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7 ways for franchises to streamline their financials


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Because of its vast opportunities, franchising remains a popular option for U.S. entrepreneurs.

Since 2013 the number of franchises has steadily risen. Last year the country supported a whopping 759,200 franchise establishments that generated some $760 billion in sales and employed more than eight million people.

That doesn’t mean financial management of such businesses is easy, and accurate accounting can be one of the top challenges. That’s why it’s important to have a strong, efficient accounting system in place before embarking on franchise ownership.

“The franchising industry is facing a unique set of challenges, including economic volatility, heightened international competition and legislative challenges,” notes BDO.com. “In today’s crowded and highly competitive environment, success depends on swift management decisions, solid relationships between franchisees and franchisors and the anticipation of future trends.”

Some suggestions for franchisees wishing to streamline their accounting accordingly:

  • Secure an FPR. Request financial data such as cost, expense and revenue numbers from your franchisor in the form of an FPR (financial performance representation) so you can more accurately project income and cash flow moving forward. “Many consultants and franchise attorneys urge prospective franchisees to avoid or proceed with caution when dealing with franchisors who fail to provide an FPR,” notes franchise consultant Ed Teixeira in Forbes.

  • Choose a multifaceted, multi-entity accounting tool. Your software should be able to view, compare and contrast the performances of each franchise location without the need to switch apps. Ideally, it should also collect data in real time and align with your other business management tools to provide further financial insights you can use to optimize profits.

  • Follow a standardized chart of accounts. Your books should be kept in the format followed by other franchisees so the franchisor can better compare and contrast financials.

  • Be aware of revenue reporting requirements. For example, special assessments or discounts from the franchisor may need to be added or subtracted from top line sales, and may affect gross sales on profit and loss statements.

  • Closely track deductions. Note that your initial investments, loans and other assets and liabilities must be listed and categorized properly to optimize them as year-end tax deductions. Tangible and intangible assets are both deductible over a period of time to reduce tax burden, but they can’t be placed on a profit and loss statement.

  • Be inclusive for cash flow projections. Estimates should include bank or SBA loans to purchase the business; lines of credit to provide operating capital or inventory; owner financing and the franchise property (if applicable).

  • Stay on budget. That will ensure positive cash flow so your business can aptly handle both predictable and unexpected expenses.

By implementing Gravity Software’s robust cloud-based accounting application, you can consolidate all your entities onto one secure database, view data on real-time dashboards and work to reduce overhead and expenditures almost immediately. Built on the Microsoft Power Platform (aka Dynamics 365 CRM), Gravity is structured to help your franchise grow and thrive.

If your business needs automated consolidated financial reporting, schedule your online demo today. Just say go!

Gravity Software

Better. Smarter. Accounting.

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