This scenario might sound familiar: you bought into a franchise. Your first location is up and running, everything is going well, and you’re ready to take on the next challenge: Location #2.
Everything is about to double in magnitude, and you want to make sure you’re making responsible financial decisions from the start, because you’re a savvy business-owner who’s good at what they do.
The question is, how do you make sure you’re laying that strong financial foundation that will give you the stability you need to effectively run your franchise? Here are a few suggestions to get you up and running and in a great place to start working with a long-term advisor.
DON’T Blend Income and Expenses of All Franchise Locations into One Account
This one might seem obvious, but it’s worth stating. Running a business is hard enough, and that’s without unnecessary complications. Throw in keeping track of business across multiple locations? That’s huge potential for a headache if you’re not thinking about the best way to group all of the financial data coming in from your franchises.
One way to ensure transparency is by separating the income and expenses by location, rather than throwing them all into one sheet and calling it a day. Breaking down your financial information by location gives you clearer insight into what’s happening at that location. It can help tell you that one location is more successful than another, and indicate as to why. Equally as important, you’ll be able to measure the data from one cycle to another, helping you to analyze trends as long as you’re in business.
You’ll spend forever trying to untangle the data, trying to identify where this sale was made, or which location that equipment went to, if all of your transactions are all funneling into the same account. Don’t be that franchise owner.
Instead, make it a standard practice to set up a separate bank account and credit card for each location.
- For deposits, make sure your point-of-sale software breaks out revenue by location. This can get tricky, however, so check out our Software Tip below for a possible solution.
Not to mention, think about when it’s time to do your taxes. The volume of financial reporting alone is going to take significant time, and you’re only creating more work for you and your accountants if they have to wade several different locations’ worth of data. It’s a pretty simple conclusion that the more time and energy that needs spent on your reports, the more it’s going to cost your bottom line.
One more thing to look out for – blending, or co-mingling, also happens when you break down expenses by percentage of overall revenue. It’s certainly tempting! But, stay strong, and use the exact expenses of each location to get a precise and cost-effective (in the long run) measure, and allocate from there.
DON’T Comingle Payables and Receivables of All Franchise Locations
Are you sensing a theme here, yet?
Those bank accounts for each location are about to come in handy again, this time with payables and receivables. Rather than comingling all the franchise locations’ payables and receivables, break them down by location. You’ll have a better data set and won’t have to comb through pages on pages of transaction histories to locate who needs to be paid and from which franchise.
This, in turn, will ensure better cash flow reporting and more accurate financial projections, because – you guessed it — there is more clarity on how money is flows in and out of each location.
With the appropriate number of general ledgers and bank accounts per franchise location, your books will be in much better shape than if everything is jumbled together.
DO Give Local Controllers Clear Processes and Procedures
Another suggestion: if your franchises span a large geographical area (or even a small one), local laws can and do vary. That’s why you’ll want someone who understands the area’s business mandates, and can give your franchise location the individual attention they need. A dedicated controller can do just that.
You’ll need clear processes and procedures for your present controllers, and also for the business in years to come. No one wants to start over from scratch because your accounting department all retired at the same time and no one bothered to write anything down because they “just knew it” after working in the same office for thirty years.
By including these processes in clear, precise language, and documenting them, you’re ensuring an equal set of expectations across your franchises, and setting yourself up for success in the future. Clear expectations and upheld standards lead to happier employees, because there are fewer surprises and a lot more understanding.
- Credit Card Tip: Need help keeping track of all the transactions on your credit card? We got you. Explore partnering with Divvy for your credit card needs, which allows users to designate the location of the expense automatically, taking that responsibility off the accounting team. No more manual coding, no more company-wide emails reminding people to send in their receipts. It’s all right here, and it’s organized exactly how you need it.
DO Invest in Accounting Software That Grows with Your Franchise
In today’s world, you constantly hear about new software – just think about how many apps are on your phone right now (or don’t, if it’s a scary number you’d rather pretend isn’t there).
The same goes for the accounting software options. How do you know which is right for your business? How do you avoid overpaying? How can you be sure this one has all the features you’re looking for?
Not only that, but thinking towards the future, you’ll want a platform that addresses existing needs and future ones as your business scales. And if you’re still feeling overwhelmed with all the options out there as you’re trying to find a package that lines up with your franchise growth plan, absolutely get in touch with our team for a consultation.
- Software Tip: We recommend looking at Sage Intacct. It’s a robust system that makes inter-location — and inter-entity — transactions much easier.
DO Reach Out to Our Franchise Accounting Experts for Help
The team at RKL Virtual routinely helps franchise owners get set up for financial management success and can help you set up your franchise financial management and accounting in the right way from the very beginning. Not only that, but we’ll be with you every step of the way, supporting you while you do what you do best: growing your business.
Every franchise is different and has unique needs, and the RKL Virtual team is here to help. Fill out the form below and a team member dedicated to your business will be in touch, armed with possible solutions and suggestions, and the determination to get you where you want to be.