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Franchise Accounting Best Practices

Working in the franchise industry, you’ll be no stranger to how vastly the business model can differ from other industries. While taking on a tried and tested business model can often work in your favour, there are several industry-specific challenges that require a more niche approach to your operations – in particular, your accounting practices.

An awareness of the extra complexities and risks of owning a franchise will help you to better future-proof your business. Our team of QFP accountants will work alongside you to streamline your operations, including; dealing with debt, managing employees, staying on top of cash flow, and maintaining KPIs.

Over the years, we’d like to think that we’ve gained a slight insight into the best practices for franchise accounting, so we thought we’d share some of our tried and tested strategies.

  1. Maintain clear, accurate financial records

Organisation is key to streamlining your operations across the whole business, and keeping your financial records in order is a good place to start. We’re talking income statements, balance sheets and cash flow statements, which should be kept updated accurately, regularly and coherently.

  1. Remain compliant with your franchise agreement

Franchisees are required to act in line with a franchise agreement, and it’s vital that you operate with this in mind, regularly reviewing statements and reports to ensure compliance. Franchisees should receive training on the organisation’s regulations for financial reporting and compliance, with regular checks carried out to ensure consistency and brand integrity.

  1. Evolve with technological innovation

Embracing modern accounting software in your practices will help to streamline your processes. Access to real-time results enables you to track data as it occurs, so that you can identify patterns or problems as they arise. 

  1. Planning a rigorous budget

It’s important not to underestimate the power of a strict budget. As a franchisee, you should expect several regular fees payable to the franchisor on top of the initial startup fee, such as amortisation, marketing and royalties. Budgeting effectively will help you to overcome any initial debt, whilst tracking monthly revenue and expenses to understand your business’ operations.

  1. Tax compliance

The landscape of the UK’s business taxes is constantly evolving, and it’s vital that you remain vigilant to regulatory changes as they occur. Efficient tax planning will help to reduce tax liabilities and fulfil your obligations in a timely manner.

  1. Analyse your data to identify trends

The more accurately you record your financial data, the easier it will be to identify trends in your results. Regular analysis will allow you to plan for the future based on real-time data that displays trends, opportunities and issues.

  1. Take control of your overheads

We’ve already mentioned how you will be subject to certain franchise-specific costs, as well as those expected from a standard business model. However, it’s important to consider how to develop more efficient cost-saving strategies across overheads, such as labour, equipment, or stock.

  1. Manage sector-specific risks

It’s always likely that your franchise may be more vulnerable to some risks than others, whether due to the economy, a changing market, or any number of factors. Developing risk management strategies will help to mitigate challenges as they occur.

Our team of specialist accountants work alongside you with our best practices at heart, to support the financial health and success of your business.

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