Why Is Salon Cash Flow Important for Your Business

Understanding (and taking control of) your salon cash flow is critical for a successful business.

Using a simple cash flow forecast can help ensure long-term profit and cover your expenses in the short term.

What You Will Learn

We’ll take a look at the basics of cash flow for salons, some of the common mistakes that salon owners make, as well as some ideas and a template to help track your cash flows.

Jump to The Section You Like

  1. What Is Salon Cash Flow and Why Is It Important?
  2. How to Improve Your Salon Cash Flow
  3. How to Avoid Most Common Salon Cash Flow Mistakes
  4. Salon Cash Flow Template
  5. Conclusion

What Is Salon Cash Flow and Why Is It Important?

 

Cash flow is the money that your salon business brings in every day, along with and outgoing cash that you use to cover salon expenses such as rent, employees wages, supplies for services or even the costs of utilities and internet.

Of course you want to have clients coming in and bringing more incoming cash to your salon than what you spend keeping your business running. This means that your business is making a profit.

Understanding your salon’s cash flow is an important part of financial planning. You can keep track of what you’re paying each month and make sure that income from services and product sales doesn’t get eaten up by a payment to your creditors later on.

Keep in mind that profit and cash flow are very different things, and mixing them up could lead to business failure or the inability to cover future bills. Unlike the cash coming in, your salon’s profits are the amount of money that you get to keep after all of the bills are paid.

How to Improve Your Salon Cash Flow

 
  • Track it Carefully: Not only is this sound business advice, but keeping track of all the money going in and out of your salon can help you to manage it better.

    Consider using visual data like graphs and charts to help you see your biggest revenue sources and expenses.

  • Keep and Eye on Inventory: Slow-moving stock or retail sales items can take up a lot of space and result in big losses over time if products expire before you can use or sell them.

  • Forecast it: This can be as simple as putting your figures for each week and month into a spreadsheet, then using graphs to help predict trends and identify areas of interest that you can optimize- maybe you can ask a long time supplier to lower their cost, for example.

  • Use Cost-Saving Strategies: Look at where you’re making the biggest payments and see if you can reduce these by doing things like cross training staff, taking advantage of supplier discounts or cutting down on product waste by measuring amounts carefully.

  • Keep your Finances Organized: Make sure that you have a separate bank account for your business expenses and your personal finances, and avoid making payments for anything salon-related using your own bank account or credit card.

    This makes bookkeeping easier and helps you to keep an eye on the actual costs each month. You don’t want to pay for something and then forget about it because it’s not in the bank statements.

  • Plan for Ups and Downs: Now that you have an idea of what your clients are likely to do and which services will be popular at different times, you can strategize to raise your hair salon’s income and bring in new clients with seasonal sales and promotions.

    Use your cash flow forecast and try running product sales on slower-moving items, offering gift vouchers to encourage people to refer their friends or run a “March Sale” to speed up that month, for example.

  • Use Salon Management Software: Salon software can help you with everything including (but not limited to) inventory tracking, appointment booking and scheduling optimization, managing expenses and keeping an eye on your best selling products and services.

    In short, it’s a salon owner’s best friend when it comes to saving time and money.

How to Avoid Most Common Salon Cash Flow Mistakes

 

Don’t Ignore Red Flags: If you notice that funds are regularly running low, or that you’re having trouble covering the cost of rent, inventory or equipment, don’t wait and hope that things will get better.

This is the time to actively strategize and look for ways to raise your revenue, bring in new customers and cut your expenses.

Consider an Accountant or Advisor: these financial professionals are good for more than helping you get ready to apply for loans or paying a tax bill- they can also add value to your business by giving you bookkeeping tips, business advice and even payroll support.

All of these things together can add up to help you take control of your finances and hair salon revenue.

Avoid Splurging on Luxuries: If your client base is expanding, you’ve managed to sell a lot of your inventory and you have enough cash coming in to pay the bills, it can be tempting to buy all of the expensive salon equipment that you’ve had your eye on all at once.

It’s often better to wait a little while and make sure that your salon’s revenue is stable before making any unnecessary major purchases. That way, you won’t end up in debt or without a financial cushion to get you through the less-busy months.

Salon Cash Flow Template

 

To help you get started, we’ve put together a template that makes it easier for you to keep an eye on your salon’s finances and cash flow. Feel free to add to it and make it your own!

Conclusion

 

Running a salon takes a lot of time and effort. You need to keep an eye on your finances, make sure that you’re bringing in new clients and plan for your business’s future.

One of the most important things that you can do to keep your business successful (and your staff and clients happy) is keep a close eye on your salon cash flow. With some planning and organization, you’ll have even more time to focus on your customers.

Citations

The cash flow sensitivity of cash
https://onlinelibrary.wiley.com/doi/abs/10.1111

Evidence on the role of cash flow for investment
https://www.sciencedirect.com/science/article/pii/03

Customer satisfaction, cash flow, and shareholder value
https://journals.sagepub.com/doi/abs/10.1509/jmkg.69.3.115.66364

Rating: 5 of 5 - 1 votes