Table of Contents
- A.What is Franchise Accounting?
- B.What Franchises Need From an Accountant
- C.Expense Management
- I.Pay for Services Required to Get Your Business Set Up
- II.Start-up Assets
- III.Monthly Costs During Start-up
- IV.Expansion Costs
- D.Reasons to Hire an Accountant
- E.How to Find the Best Accountant for Your Franchise Business?
- F.Wrapping Up
To run a successful franchise business, you must keep track of your finances and have developed accounting.
The word accounting comes from the word accountability. If you are going to be rich, you need to be accountable for your money, said Robert Kiyosaki.
Surely you have heard about McDonalds, a great example of a franchising business.
Franchise means the distribution of goods/ services. It includes a grant from the franchiser or another party. One party gives the right to another to sell goods or services.
What is Franchise Accounting?
Let’s break down franchise accounting and understand what it stands for.
Simply, franchise accounting is when you have a franchisee and a franchisor.
The franchisor will have two franchise revenues. The first one is buying goods and assets and, at the time, using the franchisor’s name, logo, and branding. And the second one is a continual contribution, which means the franchisee pays money from the amount of the revenue.
Depending on the contract, there can be several differences. Thus the process of franchising business accounting can be different.
If you are opening a burger cafe and choose to franchise, consider preparing your team for franchise accounting.
Once the franchisor helps you open the business, their involvement will be continuous for the accounting and bookkeeping.
What Franchises Need From an Accountant
Franchise businesses are successful as they have an opportunity for instant support. However, they also pay fees to the franchise and existing businesses. As a founder, you need a professional accountant to manage the revenues and expenditures.
Getting a professional accountant is the first part of the task, then you need to know what you can expect to get from your accountant.
Let’s take a look at a practical example to have a better understanding. If you browse for the top low-cost franchises, you will find many options. For example, a dog training franchise is an affordable opportunity for beginners. Your accountant should help you with the start-up legal documents and finances.
Franchise accounting starts right after the moment when you get approval to sign the contract. Your accountant needs to work closely with the lawyer and help with the contract preparation.
You can expect your accountant to have a CPA certification and be ready to get instant training and ideas about new trends.
Online tools are available for tracking employees working hours and pace and calculating their salaries. Create Pay stub to organize lists of details about the employee’s payments and manage the wages of your workers and financial people. To have more organized monthly cost lists of employees you can use timesheet excel templates, remember to include all the dates and detailed descriptions of all expenses.
Expense management is the core part of franchise accounting. In order to make expense management more accessible, it is an excellent approach to use the software.
Here are the main expenses for the new franchise Business.
Pay for Services Required to Get Your Business Set Up
These include initial marketing design, website setup, legal advice, licenses, insurance, training, and site selection or improvement fees.
- This category of costs includes the money you’ll spend on material things such as land, equipment, starting inventory, furniture, and signage.
- These are all physical items that you will need to get your business started.
Monthly Costs During Start-up
- Monthly Costs During Start-up is a category of costs that includes the money you will need to have in the bank to operate your business before you start turning a profit.
- This money will be used to pay for recurring expenses such as rent, payroll, utilities, ongoing inventory, and marketing expenses.
- If you’ve already started your business and have an idea for growing or expanding it, you may need additional funding.
- To manage expenses effectively, you need to have a financial analyst and an accountant who work together as a team.
There are many ways to keep track of the financial side of your business. The key is to make sure you track things consistently and accurately. If you pay attention to this task, it will get more accessible, and you’ll have a powerful tool for understanding the financial health of your business.
Reasons to Hire an Accountant
Having an accountant is an essential step for a franchising business, and here we present 5 reasons why you need to have an accountant.
- Save money and reduce costs by hiring a professional accountant who helps you manage taxes and file tax returns.
- Franchises that have accountants do have risks of having costly mistakes. And the founders and leaders have more time to work on the contracts and customer service.
- If you hire a professional accountant, you have a bigger chance of raising money and organizing bookkeeping. With the help of a professional accountant, you can keep your cash flow and balance sheet in order.
- Accountants save you from fraud and wasteful spending, and with the help of their knowledge, you can prevent unnecessary costs.
- You have the benefit of discussing the risks of new contracts and partnerships.
How to Find the Best Accountant for Your Franchise Business?
Now let’s focus on the question of how to find an accountant for franchise accounting.
Some accountants have the expertise and specific knowledge in franchise accounting, and it would be better if you included an accountant with the knowledge and experience.
The qualifications and certifications of the accountant are essential. Hire a professional with financial credentials with the highest ROI.
To find people with appropriate backgrounds and financial certifications, you can use the Linkedin premium version. You can work with accounting companies if you do not need an in-house accountant. If you have many tasks and cannot manage to browse between them you can hire a virtual assistant and get any help from your VA.
Another great way to hire professionals is Upwork, as many freelance accountants will be ready to cooperate with you.
Franchise accounting functions like regular accounting; however, it has some particularity. You need to consider that franchise accounting has outstanding fees, marketing costs, and charging systems.
It is a good idea for franchising businesses to hire a professional accountant to avoid mistakes and have financial management in control. Hiring an accountant will help to prevent risks, wasteful payments, and defective contracts and partnerships.