Like other types of business, properly managing your accounts and staying on top of your finances is crucial to success. One of the main challenges you must face when running a franchise is dealing with debt.
The advantage of starting a franchise business is the business model is already tried and tested, plus you get support from people who been there before – you simply have to follow the process. The downside to this is higher costs. Most people fund these additional costs with debt.
This includes the start-up costs (the franchise fee, for example) and the costs of running the business in the early months and years. Both are higher than they would be if you started a business on your own. For example, you may need a full complement of staff from day one in a franchise business whereas if you start from scratch you can build up staffing levels on a more gradual basis.
Dealing with this debt can put strain on your cash flow which in turn can lead to other problems in the business.
Accounting Tips When Running a Franchise
- If you don’t understand the basics of business accounting, take steps to learn them as soon as possible – before you start operations
- Improve your accounting skills and knowledge on an ongoing basis
- When researching finance options, look for loans that let you refinance at a later date, if possible
- Seek expert help to review all your options before agreeing any new loans
- Regularly review your debt position once you get the business up and running as finance options and the financial position of your business can change
- Track every transaction and keep good records
- Create cash flow forecasts so you can see where and when problems might arise
- Create sales forecasts and targets to ensure your business stays on the right growth track
- Setup direct debits for your monthly loan repayments so you don’t incur additional fees due to late payments
- Use accounting and payroll software to speed up the process of doing accounts and managing payroll, and to reduce errors
- Manage tax properly by, for example, getting your returns in by the Revenue’s deadlines and ensuring you pay the right amount of tax
- Get an accountant as they will help you achieve all the objectives listed above as well as providing advice on things like how to manage your accounts more efficiently, how to ensure you are tax efficient, and steps you can take to make your franchise business more profitable
Proactively managing your accounts, particularly with the help of an accountant, is the best way to stay on top of cash flow, repay any loans you take out to finance the launch of the franchise business, and ensure the business is a success.
To find out more about how Gilroy Gannon can help your franchise business, please contact a member of our team today.