Carter Cook, CPAs

Feeling overwhelmed or unsure about managing your beauty business finances? I have the perfect thing for you. I’ve teamed up with to create a Financial Empowerment workshop just for Beauty Pros. Best part is it’s free!

Unlock 🔑 your full potential 🎉 and exceed your financial goals 💸 with Beauty Business CPA Michelle Cook and GlossGenius’ Head of Payments, Raj Siyasena! Come for best practices, stay for retirement planning, healthy financial habits, tips for navigating tax season, and easy ways to maximize your savings 💰🏫 Registration link in bio!

Disclaimer:
Please note that the advice provided during the event is of a general nature and should not be considered personalized financial advice. Attendees are responsible for their own financial choices and should consult with a professional financial advisor for personalized guidance.

As an independent hair stylist this question may have come across your mind. It’s definitely something to think about, because hair extensions are a product, but yet, you as the stylist apply them as a service.

So…. Are hair extensions considered retail or a service?⁠

✨ Answer: A bit of both. ⁠

⁠Sales tax around hair extensions is widely misunderstood. Part of that is because each state has different rules about sales tax, but in general, here's how most states treat hair extensions.⁠

⁠First let's talk sales tax in general: ⁠

The final user of a product is who pays sales tax. ⁠

Example: When you use shampoo for back bar, you pay sales tax. If you sell that same shampoo to the client for use at home, the client pays sales tax. Repeat 👏 after 👏 me 👏: The final user pays the sales tax.⁠

✨ In the case of hair extensions, the client will always be the final user. ⁠

✨ When a client only buys the hair, it's a straightforward transaction. You charge sales tax on the full price.⁠

🙋‍♀️ But what about when the hair is sold as a package with the install service?⁠

👉️ In most states, the hair is still taxable, but the service is not (make sure to check the rules in your state). That means you'll need to allocate an amount of the install as the purchase price for the hair and collect sales tax on it. ⁠

⁠Remember, regardless of whether or not you collected the sales tax from your client, your business still owes the tax. It's important for you to ensure you're collecting it from your clients so you aren't on the hook. Hair extensions are expensive and the sales tax on that can add up fast.⁠

Are hair extensions a service your beauty business offers? Do you usually offer them as a package or a la carte purchase? Let me know in the comments!

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I'm not talking about taxes here and what's tax deductible. I mean, have you ever had a dilemma where you weren’t sure if a purchase would be a wise decision for your business or not?

⁠The decision process is different than with personal expenses and it can be easy for a new business owner to use that same process in their business.⁠

⁠But the process is really quite simple. Ask yourself: ⁠

✨ Will this purchase allow me to make more money than I would otherwise make?⁠

⁠That means, will the purchase allow you to work faster, attract and retain your ideal clientele, keep yourself in better health so you can have a longer career, or charge a higher price? ⁠

✨ If you can't answer yes to these questions, then you might want to reconsider if it really makes sense to make the purchase. ⁠
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Business expenses should all be investments that you hold accountable to give you a return. ⁠

Any purchases you're currently on the fence about? Let me know in the comments!

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Any beauty pros out there who use QuickBooks and utilize the bank feeds feature?

✨ Personally, bank feeds is my favorite feature. It automatically downloads your bank transactions to save you TONS of time doing data entry. ⁠

📣 Buuut...this feature has a tendency to stop working occasionally, often because of security features at the bank.⁠
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Some banks are worse than others, but I can guarantee at some point you will need to reconnect your bank account to QBs.⁠

⁠Usually it's no big deal. ⁠

✨ Login to your account.
✨ Go to the banking section.
✨ Click the "reconnect account" button,
✨ Enter your login credentials and make sure you choose the correct bank account in your chart of accounts to reconnect it to

⁠Sometimes it is a big deal.⁠

⁠When you reconnect your account, most banks will only download the last 90 days of transactions. So, if you've been neglecting your bookkeeping for a few months 🙋‍♀️, not all of the transactions are going to automatically download.⁠

⁠That means you have to manually import all the missing transactions. ⁠
⁠Have you ever had a QuickBooks bank account disconnect? Did you catch it in time?⁠

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You're booked out for months and it feels like some extra help would majorly impact your stress levels. Are you ready to bring on an assistant or another stylist? ⁠

⁠My first question: Can you afford that help? ⁠

⁠Once you hire an employee, you become second in your business. Employees are a heavy responsibility and if there's a cash flow issue, guess who gets paid last? Yup, you. ⁠

⁠That's why hiring too soon without the client demand to support the employee can quickly kill your business. ⁠

✨ So what do you do when you have an extra $30k or $50k in revenue and you're sinking trying to keep up with everything? Try hiring on a part-time basis. This can give you the relief you need without cash strapping your business. ⁠

✨ If hiring an employee scares you, consider raising your prices instead. You'll naturally cut down on the number of people you serve while still making more. And then when you are ready to make that hire, you'll ensure you've priced in an appropriate profit.⁠

Where are you in your beauty business journey? Are you looking to take on a new employee or re-work your service prices? Let me know in the comments!

