The New Year presents the opportunity to grow from past mistakes and push yourself with new goals. What better goal for your business than to resolve to be profitable? This is especially important this year as inflation drives up prices, squeezing profit margins. Here are the four most important things you can do to keep your finances in order for a profitable year.

1. The cost of flowers and greens should not exceed 25 percent of arrangement and loose flower sales. There are two steps to accomplish this goal. First, buy right. Estimate your flower sales for each week and buy no more than 25 percent of that sales estimate. You can always add more flowers and greens if you need to. If you buy direct, limit your buying to about 80 percent of what you will need and get the rest from a local wholesaler. Second, control your design room. Make sure every stem in every arrangement is accounted for — no extra flowers, no stuffing.
2. Don’t accrue credit card debt. Only only use credit cards if you pay off the full balance each month when the bill is due. Credit card interest is horrendous, and it compounds each month. You can easily pay 20 to 30 percent more by charging a purchase to your credit card and then paying the bill over time. That completely blows your control over cost of goods and other expenses. The same thing applies to your personal use of a credit card. Only charge what you can pay off in full each month. If you find it difficult to control credit card expenses, stick to cash, checks and debit cards.
3. Pay all payroll withholding and payroll taxes on time. This is another large potential trap. When it comes time to pay these to the federal or state government taxes and you are short of cash, it’s easy to put them off for a while. Don’t do it. This is a very expensive way to get short-term cash. The interest and penalties are stiff and you will never get out from under this obligation. Even bankruptcy does not erase these debts.
4. Keep year-to-date payroll at 30 percent of sales. This includes company payroll taxes, any benefits you pay yourself or employees, workers comp insurance, and your compensation as the owner/manager of the shop. You won’t hit this target every month. Typically, in January and July sales are low enough that you can’t meet this goal. However, holiday sales should bring you back to where you want to be. If you are not on the payroll, add any draws you take from the business to your payroll numbers. Be sure to include the payroll taxes you will have to pay on those draws. The only way you can meet this target is to remember that a florist has non-holiday sales volume for 10.5 to 11 months out of the year. You can’t keep extra employees around during non-holiday weeks and expect to hit this goal or make a profit. Cut back staffing as sales drop after each holiday.

Paul Goodman, MBA, PFCI, is a former CPA and the founder of Floral Finance Business Services, in Tulsa, Oklahoma. He is also the editor of Floral Finance, author of “The Profit-Minded Florist” and a regular contributor to Floral Management.