Beauty Business Strategies
The podcast where salon, spa, medspa, barbershop, and lash studio owners — just like you — learn quick tips to make more money, inspire your team, and create world-class client experiences.
Beauty Business Strategies
Mastering Beauty Business Finances: Bookkeeping Strategies with Randi Rose
In this episode, we're diving into financial stability in the beauty industry with our insightful chat featuring Randi Rose, co-founder of Thrive Business Services. Discover why relying solely on increased sales won't cure your financial woes, and learn how meticulous bookkeeping can transform your business. Randi shares indispensable advice on managing costs, understanding proper pricing strategies, and tracking income and expenses to stay within budget. This episode is packed with essential tips on achieving financial clarity and making informed decisions that align with your business goals.
Thrive Business Services website: https://thrivebusinessservices.net/
Conversation highlights:
3:12 The most common financial challenges faced by beauty business leaders
6:53 How a bookkeeper enhances your current financial processes
12:10 The downfalls of using Excel to manage your finances
15:50 What you should expect from your bookkeeper
18:10 The most common inaccuracies on your balance sheet
Watch the video version of this episode here: https://youtu.be/-0bwa07lhRE
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The Beauty Business Strategies Podcast is designed to give salon, spa, medspa, barbershop, and lash studio owners, just like you, quick tips to make more money, inspire your team, and create world-class client experiences.
Welcome to the Beauty Business Strategies podcast. Happy to be with all of you again. My name is Michael Yost. I will be your host for today and once again, as we do in every podcast, we try and have a fantastic guest that's gonna bring you great information and great insights and just great conversation. And today we are joined by Randy Rose. Randy, how are you?
Randi Rose:I am fantastic. Thanks for having me, Michael. Randy, how are you? I am fantastic. Thanks for having me, Michael.
Michael Yost:Man, it's great to have you here. So before we get into it, randy, why don't you give a little bit of introduction around again who you are, your business and give the listeners and viewers an overview?
Randi Rose:Sure, I can do that. So, like you said, my name is Randy Rose. I am a co-founder of Thrive Business Services. We provide accounting and we provide bookkeeping and client accounting services for small to mid-sized businesses. Small to mid-sized businesses. We have a niche in the the. We I talk about is myself and my business partner, who's also my best friend. Her name's Gail Goldman, and Thrive's been around August we celebrate our 10 year anniversary, but we've been doing this a lot longer than 10 years. But we've been doing this a lot longer than 10 years.
Randi Rose:About 40 to 45% of our clientele is the beauty industry. So we do bookkeeping and client accounting services for other industries as well. But we do have a plethora of experience with the beauty industry and really why we created Thrive was because we saw that there was such a need for good record keeping in the beauty industry, because the industry wasn't getting that. But that's actually why Thrive was formed. We just because we get referrals from other CPAs for other businesses. We also do other businesses. So our vision, like who we are as a company, is we champion small businesses. So we really exist to create thriving wealth, creating businesses and thriving doesn't necessarily just mean monetarily thriving is your life experience needs to be as consistent with your your business being profitable. You know like if you're working 80 hours a week and grinding yourself to a bone, then you're not thriving, even if your business is making a profit. What's the point?
Michael Yost:Yep exactly, Exactly.
Randi Rose:I love it.
Michael Yost:So I love the fact that you know not only just overall it's services. You know bookkeeping services are something every business needs to be at its best, and I love the fact that you've got a great amount of experience within the beauty industry, which we primarily focus on, obviously as well. And so let's kind of start with the first question. You know around that idea. What do you see is probably in your encounters. What do you see as the most common mistakes or challenges Maybe the better word to use is challenges? What do you see as most common challenges that beauty industry leaders face?
Randi Rose:From a financial perspective. The most common challenge that beauty industry professionals owners face is, to be honest, no different than any other industry. Your widget just happens to be hair nails, extensions, etc. Widget just happens to be hair nails, extensions, et cetera. It's thinking that if you just sell more, everything's going to be okay. I just need to sell more. And that is one of the biggest misnomers, because if what you're selling is not profitable, if it's not priced right and you don't have a handle on the pricing of it and the cost of producing it, you could just be creating a bigger hole for yourself.
