Getting the Most out of Your Franchise’s Bookkeeping Service

Franchising is an excellent way to grow your small business, or, if you are an entrepreneur, to pursue opportunities with low start-up costs and comprehensive training.

One thing you will need to succeed as a Franchisor or Franchisee, however, is timely and accurate financial recordkeeping. Some franchises do their own bookkeeping; others outsource the task to a professional bookkeeping company. Wondering “why should I use a bookkeeping service?” Most importantly: you will probably save a lot of time, money and headaches vs. doing the work in-house.

What you need to know

If you decide to explore franchise bookkeeping services, you will get the most out of the relationship if you know as much as possible about franchise bookkeeping going in.

That means understanding your role, knowing the special franchise bookkeeping needs, knowing what expenses need to be tracked, and having a good sense of best franchise bookkeeping practices.

Understanding your role

The Franchisor provides the business model for a Franchisee to invest in. The Franchisee takes the model into a new location. Each party has unique bookkeeping needs that help build the business and ensure the franchise thrives.

The Franchisor needs:

Consistent reporting across all units
Compliance with franchise agreements
Royalty fee payments
Revenue recognition of initial franchise fees
Point of sale system integration
Shared expenses
Centralized purchasing
Benchmarking

The Franchisee needs:

Financial reporting and compliance
Revenue recognition
Expense management
Financial oversight and analysis
Preparation of reports needed to pay taxes
Documentation needed for an audit

Best practices for franchise bookkeeping

Tracking all expenses and revenue

Make sure the bookkeeper you are considering offers a system for automatically tracking your expenses and revenue by linking to your bank accounts and credit cards. As with any business, you will need to record:

overhead,
profit,
revenue,
raw materials/supplies,
utilities,
rent,
salaries and
employee scheduling.

But there are also additional franchise costs your bookkeeper should know to track. The best bookkeeping companies for franchises may also keep careful records of:

initial fees
amortization of initial fees
marketing fees
royalty fees

Franchise fees are considered “intangibles” under Section 179 of the tax code. You can deduct the initial and ongoing franchise fees from your tax return.

Using cloud-based accounting software

Cloud-based accounting software minimizes errors and maximizes efficiency by

automating repetitive tasks,
providing real-time financial data whenever you want it and
generating timely reports that can help you make informed decisions about your business.

Organizing financial information

In order to maintain accurate financial records, ensure compliance with franchise agreements and support business operations, your bookkeeper should help you manage all of the following documents and receipts:

Expense receipts for operational expenses, inventory and supplies
Sale receipts
Invoices
Payroll records
Employee expenses such as reimbursements and benefits
Vendor invoices
Payment records
Bank statements
Financial reports
Tax filings
Compliance records
Franchise agreements
Insurance policies
Advertising contracts

We organize all financial transactions into customized categories to help our franchisee clients track cash flow, file taxes and manage their budgets effectively.

Timely, detailed reports

Detailed reports from BookWerks^TM (Profit and Loss, Balance Sheet, Statement of Cash Flow and others) give Franchisees insights into their expense and income patterns, which help with financial planning and analysis.

These reports also help Franchisors track financial performance across locations, helping them identify trends and improvement areas.

With BookWerks^TM, you are always ready to file taxes. And if you are ever audited, all your records will be easy to access and in order.