Salon Accounting in Canada

Canadian salon owners know that salon accounting isn’t usually the easiest (or most enjoyable) part of the job.

Whether you’re in Toronto or Montreal, as you expand your salon business, your accounting needs will grow, too. That’s why it’s important to stay on top of things.

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1. What is Salon Accounting?
2. How to do Salon Accounting in Canada?
3. How to keep books for your salon?
4. Conclusion

What is Salon Accounting?

You might hear terms like “Bookkeeping” and “Management Accounting” when accounting in general is mentioned. These are different things, though.

Bookkeeping is the day-to-day records of your salon’s finances, which you’ll use to do your accounting work. Management Accounting is the communication that you have with managers about how your salon is doing financially.

Salon accounting is everything that you do to track your salon’s income (all of your income together is called your revenue) and salon expenses, giving you important information about how well your business is doing.

Some terms that you might need to know are:

• Accounts Payable and Accounts Receivable: These are the amounts of money that you still owe your suppliers (payable) and what clients or customers owe you (receivable).

• Cash Accounting and Accrual Accounting: Cash accounting happens when you do your calculations and record everything as a payment is made, but accrual refers to recording things when a transaction happens (even if it’s not paid yet).

• Chart of Accounts: This is a record of business accounts and their transactions within a certain timeframe.

• Equity, Assets and Liabilities: Your equity is the total value of your business’s assets, if they were sold off and after any debts (liabilities) were paid. Assets are what you own as a salon owner, and liabilities are the money that you owe.

• Business Number (BN): The number assigned to a business in Canada and used when dealing with the federal government.

• CPP Contributions: This is the amount that both you and your employees will have to contribute to the Canada Pension Plan.

Here are some common reports used in Salon Accounting:

• A Balance Sheet: Your salon’s financial statement which includes all equity assets and liabilities.

• Your Income Statement and Cash Flow: Your salon’s income statement is also called it’s profit and loss statement, whereas cash flow just refers to the money moving in or out for various reasons.

• Sales Tax and Payroll Tax: This is the amount that goes to the government when a transaction is made or the amount held to pay taxes when an employee is paid.

• Payroll Deductions: These amounts are taken out of a person’s paycheck for CPP or EI (Employment Insurance) deductions and sent to the Canadian government.

How to do Salon Accounting in Canada?

Register Your Salon Business

The requirements will vary by province, but you can start by registering with the federal government and receiving your business number.

You can register in a specific province or provinces, and provide information about the location and nature of your salon business.

Open A Salon Bank Account

Having a separate account (and credit card, if possible) will help you keep your business organized and professional. Many major Canadian banks offer special accounts and credit cards for small business owners.

Decide on A Bookkeeping Method

Track your salon’s finances using either cash or accrual accounting.

Stay Organized

This means following employment laws, tracking payroll contributions and keeping good inventory records. All of this will save you time and money later.

How to keep books for your salon?

Record Everything (and back it up)

This includes income, business expenses and all your receipts, pay stubs and financial documents. Scan these documents using an app or print out a hard copy to have in case the data is lost.

Accounting Software

Using accounting software will make things easier, although you should try to also save hard copies of everything in case you need it at tax time. An accounting app will also help you make payments, manage transactions and track cash flow.

Consider an Accountant

If there’s something you’re not sure about or you just need some help with your bookkeeping and taxes, it’s often best to hire a professional. They can provide sound advice and let you focus on your salon.

Accountant’s fees vary depending on how long and complex the job is.

Conclusion

Whether you decide to keep your Vancouver salon’s accounts and file taxes yourself, or hire a professional accountant, it’s still a good idea to keep a close eye on your business’s finances.

Salon accounting in Canada can be involved, but with the help of some good bookkeeping software it can be manageable and very informative. Just remember that if you’re in doubt, it’s usually best to consult a professional.

Citations

Accounting
http://ellisarchive.org/sites/default/files/2019-09

International accounting standards and accounting quality
https://onlinelibrary.wiley.com/doi/abs/10.11

The importance of high quality accounting standards
https://search.proquest.com/openview/113ef6fb20852f7024ae491923c7e84