Salon bookkeeping: the document checklist

A salon is really two businesses stacked together — a service business and a retail business — with a payroll structure that varies chair by chair. Get the worker classification and the service-versus-retail split right and the rest is straightforward. Get them wrong and every margin figure is meaningless.

Cash is the other complication. Tips, small cash sales and cash payouts at close of day are normal here in a way they are not in most modern service businesses.

Request every month

Daily POS summaries are ideal; weekly is workable.

• Daily or period POS sales reports, split between service revenue and retail product sales
• Tip reports — cash and card, by stylist, including any tip-outs
• Merchant processor statements showing gross settlement and fees
• Booth rent received, by renter
• Bank statements for every account
• Credit card statements
• Product and supply purchase invoices — separate back-bar (consumed) from retail (resold)
• Payroll reports including commission structures and tip credits
• Rent, utilities and equipment lease invoices
• Cash log — cash sales, cash tips paid out, and any cash taken to the bank
• Software and booking subscription invoices

Request quarterly or annually

• Quarterly: sales tax filings — retail product is usually taxable, services often are not, and the split matters.
• Quarterly: payroll tax filings.
• Annually: W-9s and 1099s for every booth renter and contractor.
• Annually: retail inventory count.
• Annually: licence, insurance and lease renewals.

Ask before you onboard

These are the questions that decide whether you have priced the engagement correctly. Ask them on the first call, not in month three.

• Are stylists employees, booth renters, or both? Is there a written agreement?
• How is booth rent charged — flat, percentage, or hybrid?
• Which POS and booking system, and can I get reporting access?
• How are tips paid out, and is any cash involved?
• Do you sell retail product, and do you count it?
• Is sales tax being charged on retail but not services?
• Is back-bar product being tracked separately from retail stock?
• How much of the business is cash?

Traps that catch bookkeepers new to salons

Retail and service revenue in one account. They have different margins, different tax treatment and different inventory implications. Once combined, neither number is useful to the owner.

Back-bar treated as inventory. Product consumed during a service is a cost of service, not resale inventory. Salons buy both from the same supplier on the same invoice, so the split has to happen at the invoice line.

Booth rent netted against payouts. If a renter's card sales are collected by the salon and rent is deducted before paying them out, the gross needs recording on both sides — rent income and a payable to the renter — not a single net figure.

Cash tips invisible. Cash tips paid out at close of day frequently never appear anywhere. Agree a daily cash log at onboarding; reconstructing it later is not realistic.

Classification drift. A salon that started with employees and slowly moved to booth renters often has no paperwork marking the change. Ask directly, and flag it to the client's CPA if it looks unclear — it is a bigger exposure than the bookkeeping.