As a business owner, it’s important to have a basic understanding of the all the wording used when taking about your finances. Having this insight, will help you make more informed and invaluable decisions in your business.
As a salon business owner, it’s important to have a basic understanding of key financial terms. This will help you make informed decisions about your business and track its progress over time.
Understanding financial terms is important for salon business owners for several reasons:
- It helps you make informed decisions about your business
- It helps you track your progress over time, identify trends and areas where you can improve
- It helps you communicate with others about your business
What we cover…
Here are some key financial terms to understand in your salon business:
Assets
This refers to anything that the owns, such as cash, inventory, and equipment.
Balance sheet:
A financial statement that shows a salon’s assets, liabilities, and equity at a specific point in time.
Cash flow:
The movement of money into and out of your salon over a period of time.
Equity:
The difference between a salon’s assets and liabilities. This represents the value of the salon that is owned by its shareholders or owners.
Gross profit margin:
Gross profit divided by revenue. This ratio measures how much profit a salon makes before subtracting its operating expenses.
Income statement:
A financial statement that shows a salon’s revenue, expenses, and profits over a period of time.
Liabilities:
These are the debts and obligations that a salon owes. These could be accounts payable and loans.
Net income:
Profit after taxes.
Net profit margin:
Net income divided by revenue. This ratio measures how much profit a salon makes after subtracting all of its expenses, including taxes.
Revenue:
The total amount of money that your salon brings in from services, products and sales.
Profit:
This is the key thing that every salon owner wants. This is how much money the business makes, after everything has been paid.
Statement of cash flows:
A financial statement that shows a salon’s cash inflows and outflows over a period of time.
You don’t need to be a maths wizard, accountant or a walking dictionary to use Insightful Sums. It has been built by salon owners, for salon owners, to make sure you operate a profitable salon.
