4 Effective Accounting Strategies for Franchisees in Canada
Need some tips for managing your franchise? Here’s a few accounting strategies for franchisees in Canada to make sure you’re set up for success.
Franchisees have a unique set of concerns when it comes to accounting. This brief guide will help you determine what to look for in the ideal accounting system.
1. Accounting systems should be cost-effective, easy to use and reliable
One of the biggest issues that franchisors have is teaching accounting and other operating systems to franchisees, along with issues pertaining to frequent malfunctioning. To help resolve these problems, there are plenty of off-the-rack accounting systems that are customizable to meet the specific needs of a franchise. Franchisors will be responsible for seeking out these systems.
If a franchisor is using an in-house system, it’s important to make sure that it works properly. If the franchisor is only using franchised units, the system should undergo rigorous testing prior to a system-wide rollout. Keep in mind that franchisees’ endorsement is crucial in reducing resistance and pain when implementing an accounting system.
Affordability is also integral, as new systems should be competitively priced.
2. Accounting systems need to produce actionable financial reports
Helpful financial reports can give franchisees the chance to be more proactive in optimizing financial performance. Reports should include operating results from recent activities along with comparisons to past performance.
If there are any deviations to GAAP standards in preparation and presentation, it’s important to explain the reasons for these differences. For instance, franchisee financial statements are often prepared on a cash basis, but this could result in overstated income that gives the illusion of better performance.
3. The system should compare franchisees’ performance with others
With accurate and clear comparisons, franchisees both weak and strong will be able to determine what aspects of operations could benefit from improvement and the steps they need to take. For instance, labour costs could be too expensive, or the franchise may not be generating sufficient revenue from a certain target demographic.
4. Franchisors need legal tools in place for dependable accounting
Some legal tools that franchisors might use include:
- The right to demand franchisees to use the necessary software and hardware, which is a common requirement in agreements with franchisees.
- The right to approve franchisees’ accountants.
- Requiring franchisees to use the franchisor for all accounting and bookkeeping needs, which helps maintain consistent reporting and timeliness.
- Enforcing requirements for proper reporting if the franchisor doesn’t prepare the reports.
- Family Successions: What Bill C208 Means for Small Businesses in Canada - February 16, 2022
- Best Practices & Tax Tips for the Self-Employed in Canada - February 16, 2022
- How to Reduce Tax Liability When Planning a Family Succession for Your Business - February 15, 2022