Career Start Report – Page 23

Finance & Bookkeeping

Tax authorities such as the Internal Revenue Service expect that you are in business to make a profit. It may be that your business incurs an operational loss, especially in the first year or two when starting a new business. Your records are evidence of either a profit or loss and the basis for filing tax returns.

Small business owners are required to keep detailed records of all business deposits and expenditures, evidenced by business-related checking, savings, and credit card statements. Also, cash expenditures for the business must be maintained in records with receipts. Tax authorities expect business owners to adhere to “generally accepted accounting principles” by creating monthly, quarterly, and annual financial statements. These statements and backups support the figures for tax returns for your business tax return and sometimes your personal tax return when you operate as a sole proprietor.

Every grooming business owner can readily maintain client records manually using business forms or automated pet grooming business software. has great leads for both. We even designed a complete manual record-keeping system with detailed instructions and presented it to you in our business book, From Problems to Profits: The Madson Management System. However, we encourage grooming business owners to automate with software for groomers.

We suggest you hire a bookkeeper to review your records on a monthly basis. Generally, they will require your business checking and credit card statements and receipts for cash disbursements. You must copy them with all sales receipts for services and retail sold to tally your total sales income. The bookkeeper then fulfills the tougher task of placing your figures into orders that meet “generally accepted accounting principles” expected by tax authorities.

Don’t forget that any cash you take from the business for personal use is taxable income, and you must pay estimated taxes on those “draws” on a quarterly basis; you never wait till the end of the tax year! Groomers make serious mistakes handling personal draws from their businesses. Estimated taxes on those draws and the overall net operating income are major stumbling blocks for confused small business owners. There are costly penalties and interest associated with not filing estimated taxes properly or on time when a balance is due.

If you hire the services of a bookkeeper for just one reason alone, it should be to maintain compliance with estimated taxes and payroll taxes if you hire employees. If you have employees, even one, additional tax reports for local, state, and federal governments must be adhered to perfectly to avoid severe repercussions. Remember, when you are handling government monies you withhold from employee paychecks, they have little patience with mistakes. Use the services of a bookkeeper for payroll, and do what you best groom. You may have to groom as few as three pets monthly to pay for your bookkeeper. It is money wisely spent. You can sleep well at night knowing you have no compliance problems.

One of the best introductions to finance is our chapter dedicated to it in From Problems to Profits in Pet Grooming, along with record-keeping forms. The manual system is easily learned and gives you tremendous information on a daily basis that you can study not as a pet groomer but as an owner/manager. If you follow the manual system and turnover the paperwork and records complete as we suggest, your bookkeeper can more readily prepare your monthly financial statements. Just as your time is money, so is that of a bookkeeper. If your books take less time, the savings should be yours.

Your local Chamber of Commerce, Small Business Administration, SCORE, or Small Business Development Centers may offer classes specifically for new business owners. These classes introduce small business owners to record-keeping and tax requirements. It’s also a great way to learn how to read financial statements. If you have worked in management before, you are probably aware that administration and management review financial records every month and look for what is working and what is not. It’s no different for pet grooming business owners; it’s a matter of scale. We highly recommend you attend one.

Legal & Insurance

Pet grooming business owners occasionally need the services of an attorney. For example, before we signed a lease, we went to our attorney with the unsigned lease in hand and asked, ‘What’s wrong with this lease?” Not one lease was ever signed without prior adjustments, which also balanced the deal in our favor. Also, we had our business forms reviewed, especially those related to hiring employees. Regardless, every business owner can benefit from an established working relationship with an attorney for that unexpected incident, even those that are not so serious.

Insurance is important for groomers. Your inventory may be some retail goods, but so are the pets you care for every day. In some states, the value of a pet is set, and if harm is done, you may only face paying veterinary bills or the unfortunate cost of replacement when a tragedy occurs. In other states, you can be sued for serious amounts of money compensating pet owners for pain and suffering as a result of caring for pets. Yes, pet groomers can be sued for professional liability. Perhaps you better understand the term “malpractice.” Too many groomers forget to secure professional liability coverage until too late. If you are a business owner and you are unsure if you have that specific coverage, you probably don’t. Some companies don’t even offer it to groomers.

