Needless to say, accounting firms greatly impact the franchise business right from the beginning. An expert’s advice is crucial in a franchise business to ensure smooth running. Experienced franchise accountants can greatly help businesses save their money, time, and tax. If you’ve hired professional franchise accountants, consider yourself in safe hands. Or else, do not forget that challenges in the franchise business are real. Have a look at some of the risks in the franchise business.
Franchise Accountants – Top Challenges
You will have to control the risks and challenges that accompany the franchise and take full advantage by coming up with strategies for:
- Controlling Debts
- Handling Employees
- Keeping updates about the cashflow
- Monitoring the Key Performance Indicators
- Handling Debts
Most franchises have a big debt when they start out, and the biggest enemy that small businesses face is a debt that can shut them down. The debt that franchises have to include the following:
- When they join the franchise network, there is a sign-up fee
- They need a store location that is prominent and refit
- The staff that’s being trained also need to be paid
The franchise owner has to take care of all this before making his first cent. Resulting in more debt at the beginning of the franchise than what a sole trader would have.
Staying Updated About Your Finance Options
These days, there are several financial options. Your franchiser may have guaranteed your loan or maybe provided finance options. Some things that you should take into consideration if you’re just starting out and thinking about structuring your finance are:
- Give yourself the freedom to refinance when better debt options surface.
- Keep an expert who would regularly evaluate your debt and help you look for low-cost options.
- Always remember to have the required cash flow that services your debt.
Carrying debt is part of running a business. But a lot of money can be saved on your side if you actively supervise your debt and keep your costs down. It is significantly more important in franchise accounting because there are many recurring expenses, including the monthly franchise fees paid out of your bank account.
Setting Up Repayment Systems
In order to stop yourself from being tempted and using your loan repayment money in other things, you should ensure that you put repayment of your loans in your budget and make sure to ring-fence that money. If you don’t want to miss out on a payment, the best route to take would be to set up an automatic payment system. Because missed or late payments accompany late fees, which results in expanding the time of your interest payment.
Customer Service industries are the basis of most franchises. This means that you’ll require staff that, in turn, needs to be:
- Kept motivated
- Have a fixed time schedule
- Get their wages
You should also remember that your employees would pick up and leave if they get a better offer in a new job. So, a better option would be to automate your work using systems and business software. Automation makes a lot of your work easy, and you can focus on hiring and training the right people to become a part of your team.
Keep Updated About the Cash Flow
Cashflow is an essential part of every business. Having trouble staying on top of it is a usual scenario. It sometimes becomes quite difficult for a franchise accountant because the monthly franchise fees and the staff’s payroll is already going from your account, so making debt repayments or buying inventory becomes tough.
To make informed decisions, you need to remain updated on the cash flow plan. A cash flow plan is a budget you keep about all your recurring expenses and plan the extra expanses around them. If you don’t have a budget for your cash flow, then you will find yourself asking questions like:
- Would there be enough cash for this month’s franchise fee?
- Is the revenue for this month strong enough for loan repayment?
- Will you be able to make this month’s payroll?
It’s not easy to stay on top of all these issues because revenue becomes high and low depending on the month. The staff expenses change from time to time, especially if you ask them for overtime. Other several expanses also occur, like maintaining the building, and you might end up placing an order for extra inventory during a busy season.
The best thing you should do is make a dashboard that can track all your cash flow transactions. The smart cash flows even show what expenses are coming up in the future. The cash flow dashboards work in a way that they combine data from the POS system, your bank account, the monthly payroll and the invoicing software to inform you how much you will have to spend every month.
Monitoring Key Performance Indicators (KPIs)
KPIs would enable you to become a successful franchiser. If you work with a good franchisor, then you might already know the secrets to success. The top key performance indicators are things like:
- How long do your clients wait until they’re served?
- What product do you sell the most?
- How many clients are your regular customers?
- How many customers enter your store?
- To earn revenue of about a dollar, how much do you pay them?
There are countless similar KPIs, but a smart franchisor will inform you where to put your focus. You’re likely to become more successful when you get the metrics correctly. The KPIs are a huge part of making business management and franchise accounting much easy. If your franchiser isn’t a good one who can’t tell you about the KPIs to focus on, then you should seek help from other franchises in your network, or you can take the help of another franchise accountant by consulting them. This way, you’ll be able to understand where you need to put your energy.
How should you measure KPIs?
Some KPIs are easy to measure, such as employee productivity, cost of sold items and customer satisfaction, as compared to other KPIs. If your franchiser provides you with the KPIs, they will also have a system that can measure them. If they are unable to help you, then another accountant might know what to do.
Once you know which KPIs to focus on, you’ll also set up systems to help you measure them. After that, you will have to:
- Place targets
- To reach those targets, you’ll have to brainstorm ideas
- Then schedule your progress analysis
Your business outlook will improve if your KPIs improve. You can also stay on top of your KPIs by using apps like FUTRLI, Fathom and Spotlight. These apps generate charts and graphs of your KPIs, which you can check whenever you want.
The Most Significant KPIs
The majority of the franchises offer inexpensive services or products, which means that they rely on a huge number of sales to make money. This is why the number of sales matters greatly in these businesses.
Considering that you have to take out the monthly franchise fees and the staff payroll, they are felt pretty quickly if the sales dip. So, having the volume of sales and the cost of staff at your fingertips is the best choice. The KPI dashboard can integrate the sales volume, and you can review that data whenever you want from the POS software.
Why Should You Get Franchise Accountants?
Franchise accountants are required to run a franchise because there is a lot of money transactions happening running a franchise. The majority of the NZ franchises employ an accountant for handling their money and accounts, which can be expensive and sometimes the accountant is not specialised in handling franchise accounts. If you want to preserve your investments, then you should hire a person who is specifically experienced in franchise accounting. Because you might face some unique issues that only franchise accountants can solve. For example, a franchise accountant can advise you in the following areas:
- When you need a tax perspective to manage the franchise fees
- In handling compliance expenses
- What usually goes wrong in franchises
- What to report to provide to the franchisor
An accountant who has worked in franchises with the same niche as your franchise would be even better. They will have more knowledge about your business, and they would be able to help you more in managing your franchise; for example, they would tell you:
- What chief challenges you might face?
- What’s the secret of other successful franchises?
- The essential Key Performance Indicators
They can help solve problems that similar franchises face and will give you ready-made solutions on how to fix them.
7 Steps To Growing Business
Subscribe now for 7 daily email lessons in Business Growth.