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Bookkeeping for Franchise Business

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Accounting and Bookkeeping for Franchise Business

Franchise Business is like a branch or start-up industry that caters main brand’s business in various locations with limited establishment and setup. However, various entities such as a franchisor, franchisees and other regulatory authorities function in this business.

For smooth running and proper functioning of their businesses, franchise organizations require reporting of statements. These statements are of revenue earned, profit, and loss incurred, and business updates concerned with its operations to the concerned franchisor. Then, this reporting takes place ranging from weekly to quarterly and annual periods. They base it on the specifications laid down by the parent company and other regulatory authorities like the ‘Federal Trade Commission’.

Even the franchisor is required to share details and documented information for accounts to the respective franchises that he uses as a reference and for updating. This refers to the franchise disclosure document (FDD) which is a legal report that a franchisor presents to the franchise buyers. Thus, on request, the franchisor should present this document along with other audited financial reports.

Best Practices for Bookkeeping in Franchise Business

One of the best practices for bookkeeping in a franchise business is to keep detailed records of all transactions. This includes keeping track of all expenses and revenue generated by each location separately. By doing so, you can quickly identify any discrepancies or potential issues that may arise. Another important practice is to use accounting software to streamline the process. Accounting software makes it easier to organize data and generate reports quickly. It also reduces human error, saving time and resources. It’s also essential to develop a standardized system across all locations in your franchise network. This includes creating uniform chart-of-accounts (COA) codes that every location uses consistently for income statements and balance sheets. In addition, outsourcing bookkeeping tasks can free up valuable time for franchise owners who would instead focus on growing their businesses rather than getting bogged down with administrative tasks like record-keeping. Regular audits should be conducted at each location periodically to ensure compliance with local laws/regulations while catching errors early on before they become significant problems down the road.

FRANCHISE INDUSTRY

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How to Do Accounting for a Franchise Business?

Financial Understand the franchise agreement: Before you start accounting for your franchise business, it’s important to review your franchise agreement. This document will outline the financial obligations you have to the franchisor, such as royalty fees and advertising contributions.
Set up a chart of accounts: A chart of accounts is a list of all the accounts used in your accounting system. This includes income, expenses, assets, liabilities, and equity. Setting up a chart of accounts specific to your franchise business can help you track your financial transactions more effectively.
Track your financial transactions: Record all financial transactions related to your franchise business. This includes sales, expenses, payroll, and inventory. You can do this manually or use accounting software to automate the process.
Calculate royalties and advertising contributions: Your franchise agreement will specify the percentage of your sales that you owe to the franchisor as royalties and advertising contributions. Calculate these amounts accurately and pay them on time to maintain a good relationship with the franchisor.
Comply with tax laws: As a franchise owner, you must comply with federal, state, and local tax laws. This includes collecting and remitting sales tax, paying payroll taxes, and filing income tax returns. Make sure you keep accurate records of your income and expenses to prepare for tax season.
Seek professional help: If you’re not familiar with accounting principles, it may be beneficial to seek professional help from an accountant or bookkeeper. They can help you set up your accounting system, prepare financial statements, and ensure compliance with tax laws and your franchise agreement.

Profitability with a franchise system

Profitability is a fixed portion of revenue franchisee calculated in percentage form. It is a variable of the fees that is set by the parent company or the franchisor. Therefore, this fee is a determinant of the profit that the franchisees earn. It is a fixed percentage of the revenue made by an organization. Hence, it is also important to set fees based on the ability of the franchise industry to incur start-up costs so as to provide working under a brand name and its products and services. The one time they account for franchise fees is by implementing a policy that will help to calculate the amount to be deducted from the business income tax return.

We can account for franchise fees in various ways. It depends on the franchisee’s convenience and the requirements of the franchise organization and parent company. Two of the most basic account management techniques are ‘franchise royalty fees’ and ‘franchise fees amortization’.

So, through these types of accounts, the franchisee pays its fees over time, which splits up monthly, quarterly, or yearly. The royalty fee is an income for the franchisor which is obtained on the establishment of the Franchise Business. It is a fixed percentage amount of the gross sales that the franchisee pays. Franchise fee amortization is the distribution of the franchise fee over a predetermined period, either yearly or monthly.

Components of bookkeeping in franchise business?

Sales recording: Accurately recording all sales transactions in a systematic way is essential to track the revenue generated by the franchise business. This includes properly categorizing sales by product or service, location, and payment method, to provide detailed and accurate financial data.
Expense tracking: Keeping track of all expenses, such as rent, inventory, equipment, utilities, and marketing expenses, is crucial for monitoring profitability and identifying cost-saving opportunities. Categorizing expenses by type and location can help to identify trends and areas where expenses can be reduced.
Accounts payable: Recording and tracking all accounts payable, including bills and other financial obligations, is essential to ensure timely payments and maintain good relationships with vendors. This involves accurately recording due dates, amounts owed, and payment terms for each account payable.
Accounts receivable: Tracking all accounts receivable, including customer payments and outstanding invoices, is critical to managing cash flow and maintaining a healthy financial position. This includes regularly following up with customers to collect payments and staying on top of overdue accounts to minimize bad debt.
Inventory management: Keeping track of inventory levels and value is crucial to ensure that the franchise business has sufficient stock to meet customer demands. This includes accurately tracking inventory levels, tracking inventory turnover, and regularly reviewing inventory reports to identify slow-moving or obsolete items.
Payroll processing: Properly managing payroll and related taxes for all employees, including salary and benefits, is essential for maintaining compliance with tax laws and regulations. This involves accurately calculating and processing payroll, withholding taxes, and ensuring timely payments to tax authorities.
Bank reconciliation: Regularly reconciling bank accounts is necessary to ensure that recorded transactions match actual bank balances. This involves comparing bank statements to financial records and identifying any discrepancies or errors.

