Running a successful business as a franchise owner requires more than just a passion for what your brand is about; it demands a firm grasp on the financial aspects that drive its growth. Whether you’re a seasoned franchisee or just starting, understanding the essentials of bookkeeping for franchisees will empower you to navigate the intricacies of your business’s financials confidently.
What do accounting and bookkeeping for franchisees entail?
Often referred to just as franchise accounting, accounting & bookkeeping for franchisees involves managing financial transactions and records for a franchise business. This includes monitoring the following to ensure profitability and comply with tax laws and regulations:
- Financial Reporting
Franchise businesses face different nuances when it comes to fees, regulations, and expenses than a typical small business. So understanding key concepts is crucial to keeping your books in line.
Franchisee – Hi! This is you! You are a business owner who has purchased the right to operate a franchise from a franchisor.
Franchisor – This is the company that holds the rights to a brand and its associated products and services.
Revenue – This is the overall amount of money you generate from sales of your products or services.
Assets – These include the tangible (property, equipment, inventory, etc.) and the intangible (intellectual property, copyrights, etc.) resources your business owns that help generate revenue.
Liabilities – These are the financial obligations, like loans, taxes, and accounts payable, that your business owes.
Equity – This refers to the shareholders’ interest in the company. A company’s assets should equal the sum of its liabilities and equity as an all-around principle.
Franchisor Fees – These are the costs of starting and managing your franchise business, including the initial franchise fee, ongoing royalty fees, and marketing fees.
Financial Reporting – You must keep accurate financial records and prep financial statements like balance sheets, income statements, and cash flow statements to evaluate your business’s financial health and make informed decisions.
Taxes – This is handling tax obligations like income and sales tax. Compliance with tax regulations is essential to avoid penalties and ensure financial stability.
Cash Flow – This term refers to the amount of money your franchise business generates compared to the money it spends during a specific time period.
Inventory Management – This is the process of tracking and organizing your business’s inventory levels to prevent cash flow problems caused by excess or insufficient inventory.
COGS & Prime Cost – Tracked on your income statement, the Cost of Goods Sold (COGS) refers to your expenses on raw materials and direct labor costs to create your products, while your prime cost is a key metric that refers to the total of your cost of goods sold and labor expenses.
3 Best Practices To Remember
1 | Keep Accurate Records
In order to track your financial performance accurately, identify areas that need improvement, and make impactful decisions for your business, you’ll need to keep comprehensive financial records of revenue, expenses, and cash flow.
2 | Budget
Keep an eye on your cash flow by setting realistic budgets. Budgeting will help you make sure you have enough money to cover your recurring expenses like monthly franchise fees, payroll, or any loan payments.
3 | Pull Reports & Track Key Performance Indicators
Analyzing your business’s finances to track progress and understand its performance is essential. Sharing this data with investors can help build trust and inform them about your headway toward financial goals.
Tracking KPIs goes hand in hand with financial analysis. Each franchisor will have different KPIs they will want to look after, but on a general note, its good to track:
- foot traffic
- return shoppers
- wages paid in connection to revenue
- quantity of products sold
- customer wait times
Measuring KPIs is all about setting accurate targets and reviewing progress. Having accurate data on hand is crucial to making informed decisions to avoid unexpected results.before there’s a disastrous dip.
Ceterus As Your Solution
At Ceterus, we understand how much of a burden bookkeeping for franchisees can be. That’s why we offer top-of-the-line accounting, tax prep services and comprehensive financial insights.
With our tech-enabled software and a dedicated financial controller, you’ll get a clear view of your financial performance. With us, you’ll receive:
- Brand-compliant financial statements
- Timely transaction updates
- Peer benchmarking
- Ongoing tax advisory services
- Multi-unit reporting
- Cash flow projection
- Dedicated financial consultations
Stop handling the financial aspects by yourself. Schedule a consultation with Ceterus today!