Michael Yost:Gotcha. So again, I love that you bring that up. It's just the attitude of, if I sell more, that's going to fix everything, but, as you said, no, you got to make sure that all these things are lining up. So how do some of the things that you, with the services that you provide, and just again, and not just talking about for yourself, let's just talk about it from a bookkeeping standpoint. How can a bookkeeper help with those types of areas?
Randi Rose:Well, the first. So that's a great question. And when I talk or I educate, it's not just about Thrive. Like you know, we're not the right fit for everybody. The same way, everybody's not the right fit for us. But either way, I want people to be educated so that they know how to assess what they need and the best place to get it.
Randi Rose:So bookkeeping makes a difference in the sense that the POS systems that people use to run their business whether it be Mevo or Forest or Boulevard or Vegaro or whichever program it is that they're using is going to track their day-to-day operations of their business, but the bookkeeping piece none of that tracks the money out.
Randi Rose:It does provide information for calculating compensation and payroll, but it's not going to deal with the money out that's on your credit card or that you're paying your subscriptions or anything else. So you need to look at your financial statements, or whether you're doing it in QuickBooks or Xero or in Excel, which is not what I recommend. However, excel is a phenomenal tool for assessing things. You need to be able to see not just the money in. You need to see that money out and see is it being put to the right place? How do you know if you're in. Uh, if you're in budget with your compensation or with your inventory purchases, or with your back bar or your supplies, or your telephone or your advertising, you need that bookkeeping piece to track how you're spending the money. Or with your back bar or your supplies, or your telephone or your advertising. You need that bookkeeping piece to track how you're spending the money, to be able to see am I in budget?
Michael Yost:So again, you're speaking, obviously, our language, which is again why we've been great friends over the course of years as things we advocate at Strategies. But I think it's interesting, as you well know, because you've been in a number of our classes and we've been, like I said, you know what we're advocate at Strategies. But I think it's interesting, as you well know, because you've been in a number of our classes and we've been, like I said, you know what we're about at Strategies with our coaching and things of that nature. Let me ask this question how can a bookkeeper enhance what? Maybe someone isn't coaching right now, or things of that nature? Maybe they're not, but let's say they are.
Michael Yost:How can a bookkeeper help enhance the process? Because maybe there are some people out there going oh well, you know what, Like we advocate, hey, we advocate you use a cash flow plan and you build your expenses and we have a cost per hour calculator and we've got all those things that you're referencing and that's all great and great tools, but still, how does a bookkeeper help enhance and add to some of the things maybe people are already using? And I have another question that's kind of a two-parter. You mentioned the fact. I think it's very interesting. You mentioned the fact that you know you talked about Excel. While Excel is a great tool, why is that something that's not always necessarily maybe the tool you want to be using, Because there might be people listening in. I I know that have created lots of spreadsheets for themselves in Excel and what are some of the downfalls there, so I'm giving you kind of a two-parter here for you, Randy.
Randi Rose:That's great. So let me address that. I'm not sure I may be addressing them together at the same time. Your bookkeeping, same time. Your bookkeeping, the first and foremost job of your CPA. And, like you said, we've had a relationship for years. We consider ourselves coach agnostic and software agnostic. So we work with you, we work with Inspiring Champions, we've worked with Summit, we've worked with Salon Cadence, you know, with lots of different coaching companies, because you all have a different flavor and focus and there's not any one that's right, like lots of hair salons out there. So why this one versus that one? Right? Same thing goes for software. We work with Forrest and Vigaro and Mevo and Boulevard, et cetera, et cetera.
