Managing the financial and accounting functions of a growing franchise group is a challenge. Far more so than most other business models out there. With so many moving parts and a vastly greater opportunity for costly errors to occur, franchise finance managers certainly have their work cut out for them.

In many cases, finance teams within even medium-to-large franchise groups are significantly under-resourced and overstretched. Relying on individual stores and franchises to deliver accurate and timely financial data to drive informed decision-making. More often than not, these internal teams are bogged down in costly and monotonous rework to fix simple yet critical errors. So, the resource requirements for these organisations can be quite large.

However, building a finance and accounting function internally – one that scales with the business – is a difficult and expensive venture. Australia is witnessing an overall lift in the costs of employee recruitment and retention, training and development, technology implementation and maintenance, and compliance. Not to mention the indirect opportunity costs of better allocating resources to more value accretive projects.

Misinformation and double handling

Relying on a solely internal accounting function puts a lot of faith in your franchise and store managers’ ability to regularly record and deliver accurate, timely financial data to the broader group’s key stakeholders. Even if your franchise agreements and training protocols outline specifically how to handle all accounting information, there is always room for misinterpretation and entry errors.

Extrapolate these accounting errors across tens, or hundreds, of individual franchises and stores. This leaves you with a very inaccurate financial picture to draw meaningful insights from and inform important growth and strategy decisions. Another indirect cost of this misinformation issue is the double handling of data by head office admin staff, who are charged with cleaning up the numbers to form something usable by the business.

Recruitment and retention costs

Hiring and retaining skilled accounting and finance professionals is a significant expense. And the cost is only getting greater, where in Australia, demand is well and truly outpacing supply. We have witnessed a steady decline in graduating finance and accounting professionals since 2014, along with a growing business requirement for local talent. As a result, the costs to acquire and retain quality staff have increased dramatically, while job mobility in Australia is still on the rise.

Training and development costs

The cost of constant retraining and reinvestment in employee development is often underestimated. Businesses need to ensure that staff stay up to date with current accounting standards, regulations, and technologies. This is particularly pertinent within the franchise industry, where financial regulations and reporting requirements can vary widely depending on the type of franchise, industry, and location.

Compliance costs

Accounting and taxation compliance can be tricky enough in a regular business setting. The additional layers of complexity that come with not just having to maintain compliance at the group level but ensuring that individual stores and franchisees operate with the same standards can be drain on resources and capital. Failing to meet compliance and regulatory standards risks fines to the group and franchisees, and further impacts cash flow and operating margins.

Technology costs

With growing complexity, reporting and compliance requirements, most of the heavy lifting is now done by technology. Helping franchise groups automate accounting processes, reduce errors and gain detailed insights into financial performance. However, the costs associated with implementing these technologies and effectively maintaining best practices can weigh heavily on franchise businesses, especially smaller groups that may not have adequate resources to purchase and maintain these complex systems.

Opportunity costs

Possibly the greatest cost of building and maintaining an internal finance team is the opportunity cost of how else those valuable internal resources, and capital, could have otherwise been deployed. Whether at the group or individual franchise-level, running an internal finance function can distract businesses from their core competencies and limit their ability to focus on strategic growth and innovation. In turn, having a negative impact on long-term growth and profitability.

What to do instead

Given the high costs and certain risks that will often accompany managing finance and accounting in-house, many Australian franchise groups are turning to outsourcing and other alternative solutions to fulfil this need. Outsourcing provides access to highly skilled professionals, advanced technologies, and scalable solutions that can be customised to meet your specific needs. Here are some of the key benefits of outsourcing your finance and accounting function.

• Reduced costs – Outsourced providers can leverage economies of scale to deliver a more affordable solution. Helping you minimise the recruitment, training, compliance, technology, and opportunity costs associated with managing finance in-house. Plus, you only pay for what you need, when you need it.
• Access to expertise – Working with an outsourced finance team gives you access to a range of skillsets that are quite difficult and costly to build in-house. With the pool of local talent in the finance and accounting space shrinking relative to the demand for their skills, outsourcing not only saves money but also helps reduce staff turnover.
• Scalable solutions – As your business scales, the financial and accounting requirements will also evolve. Having an outsourced partner that can meet these demands as you grow, and scale with you, is a massive competitive advantage. On-boarding new franchisees and products becomes evidently simpler.
• Increased efficiency – Outsourcing the accounting function can help franchises improve efficiency by streamlining processes, reducing errors, and automating tasks. Inevitably, delivering more accurate, real-time data to those that need it. It also frees up time and resources that can be allocated to other strategic priorities, such as expansion and improving customer experience.
• Risk mitigation – Having a finance and accounting partner that is responsible for the outcome, rather than just a series of tasks, mitigates your risk of late, inaccurate or non-compliant accounts. Saving you from legal and other financial headaches.

It really is a goliath task to effectively manage the finance and accounting for an entire franchise group. This undertaking can be made even more challenging by constantly receiving incorrect, incomplete or delayed financial data from franchisees. And building a highly competent internal team that can still adapt and deliver in these conditions is becoming more expensive.

Outsourcing the finance and accounting functions to a quality third-party partner can provide you access to skilled professionals, advanced technologies, scalable solutions, and risk mitigation strategies. Helping to improve financial performance and shift focus back on to your core competencies.

Get the outcome without the oversized financial investment. Aretex can help streamline your franchise’s accounting processes to deliver accurate and timely data, at a fraction of the cost of build the right infrastructure internally. Get in touch with Aretex today.

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