Update on Wire service number crunching

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Dan5602896

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May 23, 2006
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Time for an update on figuring wire service money. I posted back in 12/08
http://www.flowerchat.com/forums/showthread.php?t=21069


June's Teleflora statement.
Total value of in and out orders: $974.78


Processing costs (membership, Dove, Quality program, Sending fee): $301.15
Advertising (directory, Co-op): $206.00
Publications: $3.75
Commissions due (orders in 27%, orders out 80%): $455.46
Total paid to Teleflora: $966.36


Balance of order value - costs: $8.42 (What I had left to fill the orders.)


Total value of orders to be filled: $614.78


Percent of order value out to orders in 59% June 09. (Year to date: 50%, Last year to date: 60%)


Compared last year to date incoming value down 14%, outgoing value down 42%.
 
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Dan5602896 said:
Time for an update on figuring wire service money. I posted back in 12/08
http://www.flowerchat.com/forums/showthread.php?t=21069


June's Teleflora statement.
Total value of in and out orders: $974.78


Processing costs (membership, Dove, Quality program, Sending fee): $301.15
Advertising (directory, Co-op): $206.00
Publications: $3.75
Commissions due (orders in 27%, orders out 80%): $455.46
Total paid to Teleflora: $966.36


Balance of order value - costs: $8.42 (What I had left to fill the orders.)


Total value of orders to be filled: $614.78


Percent of order value out to orders in 59% June 09. (Year to date: 50%, Last year to date: 60%)


Compared last year to date incoming value down 14%, outgoing value down 42%.
Click to expand...

I don't understand all your numbers.

Member fees are $300
Directory & Coop are $206 - Get rid of this expense

Commissions $455 ???... I don't understand where you get that number.

Orders out 80 pct? -- you need to subtract the incoming commission of 27 pct as an expense BUT add back the 20 pct outgoing commission you keep --- Do not treat the 80 pct of outgoing money as an expense because it should be treated as a neutral number. Yes you are sending that money to TF, but you also received that money plus the 20 pct commission money that you keep from your customer.

Talk to your FSR and negotiate more favorable terms and eliminate all non essential expenses, such as directory advertising and Co-Op advertising.

co-op advertising automatically renews it self and you need to call TF and tell them that you want all -and stress the word all - coop advertising cancelled in all - and stress the word all- newspapers where you have been co-opted in.

I don't think the $966 represents your actual cost of filling those incoming orders, as it appears you have added the 80pct of your outgoing orders expense as part of your filling expense.

it doesn't work that way.

joe
 
To the first 2, 18 total orders for the month. I can't get out because I'm not the only one making the decision.

Joe, I calculate my wire service money as a separate entity of the business. All money related to Teleflora in this case goes to calculating the side business of teleflora. The 20% is put back in, as you say, by using the total value of all orders.

Processing is as noted in the (). Yes, I have dumped the co-op, though they obviously did not get the message.

If I exclude the commision due on the outgoing, and count only the money received on incoming plus the 20% of outgoing, you get $519.32. After the processing ads and magazine, you still get $8.42 to cover $614.78 in order value to be filled.
$519.32 - $301.15 - $206 - $3.75 = $8.42

June's work only worked to put money in Teleflora's pocket.
 
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Dan5602896 said:
To the first 2, 18 total orders for the month. I can't get out because I'm not the only one making the decision.

Joe, I calculate my wire service money as a separate entity of the business. All money related to Teleflora in this case goes to calculating the side business of teleflora. The 20% is put back in, as you say, by using the total value of all orders.

Processing is as noted in the (). Yes, I have dumped the co-op, though they obviously did not get the message.

If I exclude the commision due on the outgoing, and count only the money received on incoming plus the 20% of outgoing, you get $519.32. After the processing ads and magazine, you still get $8.42 to cover $614.78 in order value to be filled.
$519.32 - $301.15 - $206 - $3.75 = $8.42

June's work only worked to put money in Teleflora's pocket.
Click to expand...

You should not add advertising expense and magazine subscription expense into your cost analysis.

What was your incoming dollar volume and outgoing total revenue?

joe
 
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Joe Mioux said:
Directory & Coop are $206 - Get rid of this RIDICULOUS SUCKER PLOY expense


joe
Click to expand...

Just felt that needed more emphasis.

My guess is at least 80% of orders, probably 90% are sent by senders who never take the shrink wrap off those books.
 