Randi Rose:Your CPA, your tax person, their number one, like bare minimum job is for you to be IRS compliant, to be able to do taxes Right. So, like I asked that a question, right, yes, raise your hand. So that's like your CPA, like that's the very first fair minimum. However, a lot of people only meet with their CPA once a year and so that doesn't give them the opportunity to pivot or to look timely and use that information to be able to make assessments and to make decisions. Your bookkeeping, your financial statements, should be able to be used by three people. It needs to be used by the IRS for your CPA, for your IRS tax compliance. They need to be able to look at your profit and loss and your balance sheet and do your taxes give you your tax planning balance sheet and do your taxes give you your tax planning. You need to use that information.
Randi Rose:If you need to go into a bank for financing, the bank is going to want to see your balance sheet. They're going to want to know what are you a good risk? How much can you afford? How much can we lend to you that we're going to get paid back, or all of those pieces. And then you've got your management tools, the people who are managing the business. Not about taxes, but about managing the business, your CPA. As a general rule because COPSA OD is definitely the outlier here you know they're not looking at your business to see how much of your money that was deposited was from service sales or retail sales or sales tax or tips payable or gift cards sold.
Randi Rose:A lot of CPAs are just looking at here's the money in, here's the money out, but that doesn't give you the picture that you need to strategize what is profitable. What's keeping my doors open? Where am I making my money? Where am I bleeding? What can I control? And that's where bookkeeping comes into play.
Randi Rose:No-transcript that, even if you're interested in preemptive, you want to either be looking at your books more frequently or you may need an additional tool, like your cash flow planner or whatever any other coaching company is going to create like that to see the more specific metrics that when you turn the knobs and the dials, I can move the ship this way or I can move the ship this way. If you're waiting until the end of the month, you don't have that opportunity to pivot. So it's really important for your financials to give you information that answer the questions that you have, which is how do I be more profitable? What does my strategy need to be? No pun intended, the name of your company is Strategies, right, just like we say we want people to thrive. No pun intended. The name of the company is Thrive. Did that answer your questions? Did that answer your questions?
Michael Yost:It did, it did. And actually the second part was the idea of Excel and you talked about, like I said, having right software and, again, a lot of people use Excel and, as you said, it is a fantastic tool. But what are the downfalls? Because you kind of made that reference. It's like, hey, listen, it's a great tool, but you know, then there's a kind of like that dot dot dot. So what's your thoughts on that?
Randi Rose:One of the biggest, probably one of the biggest downfalls. Ooh, I just heard my New York accent. I said flaw Doesn't come up very often.
Michael Yost:But when it does, there it is.
Randi Rose:Catch me there. One of the biggest downfalls is the duplication of entry, which is certainly I mean, I was an incubator in January and I've heard this complaint not just at strategies like it's like an owner's biggest complaint why am I having to track this information if my bookkeeper is already doing it? So as much as possible we do like to connect the two, but Excel is. Any program is only as good as the person interpreting the information from the data or building the data. So you know what I'm saying.
Michael Yost:Yeah, it's a little bit of garbage in garbage out.
Randi Rose:Absolutely. I mean, one of the biggest. One of the reasons why there are certain tools we use in Excel is has to do with the revenue recognition and the expense recognition in the same period. A great example of that is the December January. You may have your biggest sales in December. However, your payroll is not until January. So if you're just going like that CPA example I gave before, if your CPA is just going based off of money in, money out, you got lots of money in in December and your money out is happening in January. So your January is going to look negative on the bottom line and your December may look inflated.
Randi Rose:Okay, what's the real information you need to know? That may require additional steps for you to have. That may require additional steps for you to have. That. It may require things like okay, money comes out in January but we need to show it in December. That makes your bookkeeping more complicated not impossible by any stretch of the imagination, but you want your books are going to be set up to give you the answers to the questions that you need to make effective business decisions and running your business. Otherwise, why do it?
Michael Yost:Right when you think about, like people that might be listening in or things of that nature. Maybe they're considering a bookkeeper, or maybe they already have one. What would be some of the what would be some traits that they should be looking for? When it comes to a bookkeeper, that you would say, hey, listen, make sure you know, this is what a bookkeeper should be looking for. When it comes to a bookkeeper that you would say, hey, listen, make sure you know, this is what a bookkeeper should be providing to you. This is how a bookkeeper should be working with you. This is how a bookkeeper should be communicating with you.
