As we approach the end of the year I thought I would reflect on some business processes and practices that I often encounter when dealing with salons.
Over the years at ESP we have seen (and still see) many situations where salon owners are not managing their business processes in their best interests (according to best practices). As a result ESP actually trademarked the term BSP (Best Salon Practices) as we see this as the entire foundation for the use of our software in the salon industry.
Best Salon Practices is the application of the generic term Best Business Practices (BSP tm) into the salon environment based on common salon business processes.
At certain points in the future we will visit more Best Salon Practices (BSP tm) in the form of articles as these are numerous and evolving.
Don’t delete sales records
Before I launch into my reasons why sales records should not be deleted it is important to note that your sales records should be numbered. If not, then my comments that follow will be less meaningful.
Generally if you are running a computerised salon management system then then your sales records will automatically numbered. However, if you are using a paper based system then ensure that your sales dockets are numbered with pre-printed sequential numbers (this will need to be done by the printers, hand written numbers are meaningless). Note that if you are using Excel to store your sales records then you may struggle to keep proper records, unless someone very talented has built a controlled tracking system for you that eliminates the ability to simply delete a record.
Now, back to why sales records should never be deleted…
Firstly, your accountant is going to be very grumpy when they start seeing gaps in your invoicing sequence that cannot be explained. Secondly you are going to get very grumpy when your staff start deleting invoices without your approval.
From your accountants point of view they will be trying to protect you when it comes to an audit as deleted invoices look like you are trying to hide revenue. Therefore if you have invoice 001-1282 for the month but invoices 23, 89 and 121 are missing they will start asking questions.
There may be legitimate reasons why the invoices have been removed but simply removing them is not the best way to handle it. For example, in cases where there has been a mistake and you need to correct a sales record a credit note or client return should be processed. In the event that you are using manual (paper based) records you should either write out a credit note or mark on the original invoice that the sale was cancelled and state the reasons.
This may seem like more work but will save you time and stress later when you or your accountant start asking questions about transactions. A credit note or return will leave an audit trail and this will be self-explanatory as to what events took place. Another good practice to instil during this process is to make a note on the invoice/return explaining why it has been reversed.
Other benefits of having a proper audit trail include ensuring that stylist commissions are calculated correctly, client histories appear correctly and loyalty points are correct. It will also be more difficult for staff to steal from you and from each other.
Remember also that the Consumer Protection Act requires that you provide your clients with a sales invoice showing all your details. Now imagine that a client brings a product back with a copy of their original invoice but on your system the invoice has been deleted. This will create all sorts of confusion.
Expired Gift Vouchers
When it comes to gift vouchers it is often a little confusing what to do about vouchers that expire. This is one that you should discuss with your accountant so as to ensure that you deal with it correctly. The reason for the confusion is because a gift voucher is not essentially listed as a sale upfront but rather as a promise to give the bearer of the voucher either a product or a service at a later date.
Therefore it does not get treated as Income at first and therefore Income Tax may not get applied initially. However, when the client pays with the gift voucher later they will buy either a service or a product and at this point it gets allocated for Income Tax.
However, what happens if a client never redeems their gift voucher? Is this money for nothing? Unfortunately not, it must get allocated at some point and taken off your Balance Sheet.
Apart from the tax implication there is also an implication if you ever want to sell your business. For example if a prospective buyer of your salon sees that you have a large amount of unredeemed vouchers then they will factor this in to the value that they are willing to pay for your salon because essentially this money is owed to clients. Therefore if you have R100 000 in unredeemed vouchers and want to sell your salon as a going concern then the new owner will need to honour the vouchers later.
Enter sales as they happen
A common practice amongst salons is to only enter their sales transactions into their computer system at the end of each day. This is a problem for a few reasons. Firstly you are not able to produce an invoice for the client. Secondly it increases the possibility that mistakes will be made and thirdly it increases the opportunity for theft to occur.
The longer you wait to enter your transactions the more hazy the detail will become and the more difficult it will be to keep control of your daily processes.
Do your cash up on the day
Following on from the point about entering your sales as they happen is the practice of completing your cash up on the same day. Although this is sometimes difficult it is a good practice and will help to ensure that your daily records are more accurate.
Count your float at the start of each day
Generally salons will keep the same value starting float for each day. Unfortunately this leads to the assumption that this value is always the same and therefore the float is not checked at the beginning of the day. This leads to problems at the end of the day when a cash up may be out of balance because of the assumption that the float was a certain value when in fact money may have been taken out of the float before the shift for whatever reason.
If it is capable then configure your computer system to prompt for you to enter the float value at the beginning of the shift. If you are using a manual system then keep a manual record of a float count at the start of the shift and who did the count.
Back up your data
Back up your data, back up your data, back up your data!!! I have said it before and I will say it again, back up your data. Unfortunately the weight of this statement generally only sinks in when your system crashes and you lose your data. Only then will you take it to heart.
Do not rely on any assumptions about who is backing up your data. You must take responsibility for this process. You will experience either failure of your hardware or theft of your computers at some point, it’s not a question of if but rather of when. I’ll say it again back up your data!
When you back up your data it is no good having the back up stored on your only computer at the salon. If there is hardware failure, theft or a fire then it will be as if you had no back ups at all. You need to have back-ups stored off-site, away from the salon.
Talk to your I.T providers to find out how you can best back up your data off-site. Oh yes, one more thing … back up your data!