Bookkeeping for your Flower Shop
I recommend using a commercially available accounting software package for your accounting. A good system can make your life easier by tracking income and expenses, and inventory management. While you can track income and expenses with pen and paper, there are much better ways. Some people still use a spreadsheet and that’s ok too, but not terribly effective nor can you get much insight on the financial performance of your business.
There are a few types of systems to be aware of when getting your bookkeeping in order.
Accounting Software – The most popular accounting software in general for small businesses is Quickbooks. This software can do everything from being your POS System (Point of Sale), tracking sales, paying vendors, managing inventory, and, more. It’s inexpensive and works for every business, but has a learning curve since it can do so much. POS software is kind of like a digital cash register.
Other accounting software includes Freshbooks, Wave, and Xero.
Floral Accounting Systems – Specialty floral accounting systems such as FAS, or IRIS are specifically made for the floral industry and can make running a flower shop easier. They may cost a little more, but worth it due to ease of use and more insights into your business.
Hiring a Bookkeeper – Another option, and one that may sound expensive at first until you account for your time, is to hire a bookkeeper. Hiring one takes the burden off of your shoulders and they do the work for you. Rates for a bookkeeper run from $25-$40 an hour and they usually only need a few hours a month to do the books of a small business. Unless you really like doing your books, this will let you focus your time on bigger tasks.
With a little background provided here and some initial guidance from a qualified accountant, you can do your own bookkeeping.
Financial Statements for a Flower Shop
There are three main financial statements used by small businesses. I’ll give a brief overview, but don’t be like many business owners and ignore these. These are a diagnostic for the financial health of your business and the keys to being successful. Be sure to educate yourself on what these numbers mean. Don’t worry if you aren’t a numbers person. Your bookkeeper or accountant will help you understand them.
Profit and Loss Statement
You will also need a Balance Sheet that lists your assets and liabilities. On the Asset side, you have current assets such as cash, inventory, and accounts receivable. You have fixed assets such as land, building, and fixtures. You also have pre-paid or deferred charges such as insurance or inventory you have paid for but not received. On the Liabilities side, your current liabilities are accounts and wages payable. Your fixed liabilities include your mortgage and bank payments. You will also list here any capital you have invested in. It is a requirement that your assets equal your liabilities… hence the name balance sheet
Probably the most important parts of your bookkeeping system from a management point of view are sales and cost analysis. These reports are customizable and specific to each business. They are tremendously important as tools for running a profitable business. The profit and loss statement will only tell you the biggest of pictures… you will need these additional reports to help you pinpoint and correct those problems that may be putting your bottom line numbers into the red.
You should investigate and keep records on as many portions of your cash flow as is practical. With experience, you may find that some parts of your business are more critical to watch closely than others.
Bookkeeping for a flower shop is no different from bookkeeping for any other small business. Keep in mind that you have perishable and non-perishable products to keep track of. You also have all the other business expenses of labor, rent, insurance, vehicle maintenance, and such to take care of. This is where your business plan cash flow analysis comes in handy… It’s a road map for your bookkeeping. You will choose between doing your own bookkeeping and hiring a bookkeeper. Either way, be sure to install checks and balances in your cash flow system to protect yourself and your business from the disaster of theft and dishonesty.
No More House Accounts!
It used to be that flower shops always had house accounts. They took orders over the phone, sent the flowers, and patiently waited for the customer to pay. Many flower shops still have house accounts. The successful ones are careful about the amount of credit they extend, to whom they extend it. It is extremely important to be diligent about collecting the money owed on house accounts. This requires timely billing… at least monthly. If you feel that to be competitive, you must have house accounts, I would recommend a weekly billing cycle.
That being said, I strongly recommend accepting only cash, check, and credit or Debit card payments. Most modern consumers expect to pay for their purchases by credit or debit card. To get your customers to pay with credit cards, rather than putting their purchase on a house account (if you have them), it’s as simple as instructing your clerks to pleasantly say “Thank you for your order, the total comes to $x. Which credit card will you be using today?”
From a cash flow point of view, cold hard cash would be the most desired form of payment. Checks can take a couple of days for your bank to clear and make available for you… plus they sometimes bounce!
Credit cards don’t bounce, but they do have a few little details you should know about. The credit card clearing company you choose will charge you a small percentage for processing the charge and collecting the money. There will also be a transaction fee of a couple of pennies… depending upon how the transaction was entered, and how the card information was verified. Some clearing companies make your funds available as soon as you deposit the credit card transactions for the day. Some have longer waiting periods.
As a small business owner, you are a consumer of banking services… shop around and find the firm or firms that offer the best service and price.