Michael Yost:Because I think oftentimes at least my experience has been in talking with people it feels like there's a lack of communication. It feels like there's not enough questions being asked or answered. It feels like there's a disconnect and, in some ways, it almost feels for lack of a better way. Not trying to put accountants in a bad way, but you set it up exactly right, randy. Typically, with an accountant, you're meeting with them, maybe quarterly, at best biannually or even maybe only annually. So that's a different relationship. In many cases, a bookkeeper is a much more personal relationship. So give us a little bit about what should someone expect?
Randi Rose:It's a great question. So they should expect timely responses to your inquiries. First and foremost. If you are feeling, if you are feeling like you have to chase them down to get them to respond to you, you need to look elsewhere If they're not delivering what they say, just like anybody else.
Randi Rose:This next one is if they say they're going to do something by a certain time and they don't follow through, it's okay to fire them, right? You don't have to tolerate that. You wouldn't do that to anybody who comes into your business and serve them that way. So you should expect to be served the same way that you serve other people. They should understand your business, and what I mean by that is they don't necessarily have to have the same depth and breadth of knowledge that we have.
Randi Rose:They don't need you know, like all of your industry, kpis and metrics, but they should understand that the money that hits your bank deposits, that hits your bank account, isn't necessarily revenue to you, isn't necessarily income to you, and you're probably, first and foremost your balance sheet is probably more important than your P&L, and when I say P&L, I mean profit and loss, and most people just go let me look at my profit and loss.
Randi Rose:Let me look at my profit and loss, and when I look at someone's books, I start with the balance sheet, because what I can tell you is, if the balance sheet's not accurate, neither is your profit and loss, and it's usually on the balance sheet that it gets you. They should understand gift cards. They should understand tips. They should understand the difference between back bar, like your professional and your retail. They should be asking you questions what is it that you need to know, or what's the answers you need, and then go figure out how to provide you with those answers, whether that's from QuickBooks, from Xero, from Excel, from your POS system or some combination.
Michael Yost:Ok, so let me jump in and ask you this question, because you mentioned this about. You look at the balance sheet and you're looking to see. Is it accurate? What are the most common inaccuracies that you might see that shows up it? What are the most common inaccuracies that you might see that shows up Because maybe someone's again is going well, I'm going to take a look at my balance sheet and I'm going to see or can you, can you maybe give any red flags that you commonly see that makes it inaccurate, which, in turn, again all the dominoes start to fall.
Randi Rose:Absolutely so. When I look at someone's books, the first thing that you that I look for and that you want to look for is inventory. Do you have inventory on your balance sheet? Because that's one of the places inventory is technically not. An is technically not your inventory is technically not your inventory. Your retail is not really an expense to you, right? Until you sell it. So do you have too much of your cash tied up in inventory? If your inventory is not on your balance sheet, it's going to be a little hard to figure that out. You're going to have to jump through a couple of other hoops.
Randi Rose:Your tips, if you're a business. There are some businesses that don't take tips. They're not the norm, but they do exist. So if you're a business that takes tips, that money should not be showing up anywhere on your profit and loss. It should be on your balance sheet. There should be some type of a tips payable. If there isn't, then I want to know why? Gift cards Many businesses. If you do accept money for gift cards, why is your money in your gift Like okay, your bank account may say you have $40,000, but it says that you have a $200,000 gift liability balance, right, okay. So basically, if you were to sell your business, you have $200,000 of liability outstanding that someone's going to absorb because you've already spent that money. We need to take a look at that.
Michael Yost:Right.
Randi Rose:Right. So those are like some of those key pieces On the P&L. I don't want to just see sales, I want to see how much of your sales is service, how much of it is retail. If you are getting more nuanced and you are seeing, you know, maybe you have a spa, maybe you have. You want to see the breakout of your hair, your nails and your spa. Okay, great, but at the bare minimum we should be able to see here's my service revenue, here's my retail revenue and see the difference between the two. Because understanding your retail to service whether you are team-based pay or you are hourly or you are commission, either way you need to know because that's going to tell you your strategy on what needs to be adjusted and how you need to tackle it. And then cost of goods.
