When franchisees stray from franchisor-established accounting practices, serious problems arise. Franchisees who find their business performing below expectations often turn to the franchisor for answers. Franchisors find it difficult to offer support, however, when financial data is either inaccurate or difficult to access.
“In the absence of quality information, it’s impossible for the franchisor to evaluate and provide recommendations to the franchisee as to how they can improve their business,” says Larry Schwartz, Director and Senior Consultant of the Franchise Services Group at RBZ, LLP. To resolve this issue, franchise organizations turn to efficient and effective cloud-based accounting systems. “Sound information is fundamental for both franchisees and franchisors to better manage their businesses,” says Tom Compere, CPA, Manager of Client Accounting Services at RBZ, LLP.
Smart Business spoke with Schwartz and Compere about the advantages franchise organizations can realize by implementing cloud-based accounting systems.
What are the benefits of cloud accounting?
Moving to a cloud-based system means financial information can be accessed anywhere, from any device, at anytime. Transactions are automated via linked bank accounts or point-of-sale systems, which means that financial information is updated in real-time. This helps franchisees easily monitor the performance of their business. Bookkeeping, then, becomes standardized so franchisors can be assured information reporting at the franchisee level is always accurate and up-to-date.
One of the biggest pain points in the franchisor/franchisee relationship is the lack of accurate financial reporting that is key to the success of running a business. A cloud-based accounting system eliminates this pain point by providing immediate access to financial information. Franchisees also rely on the franchisor to help them evaluate and provide advice about how to improve the performance of their business. Underperforming units can affect the entire franchise system and damage the brand.It is very important that accuratefinancial information is available to the franchisor in order for it to provide this level of support. Cloud accounting is more efficient and accurate than traditional desktop software or paper-based processes. The system can also provide alerts, such as when bills are due, and offer a portal through which users can log in and authorize payment.
What do businesses need to know when migrating to the cloud?
Security and risk should always be considered when migrating to a cloud-based accounting system, so careful due diligence is critical. Make sure software vendors have the resources and capitalization to support your business properly, and have a track record of success. It’s important to choose software that is easy to use so user adoption is not an issue. Accounting systems are only as good as the processes behind them, so planning is key. Making sure that documentation about how processes will change and what they should look like when new software is installed will also place the franchisor in a better position to train their franchisees to use the new system.
How can cloud accounting create efficiencies in a franchising business?
Another pain point for franchisors is getting franchisees to adopt and maintain best practices with regard to accounting procedures. This not only affects the franchisor’s ability to help the franchisee grow and develop their business, but it also affects royalty compliance. Royalty fees — generally paid on gross sales — hinge on the franchisee’s ability to report accurate financial data. If the accounting data is not maintained properly at the franchisee level, it cannot be reported back to the franchisor in an accurate and consistent manner. This potentially affects the royalty stream of the franchisor, which can then affect the entire franchise system.
Accounting issues typically cause unnecessary friction between franchisors and their franchisees. Cloud-based accounting eases the problem, offering a standardized platform through which data can be tracked, and can ultimately improve performance for the entire organization. ●
Larry Schwartz is Director and Senior Consultant for the Franchise Services Group and Tom Compere, CPA, is the Manager of Client Accounting Services at RBZ, LLP. Reach Larry or Tom by phone at (310) 478-4148. Reach Larry by email at firstname.lastname@example.org or Tom at email@example.com
Insights Accounting is brought to you by RBZ, LLP