Avoiding Common Franchisor Bookkeeping Mistakes

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What happens when franchisors make bookkeeping mistakes? They can face harmful financial inaccuracies, compliance issues, and worst of all, strained franchisee relations.

Here are some of the most common mistakes franchisors make in bookkeeping practices:

Lack of Financial Transparency with Franchisees

If your Franchisees fail to provide clear, accurate and timely financial reports, franchisors will not have the complete picture they need to make well-informed decisions about their operations.

Communicate honestly with franchisees on financial matters. Not sharing pertinent information can lead to misunderstandings and mistrust. Be available to discuss financial concerns whenever they need your ear.

Incorrect, Delayed or Inconsistent Royalty Collection

Disputes with franchisees—and even legal issues—can result from not calculating royalties properly or collecting on time. If you use an outside bookkeeping firm with franchise experience, you can avoid these hassles. At BookWerksTM, we make sure all royalties are accurate and in line with the franchise agreement.

Poor Documentation

Another thing that can cause clashes between franchisors and franchisees is incomplete or poorly maintained financial records. If you are not skilled at bookkeeping, it may be a good idea to outsource the task to a bookkeeping company so your documentation is always accurate, clear and well-organized.

Failure to Monitor Compliance

It is your job to make sure your franchisees comply with the financial and operational standards in your franchise agreement. As with delaying the collection of royalties, not providing regular compliance oversight can lead to big financial and operational headaches within the franchise system.

Late Collection of Marketing and Advertising Fees

If you fail to collect marketing, advertising and other fees FROM ALL YOUR FRANCHISEES at the same time, you could be headed for tensions between franchisees.

Lax Internal Controls

These can set you up for mismanagement, fraud or errors in financial reporting.

Ignoring Tax Obligations

Avoid penalties and legal troubles by staying current with all your income, sales and other tax obligations. If you do not have a trusted tax accountant, we can help you find one.

Letting Financial Systems Get Out of Date

As your business evolves and grows, your financial systems and software may need updating. BookWerksTM can scale up quickly to make sure the bookkeeping processes stay cost-efficient.

Inconsistent Accounting Standards

Every franchisee must follow the same bookkeeping practices. Not only is it hard to compare performance if different franchisees are using different standards, inconsistencies can lead to confusion and disputes.

Avoiding Conflicts

When franchisees have a concern about finances, the longer you wait to address the issue, the more unpleasant the conflict will become. Timely resolution is essential.

Cutting Corners on Training and Support

Saving money on training and support in the short-term can cause expensive, long-lasting problems. The more franchisees know about managing their finances, the fewer costly mistakes they will make. Especially with people new to franchise ownership, err on the side of caution providing the tools they need to succeed.

Overlooking the Value of Bookkeeping

Some franchisors downplay the value of accurate day-to-day financial recordkeeping—at their peril. While bookkeeping is not a revenue-producing part of your business, it is necessary to maintain financial stability.

We use automated data input to cloud-based accounting systems so your financial information is always accurate and available to you. With correct data at your fingertips, you can jump on opportunities before they pass you by, and catch downward trends before they become catastrophes.

Ignoring Feedback

Seek regular feedback from your franchisees about their finances. Smothering a spark of discontent is way better than having to put out a forest fire of anger. Happy franchisees are in your best interest.

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Accounting and Bookkeeping Services for Your Small Businesses

The services of bookkeepers and accountants for small business dovetail like those of dentist and dental hygienists, and both are crucial to small businesses. Bookkeepers like BookWerksTM keep track of day-to-day financial transactions and clean up errors or omissions. Our job is to provide regular, timely, accurate reports to help you make smart decisions. Then, at tax time, your accountant can efficiently file your taxes with the information we provide. The accountant, like your dentist, is more highly trained, and therefore, more expensive. Your bookkeeper doesn’t NEED to know everything your accountant does, but conscientious work on the bookkeeper’s part makes the accountant’s job simpler (and saves you money). Accountants appreciate good bookkeepers and vice versa. Each complements the other to help their small business clients thrive. When you have your accountant handle the recording of daily income and expenses, you are paying too much, and not making the best use of their strengths.