Franchising is a great option for entrepreneurs who want to start a high-growth small business.
Franchisors provide varying levels of assistance to franchisees with marketing, start-up plans, and guidelines to use in management of the business. While this certainly makes things easier on the franchise entrepreneur, the franchisor does not provide everything, and most of running and growing the business is completely up to the franchisee.
For example, hiring and staffing – one of the most crucial parts of being a successful small business entrepreneur — is entirely up to the franchisee. Handling the franchise bookkeeping and accounting is also quite often left up to the franchisee. This can be difficult since there’s no one way to do the books.
We work with franchisees across many franchise brands. Here’s how we advise them to do their books:
1. Determine the franchise brand’s bookkeeping best-practices
- Franchisor: Ask the corporate franchisor if they have standard practices and what those are. Often, you can get guidance here on things like standard chart of accounts structure, how to recognize revenue, how to calculate royalties, and how to code expenses.
- Peers: In some cases, the franchisor does not have accounting practices, in this case connecting with reputable peer franchisees in the brand can be an excellent way to develop consistent practices.
2. Implement the accounting practices for your business
- Set up the system to run using these practices all the time. Nothing is worse than re-doing the books every time for compliance. Put in the work on the front end to keep things properly maintained. You won’t regret it!
- Go back in time (if you’ve been open for a while) and adjust the historical financials to meet the new practices. This ensures you are comparing your performance over time like apples-to-apples instead of apples-to-oranges. We recommend going back through the beginning of the previous year. But, feel free to go back further.
3. Compare your performance to your peers within the franchise brand
Ideally, you and your peers are now using the same accounting methods. Comparing performance will help all of you see the strengths and weaknesses in your businesses. The franchisor, a regional co-op, or just a group of fellow owners trying to learn from each other can all help facilitate comparisons like this.
Ceterus is a bookkeeping solution for franchisees. Our accountants focus exclusively on franchises, delivering financial reporting through our online dashboard in a way that makes sense. Our Ceterus Edge dashboard provides peer to peer benchmarking for your franchise concept.
Click here if you’re ready to check bookkeeping off your list.