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"Value added services" and unnessary ones at that.
 
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Dan5602896 said:
Joe, why not? Advertising and magazine are both costs that exist only due to Teleflora.
Click to expand...

You only want to include costs that are directly related to incoming and outgoing business.

If the expense is not a part of you garnering my outgoing business or incoming business, it doesn't belong in your cost analysis.

The magazine is strictly educational

The Advertising? it depends what you mean by advertising. Is this card ads in the directory? or something else?

If its a directory ad, then yes it can be used to show what you have done in the past, but now you want to know what your WS affiliation can do for your revenue in the future.

Assuming you drop the advertising, leaving advertising out, will help you project future profit or loss.

joe
 
Joe,
I hear you and Bloomz, but as I said, I account my wire service as a division of my corp. If I were not in Teleflora, I would not have either of the costs both you and Bloomz say should not be included.

Also, there is no easy way to account for the separation of the share of the cost of teleflora advertizing that adds to my shop volume beyond the wire out. If I could, I would eliminate their magazines, but I can't, thus, it is a cost of being in Teleflora.
 
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Dan5602896 said:
Joe,
I hear you and Bloomz, but as I said, I account my wire service as a division of my corp. If I were not in Teleflora, I would not have either of the costs both you and Bloomz say should not be included.

Also, there is no easy way to account for the separation of the share of the cost of teleflora advertizing that adds to my shop volume beyond the wire out. If I could, I would eliminate their magazines, but I can't, thus, it is a cost of being in Teleflora.
Click to expand...

Hi Dan,

I am not explaining this stuff to you correctly.

You have options, one of those options is to delete your advertising and the magazine expense.

If you took those two expenses away, your revenue would improve.

Again, the magazine has nothing to do with you sending and receiving, its is a service TF provides.

the advertising expense can be deleted. yes or no?

your membership fees can also be negotiated to a lower monthly fee.

The last two can reduce your cost of sending/receiving with TF.

The way you account for the WS fees on your income statement is immaterial from the managerial accounting you should employ in determining whether or not WS is profitable or not.

joe
 
Everybody is right DAN!

You're RIGHT DAN in calculating all of the expenses associated with your WS membership as it pertains to any profit you may derive after all the SMOKE and WAMPUM clears.

Joe is right when he suggests that, you can DROP your WS Magazine Subscription and your Also-Served-By listings and any other advertising you may have in their directory, thus saving you those ancillary optional expenses which are erroding your WS profit margin.

As Bloomz pointed out, the vast majority of florists don't even bother to take the shrink wrap film off those directories anyway. Which makes me also wonder why some of them have invoked a GREEN FEE for monthly WS statements, while still insisting to KILL TREES for USELESS DIRECTORIES that no florist uses anymore?

Rhetorical since, TREES are a renewable resource, and for everyone that a logging company cuts down, they plant ten new seedlings for their future. After all, TREES TOO are an industry and many families depend upon them to put food on their tables, just like WEE DOO!

Lastly, and as Joe suggested, renegotiate your WS membership fees.

Once you've been able to CUT TO THE QUICK and have a BARE BONES WS membership cost, only then can you run the numbers to determine if there is any profitability what so ever left for you regarding your WS membership.

If your final numbers tally to a NO, then you need to DROP your WS membership altogether and close that division.

Not to say that, you can't still send your orders out to other REAL FLORISTS as a $ERVICE to your customers.

Just to say that, you don't need to LOOSE MONEY with a WS to DOO IT!
 
Ok,
Joe, I understand exactly what you are saying.

Everyone, yes, the advertising will go. For the record, it is only the month of June reported here. It is the first month to calculate out anywhere close to these numbers. Also, I've had this shop for 11 years. I'm not new to this. In fact, I have a second business for 24 yrs and running along with various large non-profit officer position experience (treasurer through president).

What I wanted to show, is as it's own entity, when things get slow, the benefit of being in such a service as TF or FTD changes quickly. It makes it very clear just how much one is working for them verses an "us working together" scenario that is sold to prospective and current menbers when you account as a division. I showed in my first post that the cost are proportionally going up as the number of orders decline in this economy. Business is off 25% this year on top of an 8% decline last year and my wholesalers are going from 25 to 32% off. These numbers are reflected in the numbers regarding the wire service volume for our shop. To give an idea of our shop size, we buy by the box and not the piece.