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Have you ever applied your makeup without a mirror? Sure, you might have gotten it done well enough. But we all know that if you want a stunning result, you need to be able to see what you’re doing.

In other words, make-up application is way better with a mirror! Just like running a business is WAY better when you know your numbers. And that’s where the profit and loss report comes in. Understanding your profit and loss is the difference between having a successful business and barely making it. ⁠

You work hard. You're tired. It feeeels like you should be making money, but if you're not watching your profit and loss, you might be losing money. ⁠

⁠That's the crazy thing about money. It's like water. If you don't direct the flow, it goes through the path of least resistance. Buying every upsell, clicking on every ad, investing in every opportunity that looks enticing, but not holding yourself accountable to follow through. ⁠

⁠Business decisions have to be made based on facts and those come from your profit & loss. Here are some things your profit & loss can tell you.⁠

✨ How much to pay yourself⁠

✨ How much profit you're making. If you're independent and making less than a 50% profit, you need to make changes. 20% for a commission or booth rental salon.⁠

✨ Are you actually making money from selling retail?⁠

⁠This is why you need to do your bookkeeping more than once a year at tax time and categorize all your transactions so QuickBooks can create a Profit & Loss report for you. Not only does my Beauty Bookkeeping course go through QuickBooks set up, specifically for Beauty Businesses, but it also covers, entering your transactions, using the mobile app, AND understanding how to pay yourself.

Link in my bio!

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Can you recall a time when a client has reached out past, let's say…8pm? How did you feel?

Contrary to popular opinion……I think clients should be able to call/text whenever is convenient for them! Before I get blasted, let's talk.

You're a new stylist, have a few clients and a tiny income so you decide to use your personal phone for business.

You start to grow and have 100-200 clients with your number and spending all your free time navigating calls, messages, & DMs. It's A LOT and the first reaction is to feel resentful. Do they not realize this is my off time? I'm trying to eat dinner/be with family/binge watch trash TV.

From the client's perspective, they're working all day and the service you provide them is a luxury. It's convenient for them to reach out in the evenings & weekends. It's in your best interest to let them call/text right when something is on their mind.

How do you offer the kind of customer service your clients need without getting burned out?

It's certainly not by seeing the text and ignoring it until the next business day. It's hard to see a message from a client and NOT think about it, even if you don't answer immediately. We're not programmed that way, unless you're a sociopath, of course. 🤣

✨ The answer is simple. Get a separate phone for business and put it away when you're not working. Set up auto reply for text messages that informs clients you received the message and will respond during your office hours. Boom, they're comforted knowing you got their message and when they can expect to hear back.

Cell phones aren't too pricey in the grand scheme of things. You might pay $700 for the phone upfront, but it should last AT LEAST 3 years or more. From there, it's $50/month for a basic plan.

✨ It's good to prioritize mental health & that starts with being willing to purchase resources that help!

I used to have one phone for everything and eventually found that I couldn't turn my brain off. If you can relate, it's time to make a change too. It's better for you & your clients.

Bonus points if you use online booking & eliminate tons of back & forth texting!

What’s your experience with responding to clients? Tell me below!

If you are an independent beauty professional, you’re definitely in need of both a bookkeeper and an accountant for your business. You can’t just pick one because they provide two entirely different services!

