Common bookkeeping challenges for med spas

First, what bookkeeping covers and what it doesn’t

Bookkeeping for a med spa deals with the business's financial records: sales, deposits, expenses, payroll costs, liabilities and reports. It is separate from medical billing, insurance claims and patient records. A bookkeeper should not need access to clinical charts or treatment notes, and shouldn't ask for them.

Where the two meet, keep the connection at the level of totals. The bookkeeper needs to know how much was sold and collected each day and by which method, not who received which treatment. If your practice bills insurance for any services, that process and its rules belong with a medical billing specialist. Questions about regulation, ownership structure or patient privacy obligations belong with a healthcare attorney.

Packages, memberships and gift cards are liabilities first

When a client pays in advance for services they haven't received yet, the business owes them those services. In accounting terms, that prepayment is a liability, often called deferred or unearned revenue, until the treatment is delivered.

For example, if a package of six treatments is sold for $1,200, that is $200 per treatment. On the day of sale the books would show $1,200 more cash and a $1,200 liability. Each time the client comes in, $200 moves from the liability to revenue. After three visits, $600 has been earned and $600 is still owed.

Memberships and gift cards follow the same logic. Monthly memberships that include a set treatment or credit create a liability for unused credits. Gift cards are a liability until redeemed. If all of this is booked as revenue on the day of sale, a busy promotion month looks highly profitable and the months that follow, when the treatments are actually delivered, look weak. How unused balances and expired cards are treated can raise legal and tax questions, so confirm the approach with your CPA or attorney.

Product and supply costs

Injectables, skincare products, consumables and retail stock are often among a med spa's biggest costs. They behave differently in the books depending on how they are used.

Tracking product cost per treatment is where this pays off. If a treatment priced at $600 uses product that costs $210, plus a provider commission, the margin is much thinner than the menu price suggests. Knowing those numbers by service helps when you set promotions or decide which treatments to feature.

• Product used in treatments is a direct cost of delivering services and belongs in cost of goods sold.
• Retail products sold to clients are inventory until sold, then become cost of goods sold.
• General supplies such as linens or cleaning products are usually operating expenses.
• Regular stock counts help catch shrinkage, expired product and mismatches between purchases and usage.

Provider compensation

Providers are often paid through a mix of hourly wages, salary, commission on services or retail, and bonuses. Commission plans can be tiered or based on net revenue after product costs. Each structure needs a clear calculation the bookkeeper can tie back to the sales records.

Suppose a provider earns 30% commission on net service revenue. If they performed $15,000 of services in a month, but $3,000 of that was redemption of packages sold months earlier, you need to decide whether commission is based on when the package was sold or when the treatment was delivered. Either can work. The point is to write the policy down and apply it consistently, so payroll inputs and the P&L agree.

Whether a provider should be treated as an employee or an independent contractor is a legal and tax question with real consequences. Ask an employment attorney or your CPA, not your bookkeeper.

Processor payouts rarely match daily sales

Card processors deposit money net of fees, refunds and chargebacks, and often a day or more after the sale. Multiple processors, financing providers and booking platforms each make their own deposits on their own schedules.

Imagine a day with $10,000 of card sales. The deposit two days later might be $9,650, because $280 of processing fees and a $70 refund were taken out first. If the bookkeeper records $9,650 as revenue, sales are understated by $350 and the fees disappear from the expense lines. The right approach records $10,000 of gross sales, $280 of fees and a $70 refund, then matches the net deposit to the bank. Doing this every day by hand is tedious, so a daily sales summary from your point-of-sale system is worth setting up early.

Running more than one location

Once a second location opens, owners usually want to know how each one is performing on its own. That means tagging revenue and direct costs by location consistently, and agreeing on how to split shared costs such as marketing, management salaries and software.

Some groups set each location up as a separate legal entity, which brings intercompany transactions and consolidated reporting. Entity structure is a decision for your attorney and CPA; the bookkeeping should follow whatever structure they recommend. Sumday’s med spa page explains how our bookkeeping applies to practices like these.