Let’s be honest here: every salon owner is going to make a few financial mistakes at some point. We’re not all savvy in finance and when we’re starting up especially, it’s often our own limited understanding that we need to rely on. But there are a few finance mistakes we can all avoid, to make sure those small errors don’t snowball into whopping cash flow dramas.
Paying bills isn’t fun. But it’s necessary, especially if you’re relying on those suppliers to keep your salon running. While most suppliers will give you a window of extra time to get your cash in, regularly missing payment deadlines will not only sour that relationship, but possibly leave you without necessary product when your supplier refuses to fill your next order.
More importantly, if you’re operating off borrowed money, making a late repayment can damage your credit score, which will work against you if you need to refinance or borrow additional funds.
Not having an emergency fund
Things happen. Business can have a quiet slump. And if you don’t have an emergency fund to see you through, that pinch can be more of a tough squeeze. The rule of thumb is to try to have a three-month emergency fund. Put regular cash into the fund and don’t touch it. It’s a good lesson in keeping the running of your salon lean; the more cash you put away, the more you’ll need to learnt o get by on the amount you have left over. Having that emergency fund as fat as possible will give you more options in the event of disaster.
Mixing business and personal funds
It’s easy to blur the lines between your business and personal finances, but it’s also dangerous. Make it a rule to separate your personal finances from your business finances. In the event that your salon doesn’t perform well, a failed business can tarnish your financial reputation if the two are sharing the same bank account.
Open a business bank account and apply for a business credit card. Use it for all business expenses only. And do the same for your personal spending. Not separating the two can also create a mess when trying to balance accounts, doing your tax, evaluating profits and setting both business and personal financial goals.
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