Yes, bookkeepers and accountants fall under the same umbrella, but think of it like an esthetician and a dermatologist. They both are experts in the same field, but the focus and level of certification is different.⁠
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✨ Bookkeepers categorize your income and expenses, reconcile your bank accounts, and provide you with a profit and loss statement. That's about where it ends. ⁠
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✨ Accountants can do bookkeeping, but that's not where we spend most of our time. Accountants are more focused on tax returns, tax planning, and forecasting. Forecasting is basically our way of looking into a crystal ball 🔮and predicting the future. Except we use a spreadsheet instead of a crystal ball. 🤓⁠
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Every business needs to do bookkeeping and tax returns, even if you only have $1,000 in revenue. ⁠
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Forecasting becomes valuable when you have about $100,000 in revenue and a necessity once you have a full blown business with employees and business loans. ⁠

If your business is new, it's fun to look ahead and see what you might be doing in the future, but for now, it's perfectly fine to do your own bookkeeping depending on your business structure - while you're still building. ✨ That's why I created Beauty Bookkeeping so that new beautypreneurs could get the information they needed to stay compliant at an affordable price. ⁠
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Link in my Instagram bio () to sign up and DIY your bookkeeping! ⁠

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April 18th is finally here! The dreaded tax return deadline. If you haven’t yet filed, please file an extension by tonight so you don’t get penalized for Failure-To-File. If you file an extension you still have to pay by the original deadline to avoid a Failure-To-Pay penalty.

Here’s a breakdown of the two kinds of penalties the IRS can assess related to late returns and how you can avoid them 👇️

✨ ⁠Failure-To-File: This penalty is assessed if you do not file your tax return by the deadline or if you do not file a timely extension. The penalty is 5% of unpaid taxes for each month you are late, up to 25%. Ouch. This is why even if you don't have the money to pay the taxes, it's still so important to file the return. If you're not ready to file your taxes, make sure to file an extension by tonight so you don't get assessed this penalty.

✨ Failure-To-Pay: This penalty is assessed if you do not pay your taxes by the deadline. Even if you file an extension, you are still required to pay your taxes by today. The failure-to-pay penalty is ½ of 1 percent of your unpaid taxes. ⁠If you request an extension by today to file your individual income tax return and pay at least 90 percent of the taxes you owe, you can avoid the failure-to-pay penalty. BUT, you must pay any remaining balance by the extended due date (10/15).⁠ If you can't pay your taxes and you owe less than $50k, look into setting up an installment agreement so you can get straight. The form is called 9465 and you can do it online through the IRS' website.

If you would like to hear more information about what filing an extension entails, head to my podcast via the ➡️ link in my Instagram bio () to listen on Spotify or Apple!⁠

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If you’ve been following me a while as a beauty professional you probably know the difference between revenue vs profit. So if another stylist says they made 6 figures this year, be weary.

Personally this is a little pet peeve of mine.
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When people say, "I made 6 figures this year." ⁠🙄
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99% of the time they didn't. They sold $100k. Don't get me wrong. That's an amazing milestone for a business and something they should 100% be proud of. What bugs me is the word "made." ⁠
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If you didn't keep it, you didn't make it. The money you spend on your business is paying your vendors, not you. Making money means being able to spend it in your personal life - on yourself, your family, and causes you support. ⁠
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This is what nobody ever breaks down for stylists. If you want to make 6 figures - as in you get to actually keep that money and spend it on yourself/your family, your solo business needs to have revenue of $200,000. That's because the average profit margin for an independent in the beauty industry is 50%. ⁠

And if you’re a commission based salon, you’re looking at needing revenue of $500,000, assuming a 20% profit margin.
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If stylists could understand this one principle, it would change the whole industry. ⁠
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No more wondering how you could have possibly "made" so much and still have so little to show for it. ⁠
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No more freaking out about a massive tax bill because you had to dip into your tax savings to stay afloat.⁠
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No more pricing yourself too low.⁠
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No more discounts.⁠
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Knowledge changes everything. Here's to new goals for 2023!⁠
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Do you have any new business goals this year? Let me know in the comments! 👇️⁠

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Have you taken advantage of the new year and gotten a head start on setting up your books? That’s great to hear! But, just because you’ve started early doesn’t mean there isn’t potential for your QuickBooks to get messy...

If you want to avoid the mess, make sure you DON’T do any of these actions below 👇️ OR YOU WILL be pulling out your new and costly extensions..🫢

1) Use the Chart of Accounts QuickBooks set you up with. Ok, let me backup. What's a "Chart of Accounts"? The Chart of Accounts is all the categories you use when you categorize your income and expenses. This is the foundation of your bookkeeping and impacts your ability to pull meaningful reports. You need to customize your Chart of Accounts specific to the beauty business.

2) Upgrade from QuickBooks Self-Employed to a higher version of QuickBooks. I've said it many times before, QuickBooks Self-Employed isn't a great option for beauty professionals. It doesn't allow you to customize the Chart of Accounts (see no.1), among other things. BUT, if you try to upgrade your QBSE account to Simple Start, you are in for a huge headache. Instead, I recommend creating an entirely new QBs account and signing up for Simple Start through the new account. Since it hasn’t been too long since the new year, it's the perfect time to move over.

