Over the last decade, medspas have emerged as a thriving industry that meets the evergrowing demand for aesthetic and cosmetic treatments. But behind these beauty-focused aesthetic practices, lies a complex financial landscape that is starting to become a topic of priority for independent owners – especially those planning an exit.
With the market shifting to more investors, business owners are finding themselves prompted for financial statements before they are ready to sell. Here are some basic dos and don’ts to get you headed in the right direction on your financial statements:
• Do Ensure that All Financial Data is Accurate. If your balance sheet is not up-to-date and reconciled, your profit and loss (P&L) statement may not be correct. Reconcile your financial statements regularly to identify discrepancies and errors.
• Don’t Wait Until Year End to Make Adjusting Entries and Reconcile Accounts. Ignoring important updates and not keeping accurate records can lead to fi nancial errors and legal issues.
• Do Keep Detailed Records. Maintaining detailed records of all transactions, including invoices, receipts and patient information can provide a clear picture of your business performance for prospective buyers.
• Don’t Mix Personal and Business Finances. Keeping separate bank accounts and credit cards for your medspa and your personal use can make it easier to get an accurate picture of your business cash flow, as well as take advantage of tax deductions and benefits come tax time.
• Do Provide Category Details. Providing details for your revenues and expenses by service line can help your businesses profi tability be calculated more clearly.
• Don’t Overspend. Regularly review and adjust your expenses to control costs and avoid getting into debt.
• Do Consult a Professional. A certified accountant or financial advisor who knows the specific financial issues of the healthcare and spa industry can help you prevent and avoid common errors and provide advice that may help your business succeed.
• Don’t Operate Without a Financial Strategy. Plan for the long term and set financial goals for your medspa, for example, budgeting for investments in new equipment and staff.
• Do Monitor Cash Flow Closely. Doing so helps ensure that you have suffi cient funds to cover operational expenses and expansion plans.
• Don’t Overlook Taxes. Do not forget to set aside funds for tax payments and stay updated on tax laws that affect your business.
• Do Budget. Develop a comprehensive budget to track and control expenses, including rent, supplies and payroll.
• Don’t Let Debt Accumulate. Manage loans and credit wisely. And, when you do have debt, create a clear repayment plan.
Remember that managing the financial aspect of your medspa is crucial for its success. Following these dos and don’ts can help you maintain a healthy financial foundation for your business.
Editor’s Note: The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen (CLA) LLP (CliftonLarsonAllen) to the reader. CLA is an independent network member of CLA Global. See CLAglobal.com/disclaimer.