Tips look like the simplest thing in a salon. A happy client leaves a little extra and the stylist smiles. Then card tips arrive, the till is short at closing, a stylist asks where last week’s tips went, and nobody can say for sure.
Almost every tip problem comes from one mistake: treating the tip as the salon’s money. This guide shows the right way to see tips, the two bookkeeping entries you need, and a short routine that means tips are never argued about again.
First question: whose money is the tip?
The answer decides where the tip is recorded.
| Your set-up | Whose money | Where it goes in the books |
|---|---|---|
| Salon with employed stylists | The stylist’s. The salon is only holding it. | A liability account, usually called Tips Payable, until it is paid out |
| Self-employed stylist (chair renter, mobile, home salon) | Yours | Your income, kept on its own line so you can see it |
If you are self-employed, our bookkeeping guide for self-employed hairdressers covers tips as part of your own records. The rest of this article is for salon owners with a team.
Why a tip is not sales
If tips are added to sales, three things go wrong at once. Your revenue looks bigger than the work you actually sold. Your profit looks bigger too, until you pay the tips out and it suddenly drops. And any commission worked out as a percentage of sales ends up paying commission on tips, which nobody intended.
Keeping tips in their own liability account solves all three. Sales show only what clients paid for services and products, and the tips account shows exactly how much you owe your team right now.
Cash tips and card tips are handled differently
| Cash tip | Card tip | |
|---|---|---|
| How it arrives | Handed to the stylist, or put in the till | Added to the card payment, so it lands in the salon’s bank |
| Who holds it | The stylist, or the till | Always the salon |
| What to record | If it goes in the till, record it against the stylist on the bill | Always record it against the stylist on the bill |
| When it is paid out | Same day from the till, or with wages | With wages, or on a fixed payout day |
A cash tip that goes straight into the stylist’s pocket never touches the salon’s money, so there is nothing to record in the salon’s books. The moment a tip passes through the till or the card machine, it must be recorded, because the salon is now holding someone else’s money.
The two entries every salon needs
A client has a 50 blow-dry and adds a 5 tip on the card machine. The first entry records the payment:
| Account | Debit | Credit |
|---|---|---|
| Card receipts (money coming from the card machine) | 55 | |
| Service sales | 50 | |
| Tips Payable | 5 |
At the end of the month the stylist is paid her tips with her wages. The second entry clears what you owed:
| Account | Debit | Credit |
|---|---|---|
| Tips Payable | 5 | |
| Bank (or cash) | 5 |
After the payout, Tips Payable is back to zero for that stylist. That is the whole system: tips go in when clients pay and come out when staff are paid.
Paying tips out: with wages or on the day
Both methods are fine, as long as every payout is recorded.
- With wages. Card tips build up in Tips Payable during the month and are added to each person’s pay. This is the cleanest option, because the payslip shows the tips and there is one payment to check.
- On the day. Some salons pay cash tips from the till at closing. That works, but each payout must be recorded as it happens. Cash taken from the till without a record is the most common reason a till is short.
What does not work is mixing the two without a note, for example paying some card tips in cash one evening and then paying them again with wages. A running tips balance for each person prevents this.
Tip sharing and tip pools
Many salons share tips with the assistants who shampoo, blow-dry or tidy up. Any split is fine if it is written down and applied every time. Two common rules:
- Named stylist: the tip belongs to the person on the bill. Simple and easy to check.
- Pool: tips go into one pot and are divided by an agreed share, such as hours worked. Record the total pool and the split, not just the final amounts.
Record the tip against a person on every bill, even in a pool. It is the only way to prove later how the pool was built. Some countries also have rules about whether owners and managers can take part in a tip pool, so check before you include them.
Card fees and tax on tips
Card machines charge a fee on the whole payment, including the tip. Whether a salon may pass that fee on to the stylist is a legal question, not an accounting one, and the answer differs from country to country. Some places require tips to be handed over in full. Find out the rule where you are, then write your policy down so your team knows it.
Tax is similar. In many countries tips paid to employees through the business are reported through payroll, and in some they are taxed there. Your accountant can confirm the rule for you in a few minutes, and it is worth asking before your first payroll run.
Five checks that keep tips honest
- Every tip has a name. No bill should carry a tip without the stylist it belongs to.
- The day’s tips add up. The total of tips on the day’s bills equals the tips shown on the day-close report.
- Cash payouts are written down at the moment they leave the till.
- Tips Payable only grows until payday. After tips are paid, the balance for each person drops back to zero. A balance that never clears means tips have been paid without a record, or not paid at all.
- Sales never include tips. If your sales figure jumps on a busy tipping day, tips are landing in the wrong place.
How TressyPOS handles tips
In TressyPOS, a tip is entered on the bill against the staff member who earned it, whether the client pays by cash, card or bank transfer. The tip posts to a Tips Payable (Staff) account in your books, never to sales, so revenue and commission stay accurate.
Each person’s tips are totalled automatically and appear on their pay in payroll and on the salary register, so they are paid once, with a clear record. Everything posts into real double-entry books, so your Profit & Loss shows true sales and your Balance Sheet shows exactly what you still owe your team. For more on paying your team, read our salon payroll guide and our guide to commission structures.
This article describes general bookkeeping practice. It is not tax, legal or employment advice; confirm the rules that apply to you with a qualified accountant or your local authority.