Predicting cash flow in your salon

If cash flow sounds like accountant lingo to you, you are not alone. Most salon owners avoid having to deal with such things by hiring an accountant who will do all of the “dirty work”. However, when it comes down to cash flow, there is nothing to be afraid of – in fact, you should be regularly checking these numbers!

Cash flow is the average amount of money you expect to see come in and out of your salon, which is made up of all of your income as well as expenditures. Your mission is to reduce the amount of outgoing cash and increase the number of incoming in order for your business to prosper.

Do not get caught off guard!

Imagine your salon is going in full swing, clients are booking visits and your products are flying off the shelves. Everything is going well and your till will not stay closed – so you decide to host a salon event. You promote it via social media ads and loads of clients come to take part. You give out free gift bags, composed of salon products and you stay open late, offering treatments way after closing hours. At the end of the month, reality hits you – your electricity bill surpasses the amount of income your salon has brought in.

If you have experienced a significant drop in cash inflow, then you know how painful this can be. Your main source of income primarily comes from customers who purchase treatments and retail at your salon, whereas hair salon expenses range from insurance, bills and rent, to staff salaries, Internet, retail and backbar products. Make sure you are in the clear before you jump the gun!

Monitoring cash flow and future predictions

In order to launch effective marketing campaigns or any other activities in your salon, you must first create a salon budget plan. Do you know how much you are looking to spend on sponsored ads on social media, leaflets, or other forms of advertisement? Create a hair salon budget template and put each advertising medium into separate categories – Facebook and Instagram ads under “online marketing”, leaflets and referral programs under “word of mouth marketing”. Avoid putting all of your eggs in one basket – allocate most of your budget to mediums that are most effective at bringing in more cash flow, and disperse less on those less effective.     

Knowing your numbers is not an impossibility – with the right tools, compare your earnings to those from previous years and mark similarities. Using your Versum system, note any drops in cash income – if they appear after the Holidays, this is a telltale sign that you should allocate your marketing activities to that time. When launching your promotional campaigns during your low seasons, make sure to track the effectiveness, using Versum’s statistics feature.

How about predicting future incoming cash flow? You do not have to look far – Versum’s intuitive features allow you to generate expected income reports, which are collected from upcoming appointments in your booking calendar. If you have a financial goal you would like to achieve this month, but the predicted revenue shows that you are short, implement a marketing campaign to draw clients to your business!

Salon expense spreadsheet

Creating a salon budget template is a great idea for efficiently allocating your budget on important activities for promoting business growth, and it should go hand in hand with a thought-out salon expense spreadsheet. This will help you track your expenses, including how much you have spent from your budget, and on what. First, create a budget ceiling for each month – since some are slower than others, you may have varying limits. Make note of every expenditure in your business, including rent, utility bills, staff as well as supplies purchased. At the end of the month, check your spreadsheet and see what ate up most of your budget. If you notice a substantial cash outflow in your electric bill, perhaps consider investing in more energy efficient appliances for your business or implement strict energy-conserving rules in your salon for staff to follow.

When it comes to cash flow – knowing your salon’s numbers is imperative in order for it to prosper! By carefully calculating your earnings and expenditures, you will know exactly how to distribute your budget without falling into the red numbers – and with the help of Versum, calculating your cash inflow is significantly optimised. See for yourself, and start a free trial!

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