The Complete Guide to Salon Accounting

Running a salon can be tough. You have to take care of clients and manage money at the same time. But as your salon gets bigger, handling money correctly is super important. If you don’t, it could lead to money and business problems. So, doing salon accounting the right way is vital to keep your business on track. 

Why is it so important to do the money stuff right? Well, it helps you have control over your cash and make smart plans for the future. To make this easier, you can use special apps that is salon POS system to record all the sales and stuff that happen at your salon. These apps do most of the work for you, so you’ll have more time to take care of your clients. 

What is salon accounting? 

Salon accounting is the process of managing the financial aspects of your beauty salon. It involves tracking income, expenses, and profits, which helps you make informed business decisions and ensures your salon’s financial health. 

Key components of salon accounting

1. Income tracking 
  • Income tracking is all about keeping a close eye on the money your salon brings in. This includes the revenue you generate from services, product sales, and even tips. 
  • To do this effectively, you should record every bit of income accurately. For example, you’ll want to document the date of each transaction, the name of the customer, and what services or products were provided. This helps you keep a clear record of where your money is coming from. 
2. Expense management 
  • Expense management involves tracking all the money that goes out of your salon. This includes payments for rent, utilities, supplies, salaries of your staff, and other costs associated with running your salon. 
  • To keep a handle on your expenses, it’s important to categorize them into groups like rent, electricity bills, and employee wages. This makes it easier to see where your money is going. 
3. Profit calculations 
  • Calculating profits is like figuring out how much money you’ve actually made after you’ve subtracted all your expenses from your income. 
  • Regularly calculating your profits helps you understand how well your salon is doing financially. If your profits are consistently higher than your expenses, that’s a good sign. If not, you might need to make some adjustments to improve your salon’s financial health. 

So, by focusing on these key components of salon accounting, you can keep a close watch on your salon’s financial well-being, track your income and expenses accurately, and work towards making your business even more successful. 

Most common salon accounting reports 

Let’s explore the most common salon accounting reports in detail. These reports are essential for keeping track of your salon’s financial health and making informed decisions. 

1. Income statement (profit and loss statement) 
  • The income statement, often called the Profit and Loss (P&L) statement, is a fundamental report in salon accounting. It provides a snapshot of your salon’s profitability over a specific period, usually monthly, quarterly, or annually. 
  • This report breaks down your salon’s revenue, detailing income from services, product sales, and any other sources. It also lists your various expenses, such as rent, utilities, staff wages, and supplies. The income statement subtracts total expenses from total revenue, giving you your net income (profit) or net loss. 
  • The P&L statement helps you assess the overall financial performance of your salon, highlighting areas where you may need to cut costs or invest more. 
2. Balance sheet 
  • The balance sheet provides a comprehensive overview of your salon’s financial position at a specific point in time, typically at the end of a month, quarter, or year. 
  • It is divided into two main sections: assets and liabilities. Assets represent everything your salon owns, such as cash, equipment, and inventory. Liabilities represent your salon’s debts and obligations, including loans and outstanding bills. 
  • The balance sheet equation is: Assets = Liabilities + Owner’s Equity. It reflects your salon’s financial stability, showing whether your assets exceed your liabilities (a positive sign) or vice versa. 
3. Cash flow statement 
  • The cash flow statement tracks the flow of cash in and out of your salon over a specific period, typically a month or a year. It is divided into three categories: operating activities, investing activities, and financing activities. 
  • Operating activities include cash generated from your daily salon operations, like service fees and product sales. Investing activities involve cash spent on salon improvements, equipment purchases, or investments. Financing activities show cash flows related to loans, owner’s investments, and loan repayments. 
  • A cash flow statement helps you ensure that your salon has enough cash to cover its obligations and make necessary investments. 
4. Accounts payable and receivable reports 
  • These reports are crucial for managing your salon’s outstanding bills (accounts payable) and money owed to you (accounts receivable). 
  • Accounts payable reports show you which bills you need to pay and when they are due. This helps you manage your salon’s cash flow efficiently and avoid late payment penalties. 
  • Accounts receivable reports track money owed to your salon by clients who have received services but haven’t paid yet. Monitoring accounts receivable ensures you collect payments promptly and maintain a healthy cash flow. 
5. Inventory reports 
  • If your salon sells products, inventory reports are essential to track the quantity and value of your salon’s stock. These reports help you manage stock levels, reorder products in a timely manner, and avoid overstocking or running out of popular items. 

How to do salon accounting? 

