When we first started our company the administrative and accounting demands were pretty straight forward and easy. Heck, I have a background in accounting and finance and worked for company's large and small - how complicated could it be? Then came the Wire services and their monthly statements, wow was I wrong. Wire service accounting has to be the most bizarre area of floral accounting, everything else is pretty basic. It took a long time for me to get my arms around it, since we have multiple locations and 3 major services we represent it has a significant impact on our financial reporting.
If you want to get serious about accounting for wire services, or direct you accountant to get serious, there are two people in our industry that have this area down cold; Paul Goodman and Kevin Murray. These guys can cross every T and dot every I with the best of them and I've "picked up" some great ideas from both over the years. Search them out and pass their information to your accountant and they'll know where to put the numbers.
With that said, the point of my little blog is to remind you (if haven't fallen asleep yet) to be certain to do more with your monthly wire statements then just pass the information to your accountant. Don't just write a check, or cash the check, and dump the transaction into some "catch all" account in your checkbook or QuickBooks statement. Wire service statements provide you with an incredible amount of information to analyze and to help determine how truly profitable your company is. There are different accounting methods (cash versus accrual etc.) but, no matter what type of system you have for your shop you must analyze the expenses that flow through the statements. To name a few; computer expenses, membership dues, purchases (major area of concern for understating Cost of Goods Sold), advertising, answering services, clearing house fees ( by the way, I consider this as a commission), credit card processing plus other expenses that have to be "uncovered" in the statement. How much do spend monthly, quarterly and annually on membership fees with your wire service(s), do you know, do you have the information readily available? Sometimes these items are referred to as "fees" but the bottom line is that they are expenses because they reduce the bottom line.
I'm not saying these expenses are not necessary, important or beneficial to your shop. Expense is not a dirty word, it's still true that it takes money to make money. Most of the time these items are valuable and help bring business in, but you won't know how valuable unless you look at and understand them. It goes beyond "Accounting" for the numbers and knowing where to put them in your financial statements. Serious business people analyze and understand the numbers. If a shop owner doesn't take into account the dollars spent with a wire service, just like any other advertising method, they'll understate their true annual advertising costs and affect future budgeting and planning. (Budgeting that's another great topic for a blog - maybe next time, too tired right now.) Please remember the expenses on the wire statements are real, affect your cash, and are most likely valuable and necessary to operate a profitable flower shop - but you'll never know unless you capture and analyze the information. Happy Accounting!
Kevin J. Vinicombe
Kevin J. Vinicombe
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