You bought into a franchise. Your first location is growing. Everything is running smoothly. Now you’re ready for the next challenge: Opening location number two.
Everything is about to double in magnitude, so it’s important to ensure that you’re making responsible financial decisions from the start.
So how do you lay a strong financial foundation that will give you the stability you need to run your franchise effectively? Our expert advisors have a few “dos and don’ts” to consider as you set up a second location and explore outsourcing some of your financial management functions.
DON’T Blend Income and Expenses of All Franchise Locations into One Account
Running a business is hard enough without unnecessary complications. Throw in keeping track of everything across multiple locations? There’s a significant risk of unforeseen challenges if you’re not thinking through the best way to group the financial data from each of your franchise locations.
One way to ensure transparency is to separate income and expenses by location, rather than lumping them into a single sheet and calling it a day. Breaking down your financial information by location can:
- Give you clearer insight into what’s happening at that location
- Help you determine when one location is more successful than another
- Show you why different locations are seeing different success rates
- Help you measure the data from one cycle to another
- Make it easier to analyze data trends throughout each stage of your business’ lifecycle
If all your transactions funnel into the same account, you’ll spend forever untangling the data, identifying where sales were made and trying to remember which location certain equipment went to.
Instead, make it standard practice to set up a separate bank account and credit card for each location.
Keeping individual location financials separate from the beginning will make your life easier down the road, too. When it comes 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 through several different locations’ worth of data. The less time and energy spent on sifting through reporting, the less time and money used.
A word of caution: Commingling also occurs when you break down expenses as a percentage of overall revenue. It’s certainly tempting! But stay strong. Use the exact expenses for each location to get a precise, long-term cost-effective measure and allocate from there.
DON’T Commingle Payables and Receivables of All Franchise Locations
Similarly, it’s not wise to commingle payables and receivables across locations. Keeping each location’s information separate allows for better data. It ensures you won’t have to comb through pages of transaction history to figure out who needs to be paid and from which location.
This, in turn, will ensure better cash flow reporting and more accurate financial projections, as there is greater clarity about how money 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 Consider Differing Laws and Compliance Requirements Across Geographic Regions
If your franchise operates in different cities or states, finances become more complicated. Each region may have its own rules for minimum wage, overtime, payroll and tax withholding and reporting.
- States (and some cities) set their own minimum wages, and it’s part of your job to know the wages you need to pay each employee at each location.
- With changes brought on by the One Big Beautiful Bill Act, as well as previous overtime rules that remain intact, properly accounting for overtime hours is complex for employees and employers.
- States may require different payroll schedules, such as weekly, biweekly or monthly pay. If you operate in other states, you may be keeping multiple payroll schedules.
- State and local income tax requirements differ, affecting both payroll deduction calculations and tax reporting deadlines.
These challenges often appear from opening day onward and may intensify as you grow and manage a larger workforce. When you navigate these rules manually, the risk of errors increases, and financial miscues can result in fines, employee complaints or audits. Utilizing an expert HR and payroll services, like RKL Virtual Management Solutions’ Workforce Strategies, helps you ensure your payroll and accounting are accurate and in compliance.
DO Invest in Accounting Software That Grows with Your Franchise
Investing in software to help manage your payroll, HR and accounting needs can make running your business easier and lessen the risk of complications. But how do you know what software is right for your business?
You want a platform that addresses both existing and future needs as your business grows, such as unit-level KPI dashboards and seamless intercompany transaction reporting. If you’re still feeling overwhelmed by all the options out there as you try to find a package that aligns with your franchise growth plan, get in touch with our team for a consultation.
DO Reach Out to Our Franchise Accounting Experts for Help
The team at RKL Virtual can help you set up your franchise’s financial management and accounting systems correctly from the very beginning. We will partner with you every step of the way, supporting you while you do what you do best: take care of your customers and grow your business.
Every franchise is different and has unique needs, and the RKL Virtual team is here to help. Contact us today to continue the conversation and speak with an expert dedicated to helping you navigate what’s next for your franchise.
