So many Australian franchise businesses are being hamstrung by accounting and financial inefficiencies. These growth limiting factors can limit your revenue, profitability, research and development, product expansion, talent acquisition, and sales and marketing.

The 5 most common accounting and financial inefficiencies facing businesses just like yours are Cash Flow Management; BAS Lodgement + Taxation; Accurate Record-Keeping and Real-Time Data; Budgeting + Forecasting; and Managing Growth. Let’s look at each one and why your business may be hamstrung by one or more of these inefficient accounting ‘symptoms’.

Cash Flow Management

Cash flow management is a critical function for any Australian business, and it’s no different for franchise groups. Keeping accurate and up-to-date cash flow records are obviously essential for managing the day-to-day operations, but franchises have another layer of complexity. Inaccurate or false cash-flow and accounting data at the store or franchise-level can have significant impacts on fees and royalties, and in turn, revenue and profitability.

Accurate Record-Keeping + Real-Time Data

For many franchises and multi-site businesses, the accounting for each individual store or site is often handled by the respective owner or manager. This can be fraught with danger, as even with strict SOPs and guidelines for entering financial information, there is so much room for error and misinterpretation. Multiply these errors out over dozens, or even hundreds, of site locations and your ability to keep accurate financial data is significantly diminished.

The long running effect of this makes tracking performance across and between sites extremely difficult, leads to potential missteps by making decisions based off inaccurate or incomplete information, and requires countess hours of rework from head office administrative staff. All costing the business extensively.

BAS Lodgement + Taxation

Understanding and complying with tax regulations can be highly complex, and many Australian franchises struggle with tax planning and reporting. This leads to errors, missed deadlines, and penalties from the Australian Tax Office (ATO). One common error that continually encounter is with the timely lodging of BAS (Business Activity Statements). Where, in many cases, late lodgement meant that businesses missed out on valuable rebates that are essential to managing their day-to-day cash flow position.

Budgeting + Forecasting

Without accurate and timely financial data to give a clear snapshot of the past and present, there is no way to reliably plan for the future. Franchise businesses that cannot budget and forecast from an informed position will remain stagnated with limited prospects for growth.

Ineffective Growth Management

Planning for growth involves investing in infrastructure, technology, and personnel well in advance. An overwhelming challenge for many franchises is managing the financial side of business growth. Having a clear understanding of what areas/products/markets should be prioritised; how growth will be funded; and which existing franchisees can be a part of the next phase of strategic growth – just some of the burning questions that will need to be answered.

Many businesses try to grow too fast or make critical missteps when attempting to expand. Facilitating better decision-making about the future of the business, and tracking performance against objectives, is simply not viable without robust accounting systems that deliver timely and accurate information to all stakeholders. A concept that most finance teams understand well, but one that is quite difficult to maintain with so many moving parts.

What are the common causes or triggers of these inefficiencies?

Managing the financial arm of a franchise group is so much more challenging than that of other business models. Simply due to the number of points where errors can occur. There is seldom ever just one root cause of these poor accounting symptoms, but we tend to find a common thread among suffering franchise businesses with one or more of the following characteristics present:

1. Small internal financial teams that are under-resourced and overstretched, and simply can’t scale with the business.
2. Acquiring the best and most appropriate accounting resources has become significantly more expensive. [link to next article]
3. External partners that don’t have the capability or industry knowledge to fulfill all your financial needs.
4. Individual managers and franchisees completing accounting tasks with limited understanding, utilising their own methods and processes.
5. No formalised, group-wide accounting processes exist and where they do, misinterpretation and non-compliance lead to constant mistakes and costly rework.

Remaining competitive and thriving in the franchise industry is dependent on so much more than just delivering a great product. From an operational perspective, your accounting and financial management practices can give you a leg up on competitors, or they can be your Achilles heel. Now, setting robust financial infrastructure won’t guarantee your franchise success but they will go a long way to improving cash flow management, the accuracy and timeliness of business data, BAS lodgement and taxation processes, budgeting and forecasting capabilities, and effective growth management. And these are each powerful levers to pull when driving long-term success.

If you’d like to discuss the health of your business’s accounting and financial management, or you’ve become aware of gaps you simply don’t have the resources to fill, reach out for an obligation-free chat.

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