10 Accounting & Bookkeeping Must-Knows for New Franchisees
Many franchisees choose the franchise route to start a business for its stability, reliability, or “business in a box” type of start-up. But once you’re a franchise owner and responsible for managing your own small business, it’s up to you to make it a success.
One crucial part of small business ownership that helps entrepreneurs scale and remain profitable? Streamlined accounting processes and clean, organized, and accurate books.
So, if you’re a new franchisee seeking accounting and bookkeeping best practices, this is the guide for you. Keep reading to learn the top 10 accounting and bookkeeping must-knows for new franchisees.
10 Bookkeeping Must-Knows for New Franchisees
We know how busy business owners can be, so let’s not waste any time. Here are the top 10 must-knows for owning your own franchise business.
Franchise Disclosure Document (FDD)
The Franchise Disclosure Document (FDD) serves as a crucial roadmap for potential franchisees. It is a thorough disclosure document that franchisors provide about the franchise opportunity.
From the franchisor’s financial health to the initial investment required, ongoing fees, and even litigation history, the FDD offers an in-depth look into the franchisor-franchisee relationship.
Understanding the FDD is vital for new franchisees, as it empowers them to make informed decisions about their investment. By reviewing the document, prospective franchisees gain clarity on the risks, obligations, and potential rewards associated with joining the franchise system, ensuring they enter into the partnership with eyes wide open.
Unique Franchise Fees
One unique thing about owning a franchise is that there will be ongoing fees associated with the operation. Franchises often have ongoing royalty fees, marketing fees, and other costs not typical of independent businesses. First and foremost, you’ll want to make sure you’re aware of all of the franchise fees you’ll be subject too.
Secondly, you’ll want to ensure these fees are included in your financials, and be sure your bookkeeper or accountant is aware too.
Accounting Software
Many franchisors have specific software requirements for bookkeeping. This means you’ll need to investigate your chosen franchise’s needs and explore your comfort level with the software. The more familiar you are with the accounting software that your franchise uses, the better you can use it to your advantage or navigate it successfully.
Tax Implications
Understanding the tax obligations specific to your franchise model is crucial. Why? Tax requirements vary based on factors like location, business structure, and industry regulations. New franchisees should prioritize comprehending the tax implications related to franchise fees, royalties, and other ongoing payments to the franchisor.
Additionally, new franchisees should also be aware of state and local tax laws governing their operations, including income tax, sales tax, and employment taxes.
Compliance Requirements
When you own a franchise not only will be you responsible for keeping care of its books, but be sure it’s operating legally. Franchises often have specific accounting and bookkeeping procedures that are required to be followed by local, state, or federal jurisdictions. Knowing these compliance requirements is especially important considering the penalties can impose costly fines.
Hiring a Bookkeeper
Many business owners and franchisees start off thinking they can do it all on their own. However, very quickly, they realize, they’re spread too thin. Instead of taking care of your own books, it pays to hand them off to professionals. Especially franchise-experienced bookkeepers, like those found at T2B and other accounting firms.
Understanding Your Financials;
It’s one thing to have your financials produced every month, it’s another thing to understand them and use the numbers to your advantage. When you start off as a new franchisee, it’s important to develop a strong foundational understanding of financial statements (profit & loss, balance sheet) to monitor performance.
Record-Keeping Practices
Another important bookkeeping practice to keep up with is tracking and storing records. From the start, establish a system for tracking receipts, invoices, and other financial documents for tax and reporting purposes. This is often done in accounting software, where access is then given to a bookkeeping specialist to keep track of and produce reports for monthly tracking.
Financial Projections
Speaking of reports, staying in tune with and on top of your finances and projections is another way to stay successful and scale. Throughout the year, whether monthly or quarterly, revisit and update your financial projections regularly to ensure your business remains on track.
Seeking Professional Help
Again, we can’t stress this enough. Don’t hesitate to seek guidance from a qualified accountant with franchise expertise. Whether it’s tax preparation, bookkeeping, compliance, or other areas, outsourcing tasks that you’re not an expert in will allow you to focus on the day-to-day operations while the professionals handle the rest.
The Final Word: Succeeding as a New Franchisee
At T2B, we’re proud to support new entrepreneurs, whether they’re starting their own business or becoming franchisees. On staff, we have franchise accounting experts ready to help you with all of your bookkeeping and payroll needs. As well as general consulting to help your business scale.
Set your franchise up for success from the start. Schedule a complimentary consultation with a franchise accounting expert from T2B Solutions!