Benefits of Hiring a Franchise Accountant
There are several advantages to going the franchise route when considering starting a business. They include, among many other things, the benefit of brand awareness and receiving training and support from experienced franchisors. When opening a franchise, you’re sure that your product or service will be marketable.
However, there are serious risks associated with purchasing a franchise that aren’t an issue for non-franchisees. For instance, you can expect the startup costs to be higher on average, let alone the initial franchise fees.
Whether you’re just starting out in the franchise industry or are an experienced franchisee, it is critical that your franchise accounting is complete, timely and accurate. A regular accountant may not serve you appropriately. Fortunately, franchise-specific CPAs exist and can be of great help.
Why Does a Franchisee Need an Accountant?
Buying and operating a franchise requires a large initial and ongoing cash investment. That’s why it’s highly recommended to hire an accountant, no matter how good you are with numbers and spreadsheets. Moreover, there are some accounting issues that are unique to franchising. Therefore it is wise to hire a franchise accountant.
Franchisee fee-related tax implications are unfamiliar to generalist accountants, let alone franchisees with no accounting expertise. There are also franchisee reporting requirements to the franchisor that come with potentially harsh penalties for late or inaccurate reporting. This can make it difficult for you to stick to the Franchise Disclosure Document and Agreement you signed (or will sign) upon purchasing the franchise. By hiring franchisee accounting specialist, you will mitigate all of these issues and experience smooth, seamless franchise operations.
If you get an accountant who is not only familiar with your franchise but also works with other franchises in the same industry, it’ll be an added advantage. Such a person is in a good position to inform you of the specific challenges and lucrative opportunities you’re likely to encounter industry-wide.
Cash is king in any business. Monitoring your cash flow is vital in ensuring that your business is profitable, successful and sustainable. That’s why you should work with an experienced franchise accountant closely and schedule regular meetings to see what’s going on and create strategies for improvement.
Why a Franchise Accountant Mitigates Risks Associated with Starting a Franchise
The risks associated with a franchise startup include:
- The increased cost of the franchise at startup, which includes the initial franchise fee and costs required to start up the business
- Increased employee costs as you’ll need some people to help you run the business from day one
- Increased overhead that include ongoing royalties, wages, and rent
Efficient franchise accounting can help you control these risks, and a franchise-specific accountant can do this in the following ways:
Managing debt. Getting adequate capital to start up a new business is often a major concern for many entrepreneurs. The franchise fee, rent, and immediate wages required make things more complicated. Worse still, you’ll have to make all of these payments before earning a single dollar. If you get into debt, you’ll need the services of a franchise accountant to manage it and keep debt service costs as low as possible. Professionals know how to manage your debt-related costs against normal monthly expenses. This way, you won’t miss payments or incur late payment fees.
Managing employees. In most industries, as a franchisee you will have to quickly hire and train employees. That’s where hiring a franchise accountant comes in. The franchise accountant can help manage employee payments as well as other expenditures, saving you time and reducing stress.
Cash flow management. Improper cash flow management can result in the failure of your franchise. With the need to cover ongoing royalties, wages, and rent on a monthly basis, it can be challenging to do the accounting on your own. By helping you understand your budget, a franchise accountant can help your franchise stay financially healthy.
Gain Peace of Mind that Your Accounting Needs will Always Be Met
There’s nothing as good as having the assurance that you’ll have no problems with your franchise’s accounting. It means you’ll never default on your contract. Moreover, you’ll have no issues with your landlord and employees when it comes to payments. You will also have no issues filing your taxes at the end of the year.
However, the only way to gain this peace of mind is by hiring the right franchise accountant. This means you’ll need to do your homework to find an experienced franchise-specific accountant for your business. Then, and only then, can you be sure that your franchise is going to be successful and profitable.
At My Franchise CPAs, we provide the best franchise accounting services for franchisees and small businesses of all sizes and across various industries. Our unparalleled experience in this industry gives confidence to all of our customers. Whether you’re planning on purchasing a franchise or have been a franchisee for years, you can count on us. Contact us today for a free consultation.
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