We get it, keeping track of financial data and bookkeeping are daunting tasks. These processes often leave you working overtime and take you away from key tasks that contribute to franchise growth. Financial data is complex, which can lead to business owners and those responsible for business finances lacking confidence in their calculations and lack an understanding of what it all really means. In fact, 21% of small business owners acknowledge having insufficient knowledge of bookkeeping.
In this article, we outline the top three mistakes franchisors make when it comes to financial data and bookkeeping so you don't have to add rectifying errors to your to-do list.
1. Not standardizing financial data
A standardized chart of accounts is the foundation a franchisor can use for all franchisees. Books must be produced consistently in order to compare one franchisee to another. If not standardized, and left to the franchisees and their accountants, the franchise system can have various versions in multiple areas. One person might break out all overhead costs while another might combine them. Additionally, it’s crucial for financial statements and revenue accounts to follow the same naming conventions. It is nearly impossible to compare and contrast the financials without standardization.
The benefits of standardized financial data are endless. Standardization allows franchisors to see the big picture of how their brand is performing. It enables them to accurately utilize key performance indicators (KPIs) to compare how each franchisor is doing. In turn, this allows the franchisor to identify what certain franchisees excel in or even if there are franchisees that are in need of more help.
2. Not automating the royalty fee collecting process
Royalties contribute to the cost of the corporate infrastructure intended to rally behind your franchise and guarantee everyone's financial success. In any case, ensuring the seamless transfer of royalties to your franchisor is in the best interest of all parties. Your royalty payments may be a fixed charge, a percentage of gross income, or both.
But collecting fees, payments, accounts payable, and more is challenging for any business. And a franchise system is no exception. A way to eliminate the burden throughout this painful process is to establish an automated system that allows you to collect royalty fees without having to spend your time chasing down franchisees.
When a franchisor uses standardized financial data and an automated royalty fee collection system, it makes for a much more efficient franchise system.
3. Doing your own bookkeeping
It’s very common for franchise owners to hold the mistaken belief that performing their own bookkeeping can enable them to save money. DIY bookkeeping is really more expensive in the long term and can subject you to tax concerns, severe penalties, and cash flow issues. Ultimately, it can severely restrict your access to financing and slow your growth if you don't keep accurate current accounting records.
Luckily, there is technology out there to help automate bookkeeping and ensure accuracy. Franchisors can also take advantage of cloud-based software to automate financial tasks that help increase profits when paired with bookkeeping services.
Let Technology Take the Lead
Investing in the right technology can help you free up time in your day to spend doing what you love…and avoid spending those holiday weekends sinking in your books. The right provider can help you simplify your franchise operations and maximize profitability with services that take care of financial statements, KPIs, and royalty reporting. Some providers even offer bundled options that handle payroll, HR, talent management, and other critical tasks.
And when the right franchise technology system is paired with bookkeeping services, you can rest assured knowing that your critical business data and financials are in good hands.
Make the right choice with ProfitKeeper by PrimePay
Imagine a service that not only does the work for you but ensures the data is accurate and useful. That’s ProfitKeeper by PrimePay.
ProfitKeeper automates the collecting of financial data and KPIs from franchisees, assisting franchisors in boosting profitability and expanding their brand.
Our robust franchise system is also paired with a bookkeeper, so you can see your key franchise analytics as well as leave the bookkeeping to the experts. Click here to learn more about how you can succeed with ProfitKeeper.