Sometimes we just tend to overcomplicate things. Salon owners often reach out to me and ask what they should do about accounting and record-keeping when opening an additional location. They ask me, “Should I open a second checking account? What about my accounting software? How do I keep track of multiple locations?”
You can go two different directions. The first option is that you can keep everything separate. This means separate entities, separate tax ids, which also means separate tax returns, and lastly two separate sets of books for bookkeeping, etc.. This can be an attractive option if you are planning on selling off a location down the road. This is rare, and in most cases, selling off a location never happens so I rarely recommend this option.
The other option is the simpler (and cheaper) route to go. This option suggests keeping all locations under the same entity, which means under the same tax id. This means only having one operating account for all deposits and payroll. It’s a good idea to also have one or two savings accounts (see my post on Profit First).
I also recommend having one credit card for each location. A word of caution, only use the credit cards as charge cards. Pay those balances off at the end of the month! A dedicated credit card for each location is an easy way to track operating expenses for each location when making purchases on the go or when setting recurring charges for subscriptions, etc..
Aside from that, your point of sale software will provide you all the statistics you would ever need by location. Your accounting software should allow you to categorize sales entries, expense entries, asset activity and liability activity by location or class. When entering transactions, you can simply choose the location under which the transaction should be categorized. Combine this functionality with your dedicated credit cards for each location and presto, you have a fail-proof formula for knowing which location to assign your expenses.
With these simple systems in place, now you can run your financial reports by location or in a consolidated format which combines all locations for one big company report. That’s it! It’s really that simple.
Up Next: Part 5 – Amp Up Your Communication Channels