Now that you understand the basics, let’s delve into how to perform salon accounting effectively: 

  1. Register your business: Begin by registering your salon as a legal entity, such as a sole proprietorship, partnership, LLC, or corporation. Consult with legal and tax professionals to choose the most suitable structure for your business. 
  1. Obtain necessary permits and licenses: Check local and state regulations to determine which permits and licenses your salon needs to operate legally. Ensure compliance with health, safety, and zoning requirements. 
  1. Open a business bank account: Open a separate business bank account dedicated to your salon’s finances. This separation is crucial for tracking income and expenses accurately. 
  1. Apply for an employer identification number (EIN): If you have employees or are operating as a corporation, obtain an EIN from the IRS. It’s like a social security number for your business and is required for tax purposes. 
  1. Select an accounting method: Choose between cash basis or accrual basis accounting, depending on the size and complexity of your salon. Accrual accounting offers a more accurate long-term financial view. 
  1. Set up an accounting system: Create a structured accounting system to organize and record financial transactions. Utilize accounting software for hair salons or hire an accountant to help with this. 
  1. Chart of accounts: Develop a chart of accounts to categorize income and expenses. This makes it easier to track and analyze your salon’s finances. 
  1. Record income accurately: Keep detailed records of all sources of income, including service fees, product sales, and tips. Include the date, customer names, and services/products provided in your records. 
  1. Expense management: Organise your salon expenses by categories like rent, utilities, staff wages, supplies, and marketing. Keep all your receipts and invoices; they’re essential for tax purposes and future reference during your salon tax preparation
  1. Payroll records: If you have employees, maintain accurate records of their hours worked, wages, and any deductions. Follow tax regulations related to employee compensation. 
  1. Regular reconciliation: Reconcile your bank statements with your accounting records each month. This helps identify discrepancies and keeps your records accurate. 
  1. Financial statements: Regularly generate financial statements, including the income statement (profit and loss) and balance sheet. These reports provide insight into your salon’s financial health. 
  1. Cash flow management: Monitor your salon’s cash flow to ensure there’s enough money to cover expenses and make necessary investments. 
  1. Inventory tracking: If your salon sells products, maintain accurate records of your inventory levels to prevent overstocking or running out of popular items. 
  1. Stay informed about taxes: Keep up-to-date with tax laws and regulations that affect your salon. Consult with a tax professional when needed to ensure compliance. 

Do I need an accountant for my salon? 

1. Business size and complexity 

For small and simple salons, salon accounting software works well. But as your salon grows and gets more complex, professional help becomes essential. Use both advanced software and an expert accountant to manage your finances effectively. 

2. Financial expertise 

Do you have a good understanding of accounting and tax laws? If you’re not confident in these areas, hiring an accountant can prevent costly errors and ensure compliance with tax regulations. 

3. Time and focus 

Managing finances can be time-consuming. If you’d rather concentrate on serving clients and growing your salon, delegating accounting tasks to a professional can free up your time. 

4. Tax complexity 

Tax laws for businesses can be intricate. An accountant can help you navigate tax planning, deductions, and credits to minimize your tax liability and maximize your financial benefits. 

5. Financial strategy 

An accountant can assist you in creating and executing financial strategies to boost your salon’s profitability and manage your cash flow effectively. 

6. Audits and loans 

If you anticipate audits or need to secure loans for your salon’s expansion, having an accountant can enhance your credibility and financial prospects. 


Effective salon accounting services are essential for the long-term success of your beauty business. By understanding the basic principles of salon accounting, you can ensure that your salon operates smoothly and profitably. Utilising accounting software and seeking professional advice when needed will further simplify the process. Remember, consistent and accurate salon accounting will allow you to focus on what you do best—making your clients look and feel fabulous. So, don’t let the financial side of your salon overwhelm you. Instead, use this guide as your roadmap to financial success in bookkeeping for the beauty salon industry. 

However, here’s the good news – you don’t have to tackle all of this on your own! That’s where BookkeeperLive comes in. Our user-friendly accounting solutions are tailored to the unique needs of salon owners like you. We make salon accounting a breeze, so you can focus on what you do best: making your clients look and feel fabulous. 

Our service not only simplifies your financial record-keeping but also offers a free trial. You can experience the convenience and efficiency of BookkeeperLive without any commitment. It’s a risk-free opportunity to discover how our services can transform your salon’s financial management.


1. What are some common mistakes to avoid when it comes to salon accounting? 

Common mistakes include not keeping detailed records, failing to reconcile bank statements, and not staying informed about tax regulations. Avoiding these errors can help maintain financial stability. 

2. What reports should I regularly generate for my salon’s financial health, and how do I interpret them? 

Regular reports like the income statement, balance sheet, and cash flow statement provide insights into your salon’s financial performance. Understanding these reports is crucial for making informed decisions. 

3: How can financial reports help monitor your salon’s health and performance? 

Reports like income statements and balance sheets provide insights into financial performance and areas for improvement. 

4. What does salon accounting involve? 

Salon accounting includes income tracking, expense management, profit calculations, and generating essential financial reports. 

5. When should I hire an accountant for my salon? 

Hire an accountant as your salon grows. They help with tax compliance, financial strategies, and navigating complex financial matters. 

6. How can I manage accounts payable and receivable efficiently? 

Organize bills into categories and track client payments promptly to maintain cash flow and avoid late fees. 

What's Bookkeeper?

BookkeeperLive provides affordable bookkeeping and accounting services tailored to your business goals.

Included Topics
  • What is salon accounting? 
  • Key components of salon accounting
  • Most common salon accounting reports 
  • How to do salon accounting? 
  • Do I need an accountant for my salon? 
  • Conclusion 
  • FAQs 

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