Continue comparing each Cost of Goods Account to the previous month. That is, even if the dollar amount is significantly different. The percentage of Service Commission to Service Sales should be similar when comparing month-to-month. When comparing Service Commission COGS, keep in mind that the more you do in Service Sales, the higher your Cost of Goodswill be for Service Commission. This is where an intuitive software like Phorest Salon Software is invaluable for inventory reports! You can run one and know what products are moving and what products need some promo love in just seconds! Still With Me? After all, they want you to move your products too! Or, run a Promo for the month to push your slow-moving products. Or did you actually over order? If you over ordered, reach out to your vendor who should be happy to swap out items for your top sellers.Maybe the wholesale cost was entered wrong?.Did you place a retail order towards the end of the month? If so, you won’t see the return on that purchase until the following month.If you find that the percentages are not similar, investigate. If you sold $3000 and you purchased $1500 in inventory, the percentage of your purchases are still 50% of the retail sales. In the previous month, you should see that your inventory purchases were a similar percentage of your retail sales. Your retail inventory purchased was 50% of the retail sales. This figure is based on your sales.Įxample | You sold for $5000 and purchased for $2500 in retail inventory in the current month. Now that you have the basics, compare the current month to the previous month. This is the amount after all the expenses are deducted which shows if the salon earned or lost during a specific period. Each line is subtracted from the income for things like payroll, marketing, operating expenses, and management fees until you reach the bottom step, Bottom Line, also known as the Net Profit. This will give you your Gross Profit which is the total money left after the Cost of Goods are subtracted. ![]() Each line is a deduction from the income for retail purchases, back bar purchases, commissions paid, and merchant fees. Then, you step down to Cost of Goods Sold. At the top, you see the total amount of s ervice/retail sales and rental income made during a specific period. To understand how to read a Profit and Loss Report, think of it as a ladder. Here is an example of a salon specific P&L Report: How To Read A P&L Report From here, you can formulate a plan to increase your bottom line by cutting costs and finding areas for growth. This will allow you to determine if the percentage of income per item is in line with industry standards and whether your salon is operating at a profit or a loss. To get the most out of your Profit & Loss Report, use salon specific categories for your income & expense accounts. The P&L report tells you how much money you both made and spent during a specific period. Fill in the form below to download Back Office Nerd’s salon specific P&L statement template (free)! The Profit & Loss Report Tells A Story If the P&L Report had been thoroughly reviewed every month, the owner would have quickly discovered these unjustifiable spendings. This would often result in paying rush fees and other unnecessary expenses to meet arbitrary deadlines. ![]() It was only when I began reviewing the profit & loss report with the owner that it became clear that a previous manager must’ve been overwhelmed and completed requests as quickly as possible without researching costs. ![]() Without pointing fingers at anyone, I once started working with a salon who genuinely didn’t know that they were spending close to $5,000 on printed Holiday Cards. When it comes to their salon’s finances, most salon owners are in the dark.
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