Randi Rose:So, I can't tell you how many books I look at that someone's profit and loss goes right from income to expenses and there's no cost of service or cost of labor. And the reality is is that's the direct cause? That's the piece that's going to be able to tell you am I priced accurately? Because that's the cost of you providing that service or that product, not your rent. Your rent is something that you need to know about, don't get me wrong. It's its own metric. However, if you don't have cogs on your books, you should be asking some questions why not?
Michael Yost:Gotcha.
Randi Rose:Those are like the biggest. Then the last one to that is from a compensation perspective. You've got your income producing people and then you've got your non-income producing people or your administrative. Are those broken out? It is important overall for you to know the number, but it's also important for you to know the difference between the two, because that goes back into is your compensation accurate?
Michael Yost:This is great stuff, randy, that you're sharing, and I've got a list of questions that are much longer than the ones I even got a chance to get to, so I have to do this again. But for anyone that's looking to connect with you and get more information on Thrive itself, where do they find you?
Randi Rose:They can find us on the website. So we have a website. Do you want me to spell it out? Absolutely, dot thrive. T-h-r-i-v-e business B-U-S-I-N-E-S-S services, s-e-r-v-i-c-e-s dot net. All right, awesome Not a dot com You're not going to find us.
Michael Yost:There you go, it's a dot net.
Randi Rose:Dot net and if you forward slash and hit salon, you'll actually go. We're in the process of redoing the website, so if you look at the main page, you're going to be like I thought you said you work with salons. So if you go to the forward slash salon, you'll get. Here are some of the people we work with. Here are the results we've produced. Here's how to reach out to us and here are some questions specifically for that. Um, my telephone number, the business number, is 619-688-9248. I'm extension zero. So if you just hit zero you'll go to me and then I'll be able to just respond to you and then the best, the next best way, honestly, is via email. Um, and my name's Randy Rose. My email is randi R-A-N-D-I at thrivebusinessservicesnet.
Michael Yost:Perfect.
Randi Rose:So those are the ways to reach out to us.
Michael Yost:Awesome and, again, we'll make sure that we put those in the descriptor and get all that information for anyone that's looking for it. So, randy, I just want to say thank you so much for hanging out with us today. Thanks for the great information. I love some of the tips. Again, what should people be looking for? I love the fact that you gave us some things that we should be aware of, that we do and don't want to see when we're looking at our own financial statements. And again, just in general, how a bookkeeper can be an extension and an addition in a positive way, to the health of your business. So thank you so much.
Randi Rose:Yeah, you're very welcome. By the way, I forgot to mention we do have an Insta.
Michael Yost:Perfect, everyone loves Insta.
Randi Rose:After, for you know we'll put that on the the your descriptor. Yeah, so you know we do have an Insta, we do have a LinkedIn, we do have a Facebook, so I'll give you all of those. Listen, we thank you for the opportunity. We love what you guys are up to. We love the commitment that you have to business owners really being successful. I think that you guys are phenomenal. The majority of the clients we interacted with during COVID I don't know of any strategies client that I work with that went out of business. They were all so prepared and so connected to their financials that it was just not that it wasn't extraordinarily painful, because it was, but they were prepared to be able to pivot and really that's hats off to you guys.
Michael Yost:Well, thank you for that. We really appreciate those words and it means a lot because, again, at the core, that's what we're about, and I know that's what you're about is building healthy, strong, again flourishing companies. So, thank you for those words we appreciate it.
Randi Rose:You're very welcome. I look forward to doing this anytime with you and I can't wait to see you in October.
Michael Yost:I will see you in October. Thanks, Randy have a great day.
Randi Rose:Bye, bye, thanks.
Michael Yost:All right, and thank you to everyone that tuned in. We appreciate all of you and we will see you at our next podcast. Thanks.