While franchisors have proven techniques for success, one of the best ways to reinforce this even more is to support franchisees by means of uniform accountancy services and a direction for franchise accounting. Often, we hear stories that franchisees are quite hesitant in allowing franchisors into their financial records. There are several hypotheses for this, but we can say that the prevalent one is due to the competitive nature of franchisees. Either they want to avoid embarrassment when their numbers aren’t performing well, or they might be defensive when they do, especially when they feel threatened that their financial records might be stolen in the system, in an atmosphere of stiff competition among franchisees.
A reluctance to financial transparency (between franchisor and franchisees) is never a healthy franchise accounting practice. Having a reliable and robust accounting system can produce overall improved results, and can be a great marketing tool to address franchisee worries during the sales process. For franchisors like you, here are 4 tips to implement accounting direction among franchisees:
1. It all begins with a reliable and easy to use Franchise Accounting Software System.
A complicated franchise accounting system is discouraging to franchisees, especially for first time business owners. It’s just the right thing and most sensible move for franchisors to have an accounting system customised to effectively address the unique characteristics of the franchise business. This doesn’t necessarily need to be premium software. A franchise in Australia, for instance, can make use of affordable options such as Xero, Intuit, or MYOB.
Before implementing a rollout across your franchisees, make sure you’ve tested it out first on your own. You should also be able to provide your franchisees the value of having them (and their designated staff) trained on how to use it. Most importantly, they should be educated on the importance of these accounting systems, and how good accounting and accurate reporting will reflect remarkably on their business numbers.
2. Make it easy for franchisees to compare performances with others.
A dash of healthy competition is always beneficial when achieving organisational goals. Your franchise accounting system should be able to give your franchisees a perspective on how their ‘peers’ are performing, to give them a clue on how they are doing themselves. This will give clarity on which areas they spend too much or too little on, and if they’re getting the right amount of income in comparison to other franchisees’ performance.
3. Have legal control on accounting processes while assuring franchisees of a clear end result.
Usually, it is standard for franchisors to require franchisees to use their recommended accounting software (as well as hardware). On top of this, requiring your franchisees to use your own franchise accountant for all bookkeeping and accounting processes is an effective way to streamline all financial records and reporting, and so you can be sure that everything is done consistently and in a timely manner.
On the other hand, if this is not feasible for your business, you, as the franchisor, should at least have the final say as to who your franchisees’ accountant will be. You could give them either a list of qualifications, or a list of names of your trusted franchise accountants, and it is up to them on who to choose from this list. Also, you must clearly establish a rule that requires all franchisees to submit reports as required by the franchisor. This might seem like too strict of a protocol, but can assure you of better overall accounting and reporting, and even better business results.
Implementing an accounting system to drive your franchise business into the right direction need not be a headache. D&V’s Franchise Accountants do not only offer bookkeeping and accounting services, but complete SOLUTIONS to manage the complex financial aspects, benchmarking, and specialised financial reporting for your franchise business.
Schedule a consultation with us now to learn how we can direct your franchise business to the path of financial success!