Tips on credit card machines

[JJ17]

Hi All,

I am looking for advice or suggestions on how any of you may administer tips for staff from card machines. Normally clients give cash tips but staff have been missing out because we don't have a option on our machine to add tips. I can upgrade my card machine to accommodate this. My concern is our salon system has no feature to faciliate or track tips so the added tip amount will be recorded in the business financial reports as income therefore paying VAT etc. I would appreciate some guidance.
Many Thanks

 

[daydreams01]

I have stopped allowing tips on card now. I used to and then added it in with pay at end of month so it went on pay slip but we have a cash point outside salon and it costs me more in transaction fees plus makes my turnover higher than it actually is and I'm trying to avoid being VAT registered so stopped it. Stylists prefer getting their tips straight away too, it hasn't affected them getting tipped and clients feel happy knowing the tip goes straight to their stylist with no middle man!

 

[JJ17]

Thank you daydreams01 for sharing, I completely understand your view point. Transactions fees etc is something I will have to consider. Unfortunately staff feel they are missing out and some clients seem put out by the fact we don't have it as an add on to our machine.

 

[salonfrog]

Just to note: tips given freely by clients are outside the scope of VAT and therefore are not included in calculating whether you need to register for VAT or not. They should have no VAT implication.

Also, the tips shouldn't be recorded as income if you are simply collecting them for your staff. I would ask your accountant to clarify.

 

[JJ17]

Thanks salonfrog, I understand staff have no VAT obligation but I have VAT bills. Every transaction we do is computerised but I have no facility to accommodate tips or separate them without it looking like a service or expense. I have spoken to the software company but they have no immediate plans to upgrade this feature. If staff receive cash tips, it's their business and it's straight forward. If I run it through my card machine, I have to find a way to separate it from my turnover. As simple as the whole process appears, I can't seem to get my head around it!. I am interested to hear how other salons manage this process.

 

[salonfrog]

Hi JJ17.

Your POS system should have a service called Tips. I know for example in VendPOS you can just set this up yourself.

At the end of the day, the POS system sends data to your accounting system. Services like hair cuts get posted to sales but the Tips Service should get posted to a balance sheet creditor account.

The total amount (including tip) goes through the card machine.

What POS and accounting software(s) are you using? The solution could be in how they are integrated?

 

[JJ17]

Thanks Salonfrog that's how I would like to manage it but I am using Phorest and they do not have this feature. I spoke with them and whilst they are always good at taking suggestions on board, they couldn't offer me a way round it in the meantime.

 

[salonfrog]

The only way I can think of then, is to be export your income report from Phorest (by service type) as a CSV, and then import it into an accounting software (like Xero); ensuring that the Tips are posted to a none-income account.

Do you actually use Phorest for your accounts? I didn't think it had that function but I've not used it recently.

Can your accountant help?

 

[JJ17]

Your right it doesn't do accounts but it delivers detailed financial reports and I use these directly for my accountant. I also use the reports for business monitoring and while I don't want to seem pedantic I am trying to maintain transparent accuracy in my reports. However what you suggest is definitely something I will look into, thank you.

 

[daydreams01]

Just to note: tips given freely by clients are outside the scope of VAT and therefore are not included in calculating whether you need to register for VAT or not. They should have no VAT implication.

Also, the tips shouldn't be recorded as income if you are simply collecting them for your staff. I would ask your accountant to clarify.

Unfortunately all transactions credited to my business account is classed as turnover regardless of what my outgoings are so it wouldn't make sense for me to allow gratuities to go through my business account and risk ending up VAT registered, also it's less admin for me keeping track of whose tips are whose and making sure they get put on correct payslip etc.

 

[IBUK]

Thanks Salonfrog that's how I would like to manage it but I am using Phorest and they do not have this feature. I spoke with them and whilst they are always good at taking suggestions on board, they couldn't offer me a way round it in the meantime.

we have phorest and they set tips up so it is not added to the vat income. ask them to do it for you

 

[JJ17]

Thanks IBUK, Phorest told me they don't have this facility but I'll go back to them after reading you have it. Can I check where the option is on your system- Is it a pop up option when cashing out clients or hot key?