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Practical Finance—Part II
By: Monte Zwang
Posted: January 2, 2014, from the January 2014 issue of Skin Inc. magazine.
Part I of this article, which appeared in the December 2013 issue of Skin Inc., discussed becoming financially fit in your skin care business by keeping things simple and determining your break-even point.
Tools and systems for cost and cash control
Tools are only useful if they are used. Point-of-sale (POS) systems provide outstanding reports and information. If set up and used correctly, they should provide great tools for managing labor, marketing, scheduling, inventory and cost control. Sales, labor and cash register information needs to be manually entered into the bookkeeping system in order to adequately manage profitability. Managing labor, inventory control and cash is a daily activity. Information about these costs needs to be processed into the bookkeeping program each day in a timely manner. Cash control and employee responsibilities relative to the operation and security of the POS system needs definition and daily management.
Do what you do well, and don’t waste valuable time processing your own numbers. Bookkeeping requires two-to-three hours per week. Wouldn’t those hours be better utilized finding new clients, managing your clients’ experience and creating an incredible work environment for your team? Your role is to receive the numbers in a timely fashion, evaluate them and make informed operational decisions based on them.
Every relationship has boundaries, expectations and mutual responsibilities. Communicate the following needs to any professionals helping you manage your finances, including accountants, bookkeepers and financial advisors.
- Financial statements need to illustrate what is going on in the business.
- Costs of operation should be demonstrated.
- Chart of accounts that help determine a break-even point and manage profitability should be created.
- A plan should be set to minimize taxes as much as possible.
- Information should be clearly broken down so someone without an accounting background will understand.
- An exit strategy should be formed, which includes understanding how to value the business.
- The business and your personal financial life should be viewed holistically. How profitable your business is will affect your personal tax situation.
- Financial information needs to be timely, accurate and useful. It must be processed several times during every week, not monthly.
Constantly evaluate and update
The business you opened may not be the business you are operating today—if a skin care facility is going to experience longevity, it will find itself in a constant state of transition. Clients, trends and the market will transform. Keeping up with the market can be expensive if it is not planned; staying current with trends requires research and a willingness to learn. Stay aware of what your competition is doing. By knowing what it costs you to provide your services, you can respond to challenges to your pricing. And by being aware of what your unique business qualities are, you can continue to present a high-quality, fresh image of your spa.
Although it’s easy to rest on your past success, staying current is valuable for your relationship with your client today and in the future. To accomplish this, transition must be built into and budgeted into your business operating plan. Communicate your vision and plans to your team—they are the ambassadors of your mission. Committing this transition plan to a budget will allow you to test and determine whether your plan is feasible. Once convinced that it is, you can label yourself financially fit, and your business will remain vital, profitable and sustainable.
With more than 25 years as a consultant, Monte Zwang is a principal of Wellness Capital Management, providing cash flow and financial strategies to businesses in the wellness industry including medical practices, wellness practitioners and day spas.