retail product purchases go to inventory so cost of goods sold reflects what was actually sold.

The daily sales split

Point-of-sale systems are good at recording appointments and bad at producing accounting entries. Each day we take the summary and record:

  1. Service revenue, by category if you want to compare color, cuts or treatments
  2. Retail revenue from product sales
  3. Sales tax collected on taxable sales, posted to a liability
  4. Card tips owed to staff, posted to a tips payable account
  5. Processing fees, so the deposit reconciles exactly

Booth renters

Chair and suite rent is tracked by renter, with a simple receivables list showing who is current and who is behind. Renters are not on your payroll, and payments to them are not wages.

Gift cards and packages

When a client buys a gift card or a five-session package, we record a liability. As services are used, the liability is reduced and revenue is recognized. At any point you can see how much prepaid service you still owe clients.

Product inventory

Retail products are bought in bulk and sold over months. We record purchases to inventory and post cost of goods sold based on counts or your POS inventory report, and separate products used in services (back-bar supplies) from products held for sale.

Monthly reports

You receive a profit and loss that separates service and retail margin, plus a balance sheet showing tips payable, gift card liability and sales tax owed.

Key terms

Definitions for terms used on this page:

  • Cost of Goods Sold: Cost of goods sold is the direct cost of the products a business sold during a period.
  • Balance Sheet: A balance sheet shows what a business owns, what it owes and the owners' equity at a specific date.

Salons & Spas problems this addresses

  • Tips paid by card must reach staff and be reported correctly
  • Booth renters and commissioned employees are paid in completely different ways
  • Retail product sales need inventory and sales tax tracking
  • Booking software totals rarely match card processor deposits
  • Gift cards and packages are sold long before services are delivered