If you are a franchise owner or looking to buy a franchise business, you may have wondered what makes a franchise accountant different to a business accountant and whether you should choose a franchise accountant to manage your financial affairs.
The main difference between franchise accountants and business accountants is—you guessed it—franchise accountants specialise in working with franchises. They know how to navigate the specific franchise obligations which must be met when setting financial goals and handling your business and tax planning. Franchise accountants are knowledgeable about the differences between a franchise business and a non-franchise business and are aware of the relevant benchmarks for different franchise models.
So, when it comes to long-term success, the financial health of your franchise will be strengthened by an accountant who's an expert in franchises. A good franchise accountant can help you understand franchise accounting basics—especially if you maintain an ongoing relationship—and can help you cut through the legal red tape associated with franchise agreements.
At Liston Newton, we have a team with specialised training in franchise accounting. Find out more about how we can get your business moving.
The basics of franchise accounting
When deciding on a franchise accountant, it's important to consider the ins-and-outs of running your franchise. There are fees that every franchisee must pay to own the rights to a business's brand, products, and services. This means that you may have more start-up debt and extra overheads to absorb right from the get-go.
As a general rule, franchisees will need to think about the following costs to stay on top of their finances:
- Upfront fees. Franchise fees range in price depending on the brand, the franchise model and the sign-up requirements. You may also be required to pay ongoing fees for franchise support.
- Staffing. As your franchise grows, you'll need to employ more people and add them to your payroll. Many franchisees make the mistake of forgetting they will need to pay wages while staff are being trained, in addition to covering any costs associated with recruitment.
- Extra overheads. You will typically need to pay monthly franchise fees as well as staff wages. This can make it more difficult to break even unless you manage your cash flow very scrupulously.
Depending on the size and nature of your franchise, you may have been provided with a detailed owner's manual to help you with set-up, training, and planning as well as day-to-day operations. This manual typically includes a short list of key performance indicators (i.e KPIs, which we'll talk about later in the post). It's important to note that while having a built-in framework for systems and processes is handy, it won't protect you from financial risk if it isn't implemented properly.
A franchise accountant can familiarise you with the issues that are unique to franchise accounting and ensure that you have the right systems, processes, and paperwork to keep your franchise running profitably. They can guide you through the reporting, compliance, paperwork, and fees associated with owning a franchise and protect you from financial risks traditional business accountants may not be knowledgeable about.
In a nutshell, franchise accountants can:
- Help you deal with start-up debt
- Help you lodge all compliance documents (BAS's, tax returns, financials, payment summaries, and ASIC documentation)
- Complete industry benchmark comparisons
- Help you manage your employees
- Choose a suitable accounting software package for your business
- Look at tax minimisation strategies on a year-to-year basis
- Manage all ATO payments around cash flow
- Provide business advice to assist with improving gross profit and net profit margins
- Help you meet sales targets (KPIs)
- Streamline your admin processes
- Look at future cash flows to help ensure the business can continue to meet its obligations from suppliers, staff, and the ATO.
Although your franchisor will assist you in many business operations, the profitability of your individual franchise business will remain your responsibility. Therefore, it is important that you communicate regularly with your franchise accountant on matters related to payroll issues, tax minimisation, and gross and net profit margins.
The role of KPIs
Key performance indicators, or KPIs, are important because they tell you where to invest your energy to achieve your franchise's financial goals. Your franchisor may tell you what KPIs to use but if not, you can ask your franchise accountant to help you pick your KPIs and set up systems to measure them. A franchise accountant can help you devise strategies for reaching your KPIs and develop a system for regularly reviewing your metrics, so you don't go off-track during your first year of business.
They will know:
- What you need to report to your franchisor
- How it should be reported
- What is realistic and what isn't
- Where franchisees in your industry often go wrong
- How to measure KPIs and ensure compliance
An accountant with franchise accounting experience can give you valuable financial management advice on all aspects of running your franchise. From business reports to tax returns, they'll be able to efficiently assess and advise the steps required to keep your franchise running strong.
The importance of long-term planning
Franchise accounting is a crucial part of running a successful franchise, therefore building a long-term relationship with a franchise accountant is one of the wisest business decisions you can make. Buying a franchise doesn't guarantee financial success—having a dedicated specialist on board to manage the financial side of things will save you time and protect your investment from both a practical and legal perspective.
It's generally accepted that when you work with anyone over an extended period of time, you receive a return on that relationship—franchise accountants are no exception. The longer you work with a franchise accountant, the better they will be able to anticipate where your franchise is heading as opposed to simply reacting to the issues it faces in the short-term.
At Liston Newton, we have a long history of helping franchise businesses achieve their financial goals. Among our team, Shaun Newton and Kieran Liston have, in particular, worked with various franchise businesses over many consecutive years. This affords us the ability to understand what has happened in the past and help our clients plan for the future.