Bookkeeping for hair and beauty salons.

Why salon books get messy

A salon can take hundreds of small payments a week. Most are by card, some are cash, and some were paid in advance as a deposit or a gift voucher. The bank rarely shows any of them one by one. It shows a single payout from the card provider, often a day or two later, with fees already taken off and tips mixed in.

If the books only follow the bank, the picture goes wrong in quiet ways. Sales look lower than they were because fees have been netted off. Tips look like income. Rent from a chair renter sits next to service sales as if it were the same thing. Our job is to split each payment into its parts, so your sales, fees, rent and tips are each in the right place and the bank still reconciles.

Card terminal settlements

Card providers and booking apps usually pay out in batches. One deposit in the bank can cover a full day of appointments, or several days over a weekend. To record it properly, we match each payout to the takings report it covers, then record three things:

• The gross takings. What clients actually paid for services and products, before any fees.
• The processing fees. Posted as a cost of the business, not hidden inside lower sales.
• Anything else in the batch. Tips added on the terminal, refunds and any chargebacks, each recorded separately.

Deposits and no-show fees taken through a booking system need care too. A deposit is money paid for an appointment that has not happened yet. We record it when it arrives and match it to the visit once the client has been, so it is not counted twice. Gift vouchers work in a similar way: the money comes in when the voucher is sold, and the service comes later.

Cash is the part most often missed. If you bank cash takings, we match each deposit to the takings you record for those days. If cash is used to pay for small items before it is banked, we ask for the receipts so the gap is explained. Our guide to bank reconciliation explains why every bank line should match something in the books.

Chair and room rental income

Many salons rent chairs, treatment rooms or nail stations to self-employed stylists, barbers and therapists. That rent is a different kind of income from your own service sales, so we post it to its own account. This lets you see what the rentals bring in on their own, and lets your accountant treat it correctly.

Each rental agreement is set up as a regular sale, and each payment is matched to it as it arrives. Late or missing payments are flagged rather than lost, so you know who still owes rent.

Some arrangements are more tangled. If your card terminal takes payment for a renter's clients, part of that money belongs to the renter. We record it as owed to them, not as your sales, and match it to what you pay across. Any commission you keep is recorded as your income.

VAT on chair rental in general terms

For a VAT-registered salon, the VAT treatment of chair and room rental matters. HMRC's VAT Notice 742 says that renting chair spaces to individual stylists is not a licence to occupy land, unless a clearly demarcated area is provided and no other services come with it. The notice gives the hire of tables in nail bars to self-employed manicurists as a similar example. Each arrangement depends on its facts, so your accountant decides the treatment. Once that is agreed, we post every rental invoice the same way.

A business must register for VAT once its taxable turnover for the last 12 months goes over £90,000, or is expected to go over £90,000 in the next 30 days. Keeping service sales, product sales and rental income in separate accounts makes that easier to watch. See our guide on the VAT threshold.

Product stock

Salons buy two kinds of product. Retail stock is sold on to clients. Back-bar products, such as colour, developer and treatment supplies, are used up in services. We post them to separate accounts from each supplier invoice, so you can see what each one costs.

Wholesaler accounts are matched to their monthly statements and paid against the right invoices. Credit notes and returns are recorded so the balance you owe is accurate. If you count your stock at month end or year end, we record the figure you give us, which lets your accountant work out how much stock was really used. Our guide to the gross profit formula shows why the split between retail sales and retail stock is worth having.

Tips in general terms

Tips can be a large share of a salon's card takings. They are not the salon's money. GOV.UK says that by law all tips must be given to workers without deductions. The statutory code of practice adds that tips must be passed on by the end of the month after the client paid them. Where tips are paid more than occasionally, employers need a written tipping policy and must keep a record of how each tip was dealt with for three years. The code does not apply to self-employed people, such as chair renters taking their own tips.

GOV.UK also says workers still pay Income Tax on tips and may have to pay National Insurance. How that works depends on how the tips are shared out, so it is a question for your payroll provider or accountant.

In the books, we record tips as held for your team rather than as sales. When they are paid out, through payroll or another agreed method, we clear that balance. If it does not clear, we flag it, so you can see whether any tips are still to be passed on.

What is included, and what is quoted separately

Every package covers the same daily work: bookkeeping every UK working day in your existing software, bank reconciliation and receipt matching, finance inbox monitoring, missing invoices and receipts followed up, and a monthly financial summary in plain English.

We work in Xero, QuickBooks, Sage, FreeAgent, Dext, VT Transaction+ and others. You keep your software and your subscription.

Catch-up work, tax returns, payroll, CIS returns, VAT return submission and statutory filings are quoted separately. If your books are behind, start with catch-up bookkeeping so earlier months are complete. If you also run a café or bar area, our page on bookkeeping for restaurants and takeaways covers busy till takings in more detail.