For booth renters and salon owners, keeping track of income and expenses is not the most exciting task, but it’s a necessary one. Keeping your business records in order will not only keep Uncle Sam smiling, it will enable you to understand your financial footing.
Record-keeping is certainly not what you were passionate about when you decided to become a nail technician. But record-keeping is an important part of starting and growing a successful business. Knowing the basics will help you start out on the right path.
It is important to create and use a system to track your income and expenses. This will help you understand more about the profitability of your business, and it will mean you’ll have everything in order and ready to provide your tax preparer so your tax return is correct. (It’s always a good idea to keep the IRS happy!)
You can purchase bookkeeping software, hire a bookkeeper, or you can create a spreadsheet, whichever you prefer. What is most important is that you create and use some type of record-keeping system. For those of you who elect the do-it-yourself route, here are some directions on setting up a basic spreadsheet.
Across the top of the spreadsheet, starting with the second column, put the dates for each week of the year, so you will use 52 columns. Using the first column of the spreadsheet put your list of the types of income and types of expenses you have when you run your business, using one row for each item. For example, for income you might list Service, Retail, Tips (yes, tips are taxable income), Gift Certificates Sold (yes, gift certificate sales are income too). Then put a row for Total Income. In the same way, start your types of expenses, which might include Advertising, Bank Charges, Dues & Subscriptions, Insurance, Products Purchased, Office Supplies, Rent, Telephone. Then put a row for Total Expense.
This is a basic and simple place to start to record your income and expenses on a weekly basis. Total up all of your types of income and types of expenses (include all expenses you paid for by check, cash, or credit card) at the end of each week and enter the totals in the spreadsheet. Put the receipts and other documents in an envelope marked for that weekend. Be aware that you must keep all of the records relating to the income tax returns you file for seven years.
Help Is at Hand
Legally speaking, you need to understand your city, state, and federal laws to find out the requirements you must meet to be in compliance as a business owner. Your city may require a business license, if you sell retail product you may be subject to sales tax regulations. There are several entities in place to assist you. Your local city government office is a good place to start. The chamber of commerce is another great resource for local requirements. And you will find a wealth of valuable information at the U.S. Small Business Administration (www.sba.gov) on how to start and manage your business. Still have questions? Go to www.score.org where you will have access to qualified expert business management advice, and it is free!
Deducting Business Mileage
If you use your vehicle for business purposes and want to take a business deduction for your vehicle, you must keep an accurate business-use mileage record of the date, starting and ending mileage, and purpose of the trip. This takes discipline and a simple way is to put a small notebook and pen in your car and start the habit of writing down the information every time you get in your car to take a business trip, whether it is just up the road to the beauty supply store or driving 100 miles to a beauty show.
While this is not a sophisticated method, it is a good start, and you will be miles ahead of most new nail technicians in having a basic recordkeeping plan in place.
Consider Scanning vs. Paper Files
Scanned copies are now acceptable in almost every arena from the IRS to legal processes. Searching for a specific document through a scanned document folder is faster and easier than searching through a group of manila file folders and the multitude of documents they contain. With scanned copies you can simply type key words in the Search Files function, and all documents that contain those words move to the top of the file list. With scanned documents it is also easy to always keep a back-up copy of your document files in another physical location — at home, for example.
The information provided in this article is not intended to provide or be a substitute for specific individualized accounting, tax, legal, or business advice. Bookkeeping Infusion accepts no liability for any direct or consequential loss arising from any use of this information.
Ruth Ann Reese is the owner of Bookkeeping Infusion (BookkeepingInfusion.co). She can be reached at (800) 729-4179 or Info@BookkeepingInfusion.co.