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Should You Have a House Charge Account in Your Flower Shop?

So you've got a fairly sizable business going, but you're getting tired of paying monthly fees for your credit card transactions. Should you consider creating a house charge account so your customers can pay with a credit card you control? There are pros and cons to each approach. Let's explore them!

When you first opened your business, you used the KIS principal (Keep It Simple): customer payments were cash and credit cards. Some of us even limited the cards to Visa and MasterCard because processing American Express cards were more expensive and may not be offered by your credit card processing vendor. This is a simpler method of collecting payments for a small florist -- or anyone -- to keep up, but the fees become quite expensive as your business grows.

So what are the benefits and costs of sticking with your current credit card system?

The benefits of your current credit card system are the simplicity of relying on someone else to process the charges and take care of collections, billing, and all of the other mundane tasks required to make sure you get your money.

The drawbacks of processing credit cards are the costs associated with doing so. The cost of processing credit cards can be broken into three basic charges: a monthly fee, a transaction fee, and a discount fee. The monthly fee ranges from free to $50 a month and may be tiered based on the volume of transactions. Transaction fees start at $0.15 to $0.50 per transaction, and the discount rate can range from 1.2% to over 3.50%, and American Express can be as high as 5.00%.

Accordingly, there are advantages and disadvantages to offering a “House” Charge Account.

House credit cards can serve as a tool to build customer loyalty by incentivizing repeat purchases with the promise of reward points earned through purchases. They also provide your customers with a line of credit, and some business accounts prefer using a “House” account for the company’s purchases rather than issuing credit cards to key employees.

The disadvantages are the legwork and man-hours required to do everything yourself. This includes the monthly running of the customer’s statements, mailing the statements, recording the payments, monitoring / issuing credit limits and collection activity for those customers who do not pay us.

So what do we recommend?

For individual customers that only make about one order per month, it is more cost effective for that customer not to have a house account and use a credit card. For your key business accounts, it may make sense for them to have a house account. You just have to weigh the costs of the miscellaneous transaction fees associated with using outside credit cards with the time and money needed to maintain your own house credit cards.



ABOUT CHARLEY HOWARD

Charley focuses on the financial aspects of being a florist in today’s environment, providing a basic understanding of sales numbers, cost of goods, labor and payroll costs, operating expenses, the cost of wire in and wire out orders, and other income such as delivery, relay fees, rebates, and commissions.

He arrived in sunny Florida from the frozen tundra of New England in 1991, to work at Kuhn Flowers in Jacksonville Florida as the controller. His prior background was construction and real estate. He also taught at the college level as Adjunct Staff for Post College and Southeastern Community College.