There are other more common forms of liability. People can fall on your premises (even in and around your mobile grooming van), raising a potential liability problem. We know many cases when pet owners slipped on pet waste not cleaned by the groomers. Floods, storms, fires, and other Acts of God exist.

Insurance gives you peace of mind and protects your finances. You may want to consider “loss of income” insurance if you are a small business without employees. If you hurt yourself and cannot groom, how will you pay your bills unless you have significant savings? We’ve seen losses due to vehicle accidents involving mobile groomers and shop owners sidetracked by fires and earthquakes. Loss of income insurance provides you with a regular check for a specified amount when your business is disabled.

We’ve heard some sad stories on our GroomerTALK Message Board where groomers involved in accidents couldn’t groom and had no loss of income insurance. The hardships can be severe if they cannot fall back on loved ones for support or if they don’t have employees to replace them.

Be sure your policy covers lost pets, usually stated as “fleeing pets.” Most business owners have experienced the terror of a pet getting loose and executing an escape artist route outside. Hearts skip a beat, and panic sets in. If the business is on a busy street, you may hear brakes squeal, and your heart falters. Some groomers have driven or walked blocks, even miles searching for escaped pets. It’s a terrible experience. Can you imagine telling the pet owner that their pet is gone? We have floor plan designs with preventative measures, but you should still carry fleeing pets insurance.

Most career seekers don’t understand the difference between insurance brokers and insurance agents. The agent represents the insurance company that employs them. The broker represents multiple insurance companies and searches for the best coverage for you.

Many insurance companies write basic business liability insurance, including vehicle coverage for mobile groomers or salons, or shops with pickup and delivery vehicles. Very few companies cover professional liability for groomers or fleeing pet coverage. Most policies we’ve seen for our grooming consultation clients didn’t have the coverage they expected.

Insurance prices vary drastically, even city to city in the same county. You may find a lower price, but do you really have equivalent coverage? Have you dropped some coverage in return for a lower price? If you are judging by price alone, you probably don’t have the coverage you need. It may seem boring to sit down and read the fine print of your policy, but if you are involved in a serious incident and find out you don’t really have the coverage you expected, you will wish you had.

Based on our studies of grooming consultation clients, we estimate at least 50% of pet grooming business owners are underinsured. The most common coverage absent was:

  • Loss of income if the owner cannot groom.
  • Fleeing pet.
  • Professional liability (“malpractice”)
  • Flood (where available)
  • Earthquake (where available)

Fortunately, has recommendations for you from companies with years of experience insuring groomers. Ask for quotes well ahead, as it may take time to work one up for you. Click here to check our Insurance section in the Classified Ads.

That’s it for your introduction to the self-employment requirements for groomers. You may find it overwhelming at first, especially when you consider that you are also trying to master your pet grooming skills and productivity. Perhaps you can better see why some graduates of grooming schools get more grooming experience before entering self-employment.

Next, we want to briefly expand your horizons with a short narration about what awaits you in the long term as part of the grooming industry. Where do you see yourself going 3, 5, to 10 years into your career? Good question. Let’s take a look at what others have done.

Occupational Safety & Health Administration (OSHA)

A well-designed and well-maintained grooming facility or mobile vehicle can be a safe place to work. However, it is not as simple as some new business owners may think. The origin of problems usually arises from these manageable aspects of a grooming operation:

  • Wet areas (bathing tubs and washers and dryers)
  • Noise (animal dryers, vacuums, clipper vacuums, barking)
  • Corded equipment and tools
  • Air quality and temperature (dryers with heat elements generate added heat)
  • Chemicals (grooming and cleaning supplies)
  • Pet waste
  • Potty-walk areas and sanitation

Your business may be visited and examined for compliance. There are more regulations and requirements. Be aware that grooming businesses often overlook OSHA requirements until too late. We suggest you study the OSHA resources of the International Society of Canine Cosmetologists. It doesn’t take that much time to become compliant.

It’s time to move on to give you some ideas of your future in grooming once you become a member and settle in more.

 Click on the next page of the Career Start Report.