Dear Dangerously in Love with Finance,
I am the owner of a day spa, located in Boise Idaho, that is a hub of activity, with lots of bodywork and massage services. My passion is really helping my clients relax and rejuvenate, but when it comes to understanding the financial side of my business, I feel like I’m adrift at sea. In particular, the profit and loss statement feels like a foreign language, one that I will never grasp. I get that this is crucial to the survival of my day spa, but I don’t know what I am looking at and what it is really doing. How often should I be going over this? How does this financial report help my day spa? Would you be able to assist me in understanding this critical financial document?
With much gratitude,
Lost in the numbers of my day spa
Dear Lost in Numbers,
Firstly, allow me to congratulate you on showing concern for the day spa finances. Obviously, you have a heart for your work, and that is a beautiful base for any business.
Let’s turn our eyes to the profit and loss (P&L) statement, which is an extremely important piece of accounting and bookkeeping for a day spa.
An income statement—the P&L statement—would mean just the same to a health report for your day spa. It outlines your revenues, costs, and expenses over a certain period: usually monthly, quarterly, or annually.
“Revenues” is the total incoming money of your spa through services, while “profit” represents what is left when you deduct all costs and expenses from revenues.
Think of it as a snapshot of the financial performance of your spa. This statement gives you a snapshot of whether your business is profitable or losing money and is the critical piece in informed decision-making.
By reviewing your P&L on a regular basis, hopefully monthly, you will easily find out what services your money is coming from and where it is going. For instance, you might find that although the most money comes from massage services, the highest profit margin may be in acupuncture sessions. This understanding can drive you to better adjust your services or pricing strategies to yield higher profitability.
Now let’s assume that you have seen from the P&L statement that costs for your massage oils and linens are way above budgeted costs. This can now drive you to go for less costly vendors and better inventory control.
Reviewing the P&L on a regular basis will give you an insight into your spa’s financial health, allowing you to identify trends, and control costs while making strategic decisions to grow your business.
For instance, if you find that your revenue from massage services is steadily on the rise, you may need to make the decision to increase the number of massage therapists. Another example: if you notice that the trend of your monthly utility bills is rising each month, you may need to make a call to the utility company to inquire about the increased charges.
Mastering the Profit and Loss statement is a journey, not a sprint. It will become a valuable tool in your entrepreneurial toolkit with time and practice. So, please review your financial statements monthly and ask questions about accounts and charges that you don’t understand.
If you need any assistance in accounting, bookkeeping and financial management of your day spa, please do not hesitate to reach out to us. As this is what we do…….
Big hugs,
Dangerously in Love with Your Finances.
P&L Statement Cheat Sheet for Day Spas
🌿 Revenues
- Description: Total incoming money from spa services (e.g., massages, facials, acupuncture).
- Importance: Shows where your money is coming from.
🌿 Costs & Expenses
- Description: All the money spent on running the spa (e.g., massage oils, linens, utilities, salaries).
- Importance: Helps identify areas where expenses are high and need control.
🌿 Profit
- Description: What’s left after deducting costs and expenses from revenues.
- Importance: Indicates whether your spa is making money or losing it.
🌿 Financial Performance Snapshot
- Description: The P&L statement provides an overview of financial health over a period (monthly, quarterly, annually).
- Importance: Critical for informed decision-making and understanding profitability trends.
🌿 Decision-Making
- Description: Use the P&L to adjust services, pricing, and vendor choices for better profitability.
- Importance: Helps in making strategic adjustments and identifying opportunities for growth.
🌿 Cost Control
- Description: Monitor and control costs like inventory and utilities by reviewing the P&L regularly.
- Importance: Prevents overspending and optimizes expenses.
🌿 Trends & Insights
- Description: Identify trends in revenue and costs to make proactive changes.
- Importance: Helps in planning and scaling the business.
🌿Continuous Learning
- Description: Mastering the P&L statement takes time; review it regularly and seek help if needed.
- Importance: A vital tool for growing and managing your spa effectively.
Sound Familiar?
Running a day spa can be challenging, especially when it comes to managing finances. We specialize in helping spa owners like you navigate the complexities of accounting and financial management. Our team can assist you in analyzing your P&L statements, optimizing expenses, and making informed decisions for your spa’s growth.
Don’t let financial uncertainty hold back your spa’s potential. Contact us today to discuss your unique needs and discover how we can support your financial success.
Contact Healthy Bodies of Finance today and take the first step towards a brighter financial future.
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This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax and accounting situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney or advisor regarding your particular facts and circumstances. Healthy Bodies of Finance is an accounting firm that specializes in working with health and wellness providers. We provide monthly accounting & bookkeeping services and financial education. For more information on our specialized services for health and wellness providers please contact us at [email protected]