Pulse May 2018 - Page 68

ASK THE EXPERT AMY MARTIN DUARTE, CPA P: Why should small business owners invest in an accountant? MD: There is a common conception that Certified Public Accountants can only prepare tax returns or perform audits, but there are so many other services CPAs excel at that are overlooked—from operations, management, budgeting, financing, accounting systems design and implementation, payroll, as well as marketing. CPAs typically have seen it all with a variety of businesses and can advise on a multitude of issues. Of course, it’s extremely important to speak with a CPA regarding tax status of your small business to make sure the best entity selection is made to maximize the owner’s goals. CONTINUED 4 Common Mistakes Small Business Spas Should Avoid S mall business spas also tend not to prepare yearly budgets. This is a necessity in any small business where profit margins are small. Small spas that don’t have a yearly “game plan” just fly by the seat of their pants and tend to not have a handle on various items. Here are a few mistakes I see small spas making that you should constantly be aware of: RETAIL INVENTORY Make sure you stock up on items that sell quickly, and don’t place big orders for items that are slow to turn, even if there’s a cost savings to bulk ordering. BACK BAR PROCESS Be sure to have a professional back bar process in place. Technicians may be using way too much in the back bar and effectively lowering profit margins. Enforce portion control and create incentives for department leads in this cost control area. GIFT CARDS Many spas do not account for gift cards correctly and have no idea of what their liability is in regards to these P: What affect will the new U.S. tax laws have on small business spas? MD: If a small business spa is a corporation, they should really sit down with their CPA to discuss future tax impli- cations. The corporate tax rate went from a tiered tax to a flat 21 percent, which has limited tax planning oppor- tunities. Depending on the spa’s net profit they could go from paying 15 percent to 21 percent. If a small business spa is an S-Corporation or Partnership, odds are the new law will be good for them as there is a 20 percent ordinary business income deduction that did not exist in the past for pass-thru entities. That means if the owner is actively working in the spa they can get a 20 percent write-off on the pass thru income they receive from the business. Hire and have good professionals working with you—attorneys, bankers, accountants and insurance brokers. These individuals will be the key to your long-term success. n 66 PULSE ■ May 2018 debts. RAISING PRICES Typically, small spas who aren’t making money raise their prices, but don’t analyze or change commission structure for employees. For example, a facial costs $100 and technician commission is 40 percent, that would leave $60 for professional supplies used for the facial and fixed and variable general and administrative expenses. Say professional product costs increase and the spa changes the facial cost to $125 but doesn’t change commission structure to a flat rate vs. flat percentage. The technician actually gets paid more and instead of $25 increase the spa expects, they only net a $15 increase. The technician gets a $10 raise per treatment as well as a tip base increase as clients will now tip in $125 vs. $100. The only person who really wins out is the technician. Be sure that’s the win you were going for before making these decisions.