Wanting to run a successful franchise business takes a bit more than a ‘wing and a prayer’ when it is your good name that is at stake. You have established your own business that has grown and developed and now you want others to take it further, and benefit themselves, by establishing a franchise business. In and amongst all of the support you arrange for them, taking care of the financial management of their franchise businesses is critical. Why? It can not only impact on their ability to operate their business, but it can also have a direct impact on your own.
Here are five reasons why bookkeeping matters for a franchisor and their franchisees:
1. It can help with managing the debt in the early days
Starting a franchise business is a costly experience, not only from the funding required to buy into the franchise, but also things like the shopfitting, purchase of goods, branding, advertising, the list goes on an on. The last thing you want is for your new franchise to be overwhelmed by the debt and not manage it effectively. Good bookkeeping can feed in the information needed to assess their status and what they need to do to bring that debt down and move into a profitable status.
2. It lets your franchises keep on top of your cash flow
Cash really is king, they certainly got that right and the easiest way to understand your cash flow is to set up a budget and monitor the spend and income. With bookkeeping you can identify the regular bills that have to be paid like regular franchise payment, payroll, utilities and so on, and ensure the money is there for them. And it can also help you identify any shortfalls and put plan in place to manage them. It gives you a fighting chance of managing the situation if you are on top of it.
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3. It provides essential information which can be shared
How do you know one franchise is doing better than another if you only see the top line? With consistent bookkeeping, there is a window which other franchisees can use to measure their effectiveness and to learn from others. Who is delivering the most profitability and how are they doing it? Why is someone’s cash tied up when no-one else’s is? When you measure and report in a consistent manner, everyone can benefit.
4. It feeds in to running a compliance franchise business
If you are managing a compliant business, you need to know that your franchisees are compliant too. Bookkeeping can give the visibility to ensure funds are available for the taxman and a good bookkeeper can even make sure people are being paid on time by running the payroll, so franchisees don’t even need to worry about paying employees in a compliant manner.
5. It makes the work of running a business easier
No one made money working in the dark – except maybe a mushroom grower. Effective bookkeeping enables you to work with the realistic situation you are in; if the franchise is struggling with profitability, then it can highlight where the problems lie and enable them to do something about it. Bookkeeping enables your franchisees to take smart decisions.
Wrapping it up
When you start running a franchise business, setting up as you mean to go on is definitely a sensible thing to remember. By establishing good bookkeeping practices from the outset, you set your franchise businesses up in a way that will make it easier to manage, to learn, to grow and to become more profitable. So make it a part of the franchise arrangement from the outset.
