Do you own a Business or just a JobDo you own a Business or just a Job
Do you own a Business
or just a Job ?
(If the Taxman does not get you, the competition will)
Hair & Beauty is part of the Service Industry, bigger in Australia than Manufacturing or Primary Production and the fastest growing. There is no GST on the Financial Services portion of the Service Industry, but the remainder is seen by the Taxman (funny how no one complains about this term being sexist) as his cash cow.
There is very little incoming GST in Salons, but every service is taxable at the maximum rate. So whether as Salon Owner you applied for the job or not, from here on in you are one of the Taxmans biggest tax collectors. So what sort of boss have you got ?
When I was a Tax Assessor in the public service (which you just joined) there was an old adage "If it wasnt written, it wasnt said". The same principal applies to keeping accounting records. If you do not have a daily record of transactions, do not expect he will believe your GST calculations. Some "business people" keep more detailed records of their car usage, to reduce FBT, than they do of the business that bought the car "hold your hand out, you naughty boy".
Secondly, he has a cute approach to investigations (and remember, since self-assessment he has a lot more people to do investigations, so they expect 1 in 10 returns will now be investigated). If you are not anorexic and dont sleep in the streets, he will assume you spend a lot of money and 10% of everything you consume plus 10% of everything you own is HIS goods and services tax. He ignores all expenses, unless there are detailed written accounts, and has been known to use carbon dating to check when they were written. Of the other 90%, approximately 50% is HIS income tax. If you have not kept records and have not voluntarily paid all the tax, then you must be trying to cheat him. If you are a cheat, then he applies this reasoning to not just the last 7 years, but to every year since you started delivering papers. Then he hits you with severe penalties (can be over 100%) on whatever you cheated him out of, and then he charges interest.
By now you have either wet yourself, decided to play the game his way or decided I am exaggerating. Consider this the vast majority of people and businesses forced into bankruptcy are done so by your new boss the Taxman. Even a Pty. Ltd. structure will not protect your family home against a wronged Taxman. And you were worried about a womans wrath.
Even if you are not worried, your Accountant will be. The Taxman keeps tabs on which Accountants submit returns that are subsequently investigated. Too many and the Accountant can say good buy to his business. Many are now refusing to do the books for clients who do not have a system in-place.
A computerised Salon Management system is a very inexpensive insurance policy, but not just against the Taxman. We are following the USA in our attitude to litigation. If something goes wrong it must be someones fault. If I get an allergic reaction to a chemical treatment or my hair just goes the wrong colour, someone will pay bigtime. A good Salon Management system will keep a client history of all products purchased, chemicals used, treatments, who performed the service, date & time, birthdays, etc. There is no double entry since most details are captured when the booking is made and when the treatment is invoiced. This history is a fantastic database for marketing. But also you can include allergies and preferences, print it out and have the customer sign it. It is added insurance for the customers (ie a service to them because you and your staff know what they want) and it reduces the chance of you loosing your customer and your shirt!
It is difficult to make enough money out of services alone, so most Salons sell stock as well. Margins on stock are not high, so it needs to be tightly managed to be profitable. I find that stock often gets "lost" when it is known that I cannot determine usage nor stock levels from one day to the next. To manage a business effectively, stocktakes are not done to find out how many replacements to order, but to verify that your stock control systems are working and to take corrective action if they fail. By the way, without adequate documentation, your new boss will probably assume that most losses are either used by you or sold by you on the side, and therefore are assessable rather than deductible.
Most companies, (and sooner or later this will include your Suppliers), most transport companies and all Government Departments will refuse to do business with anyone who is not registered for GST or cannot produce a typed, properly formatted, purchase order or invoice. There is special legislation to allow them to, but it is just too much paperwork for them. You may want to offer a Christmas or birthday trim to all the women in an office block or nursing home and invoice the owner. They can withhold 48%, no problem except they dont want the extra paperwork nor be responsible for paying the tax their systems will not be setup to handle it.
Many Salons use commissions as the primary means of encouraging staff to provide better service and to cross-sell. That driving force is seriously drained by the manual effort to administer it and the resultant delay in calculating the commission. ("Pay the worker while the sweat is still on the brow" Mao)
Sales teams have shown graphical comparisons of results for decades, because it works. Salon employees are now sales people, just as bank tellers are. If you are motivating your staff with commissions, motivate them even more by showing them graphically how they are progressing against each other. Competitive spirit is a natural human trait, so act like other good sales managers and make it work for you.
Customers (listen-up, these are your cash-cows) patronise Beauty Salons to improve their image and to get service (made to feel special). How good is a Salons image and how special does a customer feel, when your staff flick aimlessly through a well used appointment book, trying to find the last appointment ? Good gymnasiums have your progress records on a computer system, even tyre companies record details for your car it is just expected of any business today. Our system even allows you to send an appointment reminder via SMS message to their mobile phone or fax hows that for Salon image and making the customer feel special.
Businesses are a living organism and as such they have only two natural states growing or dying. If you are not actively marketing yours, it will die, naturally. Sales people know it is an order of magnitude easier to sell to someone who has already bought from you, than it is to sell to a new person. A database of your customers and their buying habits over the last two years would be easily saleable. It certainly will add substantially to the value of your business, should you later sell it. Before then it is worth its weight in rocking horse poo if you are to grow your business. A Salon Management system not only maintains such a database but gives you the tools to market from it. Ours even manages a Loyalty program. The obvious point is, if you are not actively marketing your services and you do not have any tools to assist you, do you have some form of agreement with all your competition that they wont market to your customers. Even if you did, your business would still not be growing, so by definition it would be dying.
In a very popular management book, "The E Myth Why most small businesses dont work and what to do about it", Michael Gerber could be talking directly to Salon Owners. He points out that most business owners move from having a job to owning a job, never progressing beyond to owning a business. They work long hours for little reward IN their business, instead of ON their business. When they get tired, sick or old, there is precious little of a business (that does not include them) to sell.
His answer to progressing to owning a business is to install systems - to work ON your business. Naturally, as with almost every other US business consultant, McDonalds is held up as the prime example. However, you do not have to franchise to build a saleable business. A computerised Salon Management system provides most of what is required. You still need to work on how it is used, but one Salon could never justify the cost of developing all its own systems from scratch.
You can hear them regurgitating doggedly, "Its worked this way for years", "dont fix it unless its broke", and other gems from the Encyclopedia of Dinosaur Logic. Meanwhile increasing numbers of small businesses are "going under" like lemmings, from the added administrative workload of just being in business. The Government, Banks and even Councils are introducing "user pays", removing or charging for their services. Even suppliers expect you to order through the internet or an automated phone service. Only three things are definite death, taxes and change, and change is happening at an increasing rate. Only those who embrace change can succeed. Without changing the way you do business it will not matter whether you own a business or a job, it will be worthless.
The good news your ability to change is like the image you project it is all in your mind and, even if you are just a mere male, you have the ability to change that today!
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Gumnut Software Pty. Ltd. Australia
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