Lets for argument sake throw out the ads and magazine, that still only leave $218.17 to cover $615 of incoming order value. For laughs, lets reduce the processing fees by 50%. That give a total of $368 to cover $615 in order value. Is a 50% reduction in processing cost a resonable expectation? I don't think so. Fortunately, I only need $246 using my factor for pricing to make that $615 and net 10%. I might be able to reduce the processing $28. Drop FTD and have them not penalize me? Still short $8. Get them to drop the membership from 149 to $121, but there are 2 other members within 1 mile so even $8 could be tough. Won't hurt to ask.

I and everyone else are only working to put money in TF's pocket at such low numbers.

The magazine is a product provided at a cost to me as a requirement of me having a franchise contract with TF. How valuable it is, is not of issue. Only how to account for it's cost is of issue. Again, as a division expense, it is costed to TF as part of doing business with them.

As to categorization of the advertising, when accounting the wire services as a division of the corporation and not as a revenue stream of the corp, all cost related to that division stay with that division. Though, certainly one can account the wires as just a vendor/customer in which case the advertising would be accounted under your general category of advertising. To account them as just a vendor/customer is to ignore the franchising aspect of the business relationship with the wire service. To account them not as a division of your business is to hide the real cost of doing business with them as it mixes your good will with theirs. If your large enough on sending and/or even receiving, their good will value will add to yours. However, if you become small as in this June example, your good will value is only adding to theirs at your expense. You can not know this if you account them as a customer/vendor.

Renegotiating the fees are not necessarily an option. I have 1 other shop 1/2 mile to me and a 2nd 1 mile to me. But, it never hurts to ask.

Yes, there are options to TF and FTD and if I can get my sweetie to understand these numbers, then the options will be implimented.
 
Dan5602896 said:
As to categorization of the advertising, when accounting the wire services as a division of the corporation and not as a revenue stream of the corp, all cost related to that division stay with that division. Though, certainly one can account the wires as just a vendor/customer in which case the advertising would be accounted under your general category of advertising. To account them as just a vendor/customer is to ignore the franchising aspect of the business relationship with the wire service. To account them not as a division of your business is to hide the real cost of doing business with them as it mixes your good will with theirs. If your large enough on sending and/or even receiving, their good will value will add to yours. However, if you become small as in this June example, your good will value is only adding to theirs at your expense. You can not know this if you account them as a customer/vendor.
Click to expand...

This is Financial Accounting and not Managerial accounting.

Dan, for June, it looks like you sent $360 of orders out. Is that 100 pct or is that 80 pct of the value or is that 20 pct. You wrote in your first post, total in and out was $974

(974-614= 360)

and you received 18 incoming orders valued at $614

your membership fees total $301.00. What makes up this number, i.e. membership, quality assurance, SAF, low sending, reciprocity, etc fees?

If that $360 represented 100 pct of the outgoing sale and not your 20 pct commission, your revenue would be $72 for outgoing, and $449 for incoming which totals $521.

However, if the $360 represents your cut of the commission ($1800 in outgoing sales* 20 pct commission) then you look to be in a better position with TF. Your sending to rec'g is 3:1 which is very good.

Which is it? Does the $360 represent total outgoing sales or just the commission you earned?

also, you haven't mentioned rebates, do you get them if not, why not?



thanks joe
 
Joe,
I understand that writing a check to a wire does not mean you are not profitable. Obviously, we would not have order gatherers if this were the case (not profitable).

To the orders, I wrote: Total value of in and out orders: $974.78
The total value means the value of what the customer spent whether in or out. I also wrote that the total number of order were 18. Total means all in and out.
Yes, $360 of out going.

As to processing charges I wrote: Processing costs (membership, Dove, Quality program, Sending fee): $301.15 This reflects the costs directly related to being able to send and receive. Can't do either with out membership, without paying to send/receive, without paying to be monitored and without paying a penalty for having 2 services. This cost has to come out of the revenue generated by incoming and outgoing.

I noted my sending to receiving ratio at the end of the first post. It was for June out being 59% of in. Last year it was 60%, so June was my usual. This year, as of the end of June, 50%. Thus, June was better than the current year on average.

Yes, we get rebates. Not mentioned because none were listed for June. Rebates are counted as income toward the division of TF, so it does offset some of the costs and adds to the money remaining to fill an order.
 
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