Are you thinking of investing in a franchise? Starting a ready-made business has lots of advantages – including support, guidance and a proven business model – but there are also some key things to consider, in particular how you will manage your accounts and finances. We take a look at the basics of franchise accounting:
Why is accounting for franchises different?
While new franchises are essentially small businesses, there are a number of factors you’ll need to consider straight away including business structure, reporting, tax planning and managing fees and payroll. An experienced franchise accountant can identify and help with all of these and make sure you are set up for success from the start. Here’s an introduction to how franchise accounting works:
Buying in to a franchise requires an initial investment. This covers the help you’ll receive from your franchisor, plus access to the franchise’s operational procedures, training and equipment. You’ll also need to pay a percentage of revenues on a regular basis so carefully recording and reporting income is imperative.
A specialised accountant can help franchisees with the tax implications of fees which depending on their trading status. There will be a number of costs that will be tax deductible, like royalty fees. However, limited companies will be different to sole traders and partnerships in terms of what can be considered a capital asset. The type of franchise agreement will impact whether the fees are tax deductible or not.
There are specific reporting concerns for franchises and franchise accountants can help ensure these are submitted on time. With access to the latest cloud-based accounting software to help you monitor and record your franchise accounts, they can also help monitor the health of your franchise.
Staffing & Payroll
Most new businesses start small and grow organically, adding extra staff as and when. Franchises usually have staffing requirements straight away, and if you’re new to the process, the administration around payroll and pensions can be overwhelming. A franchise accountant can set up a simple payroll system for you and ensure that you meet your obligations.
Investing in a franchise often involves more risk and investment from the beginning, but can also generate greater rewards. Having an expert involved from the start means that you can manage income and expenditure effectively and spot risks early.
Why not manage your franchise accounts yourself?
When you are starting out in franchising, an accountant can help you with your business plan and plan for the future. We recommend engaging with an accountant as early as possible to get your processes right from the beginning. More importantly, expert franchise accountants know the specific processes required for franchise success.
Why do I need a franchise accountant?
Working with a qualified, chartered accountant will be one of the most important decisions you make and getting an accountant on your team from the beginning can help you avoid common pitfalls later on.
Chartered accounts are obligated to keep up to date with all new legislation or tax regulations that will impact on you and your business. They can also help you meet tax deadlines, keep your business on track and ensure that you submit on time and accurately.
An accountant can also ensure that you are not paying too much money and are claiming back items on expenses that you may have overlooked.
Contact us today to discuss your Franchise Accounting needs
British Franchise Association
The British Franchise Association is the first point of call for any new franchisee or franchisor. There are only a handful of franchise accountants who are BFA affiliated and these firms are the experts that you want on your team. The BFA (British Franchise Association) recommend engaging with an accountant who is experienced in franchise accountancy.