3) Never reconcile your accounts. Another big word - reconcile. This is a fancy way of saying, making sure every transaction is entered and nothing is duplicated. QuickBooks Online does a great job of automating this process, but most beauty professionals who do their own books aren't even aware of this step in the process. This is the only way to know that you've captured every expense and you're set to get the maximum tax deductions.

Beauty Bookkeeping, an e-course designed to teach independent beauty professionals, booth rental salons, and commission salons how to do their own bookkeeping, is available for purchase via the ➡️ link in my IG bio ()! If you want to get your bookkeeping in tip top shape, know how to pay yourself really well, compete with industry benchmarks, over save for taxes, and understand your numbers, you might want to consider it!

Have you ever considered Affiliate Marketing in your beauty business? It sounds awesome, but how does it impact your taxes? ⁠
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Actually, it's super simple. 👌

✨ If you earn more than $600 a year from a brand, they will send you a 1099. Make sure you give that 1099 to your tax accountant and you're set! If your business is an S-Corp, you probably won't get a 1099 so make sure your bookkeeping is 100% accurate.⁠
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✨ For bookkeeping, I recommend adding a new category to your Chart of Accounts called "Marketing Commissions," and when the money is deposited into your bank account, make sure it gets categorized to "Marketing Commissions" instead of "Services" or "Retail."⁠
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If you haven't considered affiliate marketing yet, now is the time. The number one reason why beauty professionals struggle to make money when selling retail is they stock product they can't sell (brands making you buy all the skus 🙄) or they buy too much at one time and can't turn it over fast enough. Turnover is the key to making money with retail. But affiliate marketing turns all this over on its head. No more worrying about turnover. No more worrying about having everything in stock. No more worrying about having to reinvest your profits into buying more stock.

Total. 👏 Game. 👏 Changer.⁠ 👏
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Have you tried affiliate marketing? What's your experience been?⁠ Let me know in the comments!

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Have you ever been stuck on certain details concerning your beauty business but you weren’t sure if it’s a question for your accountant or possibly worth reaching out to an attorney for?

Sometimes the line between accountant and attorney can seem hazy. Let me help break down what an accountant can help with vs. what you need an attorney for.⁠ 👇️
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Accountants can help you with:⁠
✨ Taxes (income, payroll, sales)⁠
✨ Bookkeeping⁠
✨ Consulting (entity selections, profit maximization, S-Corp election, expansion considerations, etc.)⁠
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Attorneys help you with:⁠
✨ Contracts & Agreements⁠
✨ Employment Law (can overlap with payroll)⁠
✨ Entity Selection (there might be legal reasons why you would choose an entity that does not give you the greatest tax advantage)⁠
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Bottom line: Both accountants and attorneys are important to running a successful business. ⁠

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How do you work/life balance as a self-employed beauty professional? I bet your answer is, “What is work/life balance, Michelle?”.

I get it, being your own boss and nurturing your business can sometimes mean around the clock maintenance. And, you know what? That’s okay, as long as you are happy with that arrangement.

I personally hate the term “work/life balance” because there’s really no such thing! My life is mine whether I’m working or not and I want to be happy no matter what I’m doing.

How do I manage? Well, my planner is more than work meetings and to-do lists.

✨ It’s goal reminders
✨ It’s vacations planned
✨ It’s making sure I’ve got things that will bring a smile to my kids’ faces.

For me, when things are planned, they happen. Business. Personal. It’s all important.

As long as you're happy, in control of schedule, and plan accordingly everything will work out.

So, how do you stay content while taking on all the responsibilities of running your own business? Let me know in the comments!

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Meet Katherine Reyes! She operates as the Marketing Coordinator here at Carter Cook, CPAs with a background in professional copywriting and digital marketing!

✨ Growing up in the suburbs of Chicago, Katherine found joy in all things birds, in fact, her first ever dream was to become an avian veterinarian! Turns out science was involved, and well, let’s just say that isn’t her specialty. Currently, Katherine also works as an actress, is married to her high school sweetheart having been together since 2012, and has a beautiful, blue fid (feathered kid) named Marty.

Read the rest of Katherine’s bio via our website! ➡️ Link in my IG bio ()!

https://www.cartercookcpas.com/about/

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