The recurring costs beauty pros forget to budget for
Insurance, license renewals, software, education, equipment and tax: how to find the recurring costs beauty pros forget and budget for them every month.
The costs that catch independent beauty pros out are rarely the big monthly ones. They are the bills that come round once a quarter or once a year: insurance, license renewals, software that renews annually, education, equipment that wears out, and the tax nobody withholds for you. Write every one of them down with how often it is due, turn each into a monthly amount, and set that amount aside every month so the bill is already covered when it arrives.
Why do recurring costs catch beauty pros out?
#Because a monthly budget only shows the bills that arrive monthly. Rent, product orders and your phone are easy to remember because you pay them often. A yearly insurance renewal or a license fee arrives once, when you have not thought about it for eleven months, and it has to come out of whatever that month happened to bring in.
The trouble is not that these costs are large. It is that they are irregular. A month with three annual renewals in it can look like a bad month when the business is doing fine, and a quiet month with none of them can look better than it is. Until every recurring cost is in view, your monthly profit is a guess.
Which recurring costs do beauty pros most often forget?
#Most of them fall into a handful of groups. Not all of them apply to everyone, and what each one costs depends on where you live and how you work, so treat this as a checklist rather than a price list.
| Cost | How often it usually comes round | Why it gets forgotten |
|---|---|---|
| Professional and liability insurance | Yearly, sometimes monthly | Paid once, then out of sight |
| License and registration renewals | Yearly or every few years | Long gaps between payments |
| Required training to keep a license | Yearly or every few years | Often booked late, in a rush |
| Software subscriptions (payments, bookings, bookkeeping, design) | Monthly or yearly | Small on their own, many in total |
| Card processing fees | Every card payment | Taken before the money reaches you |
| Education and courses | A few times a year | Feels optional, so it is left out of budgets |
| Equipment replacement (lamp, bed, chair, dryer) | Every few years | Nothing to pay until it breaks |
| Laundry, cleaning and sanitizing supplies | Weekly or monthly | Counted as products, or not counted at all |
| Website, domain and email | Yearly | Auto-renews on a card nobody checks |
| Accountant or bookkeeping fees | Yearly, at tax time | Arrives when cash is already tight |
| Your own tax | Quarterly or yearly, depending on where you live | Nobody withholds it from what clients pay |
The last row is the biggest one for most self-employed pros, and the one with the hardest deadline. If you do not set money aside for it yet, how much to set aside for taxes explains how to work out your own percentage.
How do you find the recurring costs you are missing?
#Go through your last twelve months of bank and card statements, not just the last one. A one-month view misses everything that renews quarterly or yearly, which is exactly the group you are looking for.
- Export or open twelve months of statements for every account and card the business uses.
- Mark every payment that appears more than once, or that you know will come round again: same payee, similar amount.
- Write each one down with its amount and how often it is due: weekly, monthly, quarterly, yearly or every few years.
- Add the costs that have not appeared yet but will: a license renewal due every two years, equipment you know is ageing, a course you plan to take.
- Check for subscriptions you no longer use. A software plan you signed up for and stopped using is a recurring cost too, and the easiest one to cut.
This takes an evening once. After that, keeping the list up to date takes a minute each time a new bill appears.
How do you budget for costs that are not monthly?
#Turn each one into a monthly amount, add them up, and treat the total as a fixed monthly cost of the business, the same as rent.
Monthly amount = the cost ÷ the number of months between payments
A yearly cost is divided by twelve, a quarterly cost by three, and a cost due every two years by twenty-four. For costs that arrive every week, multiply by 52 and divide by 12.
These numbers are illustrative; use your own.
| Cost | Amount | How often | Monthly amount |
|---|---|---|---|
| Liability insurance | $360 | Yearly | $30 |
| License renewal | $120 | Every 2 years | $5 |
| Booking and payments software | $90 | Quarterly | $30 |
| Education | $600 | Yearly | $50 |
| New lamp and bed, expected to last 4 years | $960 | Every 4 years | $20 |
| Website and domain | $180 | Yearly | $15 |
| Total | $150 |
In this example, $150 a month is the real cost of bills that look, month to month, like nothing at all. Leave it out and every month's profit looks $150 better than it is, until the month several of those bills arrive at once.
Where should you keep the money for recurring costs?
#In a separate account, set aside every month. Some people call it a sinking fund: money you put away regularly for a cost you know is coming, so that when the bill arrives, the money is already there.
- Move the monthly total on the same day each month, ideally the day after you pay yourself or the day your largest client payments land.
- Keep it apart from your everyday account. Money left alongside your spending money tends to get spent, especially in a quiet month.
- Keep tax separate from everything else. Tax has a fixed deadline and is usually the largest amount, so it is clearer in its own account than mixed into the fund for renewals and equipment.
- Pay the bill from the fund when it arrives, then carry on putting the same monthly amount aside.
Once a year, compare what the fund paid out with what you put in, and adjust the monthly amount if a cost has gone up or a new one has appeared.
How do recurring costs change your prices?
#They are part of what every service costs you. If your prices only cover products, rent and your time, the yearly bills are being paid out of your profit, and your profit is smaller than it looks.
Add the monthly total from your list to your fixed costs before you work out the overhead share of each service. How to price beauty services shows the full method, and booth rent vs commission uses the same fixed costs to find a break-even point.
How do you keep track of recurring costs month to month?
#Record each recurring cost once, with its amount and how often it is due, and let the next payment date move forward each time you pay it. Then the only thing you need to check each week is what is due next and whether anything is late.
iBeauty keeps recurring costs separate from one-off expenses. Each one has its own frequency (weekly, every two weeks, monthly, quarterly, yearly or every set number of days), its next payment date, and a reminder when it is overdue. Wallets keep the money you set aside, for tax, savings or upcoming bills, visible next to the month's net profit.
Key takeaways
#- The costs that catch beauty pros out are the irregular ones: yearly insurance, license renewals, software, education, equipment and tax.
- Go through twelve months of statements, not one, to find them.
- Monthly amount = the cost ÷ the number of months between payments. Add the total to your fixed costs.
- Set that amount aside every month in a separate account, and keep tax in its own.
- Include recurring costs in your prices, or they are paid out of your profit.
Frequently asked questions
#What recurring costs do independent beauty professionals forget?
#The ones that do not arrive every month: professional and liability insurance, license and registration renewals, required training, software subscriptions, education, equipment replacement, website and domain renewals, accountant fees, card processing fees and the tax that nobody withholds from what clients pay.
How do I budget for yearly business expenses?
#Divide each yearly cost by twelve and treat the result as a monthly fixed cost, the same as rent. For a cost due every two years, divide by twenty-four; for a quarterly cost, divide by three. Set the monthly total aside every month so the money is there when the bill arrives.
What is a sinking fund for a beauty business?
#A sinking fund is money you set aside regularly for a cost you know is coming, such as an insurance renewal or new equipment. You put the same amount into a separate account every month and pay the bill from it when it arrives, so it never has to come out of a single month's income.
How do I find all my recurring business costs?
#Go through the last twelve months of statements for every account and card the business uses, and list every payment that repeats, with its amount and how often it is due. Then add the costs you know are coming but have not appeared yet, such as a license renewal or equipment that is ageing.
Should recurring costs be included in my service prices?
#Yes. Recurring costs are part of what it costs to run the business, so they belong in your fixed costs when you work out how much overhead each service has to cover. If your prices leave them out, they are paid out of your profit instead.
iBeauty is an app for independent beauty professionals that records every visit, client, service and cost, keeps recurring bills and reserves in view, and shows the profit left at the end of the month. The first month is free.