Issue link: https://www.massageandbodyworkdigital.com/i/1191154
20 m a s s a g e & b o d y w o r k j a n u a r y / f e b r u a r y 2 0 2 0 • If you perform 10 massages this week, charge $90 each, and do not accept tips, your gross income is $900 for this week (10 x $90 = $900). • If you perform five massages this week, charge $80 each, and three clients tip you $10, your gross income is $430 for this week (5 x $80 = $400, plus 3 x $10 = $30, for a total of $400 + $30 = $430). Tips should be claimed and recorded as income. If you file a Schedule C, tips are considered gross income. You may choose to record them separately for your own tracking purposes, but they are still included on Line 1 of your Schedule C, "Gross receipts or sales." Now that you understand what gross income is, you'll begin to see why it's so important to record it properly. ACCEPTING MONEY There are a variety of methods to accept money into your business, and it's wise to consider how to make each work efficiently. This includes cash, checks, credit cards, and online transactions. As a business owner, you get to decide what types of payments you accept. Let's work through the ins and outs of the basics. Cash Cash is standard, but if you hate having to keep change on hand or going to the bank, you can certainly discourage clients from paying with cash and encourage other forms of payment. If you accept cash, you'll be well-served by a simple, repeatable process for handling and recording cash payments. What does that mean exactly? Probably something like this: Have an envelope of smaller bills to provide change if needed. Typically $50–$100 worth of $5 and $10 bills will work, depending on your volume and how frequently you get to the bank to make deposits or get more change. A transaction would look like this: • A client pays in cash. (You provide change when needed.) • You make a note of the transaction. (We'll cover this in a minute.) • You hold the cash in a specific place in your office. • You deposit all cash into your checking account regularly. Always, always, always deposit all cash into your bank account for two reasons. When you deposit all your cash, your bank statements become an accurate record of your gross income from services provided. You're going to keep track of gross income on your own too, but it's wise to have deposits be an accurate secondary record. Also, depositing every penny creates a clear separation between you and your business. Instead of pocketing cash to pay yourself (which can be easily forgotten and not properly recorded), you create a structured process for tracking your business's gross profits and how much you pay yourself, which we'll cover in upcoming columns. Gross income and take-home pay are two very separate transactions and should not be muddled. Remember, we're treating this business like a business, not a hobby or an experiment or a game. It's a business! Checks You can choose to accept personal checks as payment, or you can choose not to. A small, informal poll told me that bounced checks aren't a big problem for most of us, but if you've ever had to chase down payment on a returned check, you may have some negative feelings about accepting checks as payment. If your client base is made up of tourists or non-regular clients, or if you're a bigger business with multiple practitioners and high client numbers, it may be best to not accept checks. But if you are an individual, hyperlocal massage business, accepting checks can make sense. Most banks and credit unions have apps to easily manage remote deposit, so accepting checks doesn't need to mean more trips for deposits. Same as with cash, you'll need a simple, repeatable process for handling and recording check payments. A transaction would look like this: • A client pays with a check. • You make a note of the transaction. (We'll cover this in a minute.) • You hold the check in a specific place in your office. • You deposit all checks into your checking account regularly. Credit Cards Here in the 21st century, it's standard to accept credit card payments. Most debit cards also function the same as credit cards in regard to easy swiping and signing, and people are carrying less cash in their wallets. Accepting credit cards means you don't have to make a trip to the bank or deal with remotely depositing a check, and the money gets dumped right into your checking account automatically. Accepting credit