Conclusion

Franchise businesses are a common form of business model, in which the franchisor permits a local business owner, known as the franchisee, to use their products, brand and operational system. The franchisee pays an initial fee and continues to pay royalties to maintain these privileges, while also benefiting from training, marketing help and guidance from the franchisor. This often takes place in sectors such as retail, fast food or services. As part of this agreement, the franchisee must adhere to certain practices with regards to product offerings, marketing strategies and customer service processes.

Hiring Virtual Accountant With Meru Accounting

Why should I choose Meru Accounting for outsourcing bookkeeping services?

Meru Accounting provides world-class services that cater to all the needs of cloud accounting and bookkeeping of your business.

We work on the best accounting software like Xero and Quickbooks, as well as add-ons that will make sure all your work is up-to-date.

Help you with switching from your traditional software to Xero and Quickbooks.

We also manage VAT, BAS, Sales Tax and Indirect taxes for you so you are always ready at the end of the financial year.

How will outsourcing help my business?

When you choose to outsource your accounting work with us, it benefits you in the following ways:

1. Cost-saving
2. Access to skilled and experienced professionals
3. Better management of books of accounts
4. Decreased chances of errors
5. Improve business efficiency
6. De-burdens in-office employee’s dependency
7. Better turnaround time

How will I share my data with Meru Accounting?

We work on virtual technologies like Team Viewer, Virtual Private Network (VPN) to share and access data from your system.
You have to share your accounting software login details.

Through that, we complete all of your work and update it on the cloud, so you can have access to your data from anywhere and at any time.

What if I work on different accounting software than Meru Accounting work on?

Software is not a barrier for us. Due to our strong and professional accounting knowledge, we can prepare your books in almost any of the accounting software.

Where do I contact in case of any confusion?

Our experts are always all ears to listen to your queries regarding bookkeeping and accounting or our services. You can contact us anytime by visiting: Contact Us page.

How much Meru Accounting charge for bookkeeping services?

We provide our bookkeeping services at the rate of US $10 per hour. So, you only need to pay for the amount of time actual work is done.

What does Meru Accounting do to secure data of its clients?

We take certain preventive measures to secure your data, like:

Cyberoam Firewall to prevent any kind of foreign threat.
Dual-step authentication
Implement anti-virus
Limit user access so that login details are with a few people.

What are the accounting software’s Meru Accounting work on?

Meru Accounting work on some of the best accounting software’s like:

Xero
Quickbooks
Netsuite
Saasu
Wave
Odoo

Along with that, we also work with many add-ons like Workflow Max, Receipt Bank, Slack, TradeGecko etc., to extend your software’s capacity and improved work experience.

How can I book for a free trial?

To book for trial, call us on our numbers or Please fill out the form here.

Our Work Information

What qualifications and professional memberships do you hold?

We have combined team of Professionals. Seniors are generally Certified Chartered Accountants. Junior Bookkeepers are having Qualifications like Bachelors of Commerce, Masters of Commerce, Masters in Business Administration in the subject of Accounts and Finance, Intermediate level Qualification of Chartered Accountancy, etc.

What is your Work Methodology?

For information visit our work methodology page.

Do you have suggestions to make my Bookkeeping procedure stronger?

We prepare a checklist of information required for bookkeeping and send you at timely intervals so as to ensure that we can do bookkeeping faster.

Australian references including business name, contact name, email and phone number.

We can provide to you once we move ahead in our interview.

Why are you an MYOB expert?

We serve clients on MYOB and have expertise working in Essentials, Account Rights Plus, etc.

Have you managed payroll on XERO before?

Yes, We are presently processing Payroll for Number of clients in US , UK and Australia and take care of complete payroll activities.

What is GST?

Goods and Service tax (GST) is levied on sales of all the goods and services in Australia. GST is generally chargeable at 10% of value of sales.

What is BAS?

Business Activity Statement is a predefined form to be submitted to the Australian Tax office by all the business persons in order to report on their all the tax obligations during the period covered.

How often does business submit BAS?

BAS is generally required to be filed quarterly by various businesses.

Individual Business Owners

Can the Owner of the Business file the tax return on his own ?

Yes, Owner of the business can prepare sign and lodge the tax return on his own. Its not mandatory that the Tax return needs to be signed by an EA or CPA.

Is it mandatory that Tax return can be prepared by only CPA’s or EA in USA ?

No , its not mandatory that it should be prepared by only CPA or EA. It can be prepared by anyone who has PTIN.

Do Meru Accounting have the authority to file the Tax return ?

We have Enrolled Agent who has the Authority to sign the documents for our clients after completing the through professional check.

Why Prices of Meru Accounting are so less compared to CPA’s in United States:

Meru Accounting has its operational centre in India and hence the prices are quite less as compared to US based CPA’s and Enrolled Agents.

What type of Quality is Expected from Meru Accounting?

Meru Accounting has a team of Tax experts. Each Tax expert prepares around 300-400 Tax returns every year for various CPA’s in United States and Individual Businesses like yours. Due to this vast Experience and Robust Quality Check processes in place we can ensure you about correct Tax planning for your firm.