Top tips from Chris Roberts, director of Franchise Finance
One of an organisation’s greatest assets is its team of people. But a team consists of more than just employers and employees. There are many stakeholders in a business, think suppliers and referrers - and much more.
One crucial member of your team is your accountant. Every franchisee should have a good one, but unfortunately not every franchisee does. Your accountant needs to understand much more than just a profit and loss account, cash flow and balance sheet - they need to understand you and your business model too.
Take the time to meet with an accountant and explain your personal goals and business objectives, so that you’re all aligned and striving in the same direction. Do you want high profits because you want to impress your bank manager, so you can borrow money in the short term to grow or because you’re looking to sell your business in the medium term?
Alternatively, do you want low profits because you want to minimise tax? A mutual understanding of this is vital to maintaining a beneficial relationship.
You should view your accountant as a member of your extended team. If they don’t fit the organisation’s culture, get rid and search for one who does.
Your accountant needs to understand the whole picture. Business is not simply about money, it’s also about people, sales and marketing, delivering your service or product and providing superior customer value.
A good accountant should be much more than a financial record keeper - they should know or acquire some industry related knowledge (ie, of franchising and your own industry sector) and research the basic benchmark ratios, so they can help you identify what’s good and what could be improved within your business. They should also be identifying trends and discussing the potential impact of these on your business’ performance.
Hold regular review meetings, perhaps examining management accounts on a quarterly basis with your accountant.
Don’t wait until you get your year-end accounts, otherwise it could be too late. You’re entitled to a swift and accurate response, providing of course you provide timely and accurate information yourself.
Top tip: why not ask for a guaranteed service level agreement?
Cost of service
Ensure you know how much the service you want is going to cost you. Consider the best way for you to pay for the service. Would it be better for you to pay monthly or at the end of the financial year? Once you make this decision, you can negotiate a deal accordingly.
Ultimately, it should feel as though your accountant is part of your team, not that an upcoming meeting with them is like going to the dentist or doctors.
Top tip: it makes sense for your business accountant to help look after your personal tax affairs too. They will understand your personal and business objectives, thus your accountant can maximise your tax efficiency.
I would also strongly recommend that in the early years of running your franchise business, unless your franchisor provides a bookkeeping system as part of the franchise package and you fully understand it, you let your accountant do the bookkeeping for you.
This will be more expensive, but there are three key benefits to take into account:
• You can concentrate on driving sales and marketing, thus establishing and growing your business.
• Your Sunday nights will belong to you. You’ll have time to relax and recharge your batteries, instead of worrying about doing the books, because that’s probably the only time you’ll have to do them.
• You should get your yearly final accounts a few weeks after your financial year end (not months after). Also, the part of your accountant’s bill that relates to providing these should be cheaper, because everything will be in place and organised in the correct format.
Top tip: Browse the affiliate section of the British Franchise Association’s website when researching accountants. You can take comfort from the knowledge a set industry standard is being maintained by affiliated firms.
Understand your accounts
While you don’t necessarily need to produce your own accounts, you most certainly do need to understand them. After all, it’s your business.
It’s worthwhile therefore investing some time and money in yourself to ensure you do. You wouldn’t start driving a car without studying the Highway Code, would you? So why run a business without understanding at least the theory of business finance and accounts?
I can assure you it will pay dividends in the end. Quite literally.