Your go-to guide to making the right choice and the crucial services these financial experts can provide
As a franchisee, deciding which accountant to appoint is an important decision. You’ll hopefully be working with them for a number of years and they should play an important role in offering advice and guidance on how best to build your business, as well as producing your annual accounts and offering tax advice and compliance services.
It’s vital your accountant understands the complexities of setting up and operating a franchise, so they can offer expert advice and guidance every step of the way. Therefore, it’s advisable to appoint a British Franchise Association affiliated accountant, as you can rest assured they will have undergone a rigorous selection process and must be able to demonstrate they possess sound accounting knowledge in the franchise sector.
It’s also worth asking if anyone at the accountancy firm is accredited with the British Franchise Association’s qualified franchise professional qualification. This qualification is the formal recognition of professional knowledge and experience in franchising and demonstrates an understanding of the industry’s complexities and best practice.
Before making an investment
If you have a franchise in mind that suits you and your lifestyle, you should seek specialist accounting advice before parting with your hard-earned cash. As well as the initial franchise costs, there may well be other costs to consider. You’ll also need some working capital until the business is running profitably, which may take a year or more.
Although most franchisors are reputable, unfortunately, there are some that are less than trustworthy and, as a rule of thumb, it’s worth checking that the franchisor is a member of the bfa.
There are strict guidelines to determine whether a franchisor can be granted membership. These criteria include an assessment of the business model, an evaluation of the franchise agreement, a review of the training and support provided and proof that franchisees can maintain profitable businesses.
It’s vital to obtain the correct advice before proceeding with any franchise purchase. I have seen clients struggling in the early years, as they didn’t have a proper business plan with realistic cash flow forecasts and lenders aren’t keen to inject further cash because the franchisee has underestimated start-up and ongoing running costs.
An all-inclusive package is best
Look for an accounting firm that specialises in the franchise sector and offers an all-inclusive accounting package that takes care of the day-to-day bookkeeping, plus payroll and VAT requirements if necessary, and produces monthly management accounts.
Ask if the package includes unlimited telephone support, as your first few years in business may require a certain degree of handholding. This enables you to concentrate on setting up and running your business, rather than spending time worrying about the paperwork, which is proving to be even more important with the new HM Revenue & Customs Making Tax Digital legislation.
Don’t be afraid to ask questions
Never hesitate to ask your accountant a simple bottom-line question.
If you’re debating whether to buy or lease equipment or are concerned about the cost of your insurance coverage, don’t be afraid to seek help. Some people forget that personal financial issues are very often linked to their business and sole traders or partners find their paperwork overlaps with business and family finances. Using a respected firm of specialist franchise accountants will help to establish an integrated approach.
Providing intelligent advice
In addition to a routine accountancy service, you should be offered advice on budgets, profitability improvement and operational procedures. Reporting on profitability is a standard procedure, but helping create it by providing intelligent, entrepreneurial advice is what your accountant should strive for.
A good accountant will help you focus on how to improve the profitability of your franchise by analysing all the elements of your business. This should include:
- Developing a comprehensive business plan. Businesses evolve and so should your plan. It should be designed to enable you to forecast the future, help you stay ahead of the game and assist you to realise your full potential. It’s vital to ensure your accountant regularly reviews the plan with you.
- Advising you how much to invest in your chosen franchise. Don’t underestimate how much you’re going to need to fund the franchise business. Remember, you’re still going to need to live, pay your bills and look after your family while the business is getting established and, quite possibly, not making money.
- Compiling the data you need to secure finance for your business. A good accountant will help you prepare a comprehensive cash flow forecast and should also be able to act as a referral source for lenders and legal professionals.
- Devising the best structure for your business. Are you better to run the business as a sole trader or form a limited company?
- Tightening internal controls. You cannot be everywhere all the time and must put strict internal controls in place to ensure standards are maintained with good financial controls.
- Advising you on bookkeeping, VAT, self-assessment and payroll if required. Ideally, you should look to appoint an accountant who can act as a one-stop-shop for all your accounting needs. This ensures continuity and should offer you the best value for money.
- Offering you mid-year planning sessions to help you improve your bottom line, as well as pre-end- of-year planning, which is vital to ensure you make the most of tax planning opportunities.
- Benchmarking. Where the accountant is the nominated accountant for the whole franchise network, they should be able to offer a benchmarking service that will enable you to compare your performance against that of your fellow franchisees.
- Offering fixed fees. It’s important to know exactly what the service will cost, with no hidden extras.
As with all things in life, you get what you pay for. Taking the time to appoint an accountant who possesses a wealth of experience in the franchise sector will not only give you peace of mind but ensure that your business stands a better chance of success, which after all is why you decided to purchase it in the first place.
Desirie Lea is a director of Morris & Co Chartered Accountants