Gift certificates can be a nice boost to revenue and a great way to get new customers into your studio. Many studios struggle with keeping up with gift certificates so let’s take a look at how to track sales of gift certificates their effects your bottom line.
1. Income happens when you sell the gift certificate: Most studios are cash basis taxpayers, which generally means that when they get cash, it is considered income and when they spend cash, it is considered an expense. Therefore, when you sell a gift certificate, you should consider it to be income at that time. You will want to ring it up in your point of sale system as an income item. The only way you could defer recording it as income is if it is refundable, which I strongly discourage. Large retailers have to track gift certificates and cards as liabilities but this does not apply to most studios. Remember that the sale of a gift certificate should not be subject to sales tax (sales tax will be collected when the gift certificate is redeemed).
2. Tracking balances of gift certificates: I suggest that you individually number your gift certificates if they are paper based so that you can track the outstanding open balance on them by number. This also makes it easier to find the certificate especially if the customer redeeming the certificate is not the same person who purchased it. Make sure your staff knows what valid gift certificates look like to minimize any theft or fraud. Investigate your point of sale system capabilities to see if it can track the open balances. If not, a simple notebook can be used to keep balances and details of gift certificates that were issued and their associated balances for verification.
3. Redeeming the gift certificate: I suggest setting up a payment method for gift certificates just like you would for credit cards, cash or checks. Ring up the items as usual and then show the payment method as gift certificate. Collect the gift certificate and include it in the drawer just as you would for other forms of payment. These can be balanced in the same fashion as checks or credit cards would be in your end of day process.