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The Basics of Franchise Accounting

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StrategyDriven Managing Your Finances Article |Franchising Your Business |The Basics of Franchise AccountingOwning a franchise is an easy and affordable way of starting a new business. As a franchise owner, a lot of the heavy lifting involved in starting a business is already done for you. Franchisees can take on an already established brand and don’t have to worry about marketing themselves, as this is done by the franchise centrally.

All the franchisee needs to worry about is dealing with the day to day running of the business, which includes the accounting. Many aspects of a franchise business will be managed centrally. In particular, the costs of marketing and developing new products don’t fall on the shoulders of individual franchisees.

Franchise accounting is similar to accounting for any other type of business, although there are a few extra steps. Let’s take a look at exactly what a franchise is and how they are run and managed.

How do Franchises Work?

A franchise location is owned by an individual, the franchisee. However, the franchise as a whole is owned by a larger corporation. For example, each individual McDonalds store is owned and operated by an individual franchisee. However, McDonald’s decides what’s on the menu, how the store functions, etc. They also handle all of the marketing and other costs of developing and growing the business.

franchising makes owning and operating a business accessible to people who would otherwise be unable to. Returning to the example of McDonald’s, a franchisee may be able to open a McDonald’s franchise as the first business that they run themselves. It’s hard to envisage most people launching a startup that has the kind of name recognition that McDonald’s does, or the existing infrastructure.

With the franchising model, new locations can be opened easily and quickly. From the perspective of the larger franchise business, this makes expanding a much simpler proposition. New franchisees will bear many of the responsibilities, and some of the costs, of opening a new franchise. If the new franchisee fails, the franchising corporation hasn’t lost as much in terms of time and money as it would if it had invested fully in a new physical location.

Franchisees, on the other hand, get to open a new business with an already established customer base, marketing strategy, etc. The franchisee will have to pay the franchising business according to their contract. This can either be in the form of a percentage of the profits, or it might be a flat rate.

Role of the Franchisor

The franchisor is the larger corporation that ultimately owns all the franchises. They manage the brand and business as a whole, deciding how to market the business and how to develop the available product ranges. The franchisor also provides assistance to their franchisees as and when it is needed.

Fees and Franchise Accounting

A franchisee owns the franchise location that they run, even though the business they operate is under license from the franchisor. They are required to follow all the guidelines set out by the franchisor. If they don’t, the license can be revoked and the franchisee can end up with a location but no business to occupy it. The franchisee will be required to pay fees to the franchisor; that’s how the franchising business makes their money.

The fees a franchisee pays are used to cover a number of costs. For example, these fees allow the franchisee to use the franchisor’s trademarks, brands, products, and services. Franchisors are legally required to set out all the fees involved in being a franchisee upfront and they cannot spring unexpected charges on the franchisee at a later date.

There will be an initial fee to pay the franchisor, which serves as a kind of entry charge. There will also be some form of ongoing fee, usually a royalty fee. Proper franchise accounting requires you to be familiar with all the expected fees and charges; you won’t be able to maintain accurate accounts unless you know what deductions and fees to factor in.

Initial Fees

The initial fee is the entry fee that grants the franchisee the right to use the franchisor’s trademarks, including brand, products, services, logos, etc. And, of course, the most important thing your initial fees will pay for is the right to use the franchisor’s name. Finally, your initial fee will cover some of the costs associated with opening a new business.

For example, the franchisor will cover the costs of training staff to use their point of sale systems, as well as any other in-house sales software. Initial costs are paid as a lump sum to the franchisor. Before you pay any initial fees, it is important that you establish exactly how much business capital you will need.

Amortizing Initial Fees

When filling out a business tax return, a franchisee can deduct their initial fee from their total profits; this is known as amortizing. Amortizing is similar in nature to depreciation, except that it deals with tangible rather than abstract assets. By amortizing a fee, its cost can be spread out over several years. This makes it possible for franchisees who can’t afford to pay a lump sum to instead pay the fee gradually over the useful lifetime of tangible assets, such as trademarks.

You can amortize the fee over a relatively long period of time, paying off fractions of it annually. For example, if you amortize your initial fee over a period of 20 years, you divide the total fee by 20 to work out how much of it you will pay per annum.

Royalty Fees

Royalty fees are the main way that the franchisor makes their money. Royalty fees are a little bit like a tax that the franchisee pays on every sale. This is the cut of the profits that the franchisor gets in exchange for essentially providing the core business. In some cases, royalty fees might be specified at a flat rate. However, the majority of the time they will be paid as a percentage of sales.

Marketing Fees

Some franchisors will further charge franchisees to cover the costs of marketing. Even though individual franchisees aren’t involved in the centralized marketing efforts, they still benefit from the effects of new marketing campaigns, so it does make sense that the franchisor would want to recover some of their investment.

Both franchisors and franchisees need to understand the intricacies of franchise accounting if the arrangement is to work. A mistake in a franchisee’s bookkeeping can end up in the franchisor being paid incorrectly and can lead to a distorted image of how healthy individual franchises are. For this reason, many franchisors are now centralizing their accounting and utilizing cloud-based accounting software. This allows individual franchisees to access and update their business accounts on a daily, weekly or monthly basis.

Conclusion

Franchise accounting needs sophisticated accounting software like QuickBooks Enterprise hosting which can be accessed on Citrix Xendesktop VDI that enables accountants to work remotely for franchise-based models to work from anywhere anytime.

Saving Money As A Startup – Ways To Increase Your Margins

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Launching a business is never a walk in the park, not least during a pandemic when the future is uncertain. Despite economic concerns, there are advantages to setting up a startup at the moment. The Covid-19 crisis has caused widespread disruption, but it has also created opportunities. If you’re just starting out on your entrepreneurial journey, it’s crucial to keep a close eye on the books. In this guide, we’ll explore ways to save money and increase your margins.

StrategyDriven Starting Your Business Article | Saving Money As A Startup - Ways To Increase Your MarginsInvesting in technology to improve efficiency

Increasing efficiency in business is often an effective means of saving time and money. Technology has become increasingly critical for businesses in recent years, and it offers company bosses the chance to streamline and speed up operations, reduce the risk of errors and introduce cost-effective ways of working. If you’re thinking about investing in technology for your startup, undertake extensive research, keep track of what your competitors are doing and look for devices, machinery, software or equipment that will enable you to work faster, provide a better service, offer a more diverse range of products or services than your rivals and lower costs. Think about what your business needs and consider hiring or buying second-hand equipment to save money. Hiring makes financial sense for short-term projects, while buying used machinery can work out a lot cheaper than buying brand new models. Whether you’re looking into water cooled chillers, construction vehicles, coffee machines or computers, it’s advantageous to explore the options on the table, compare prices and analyze the impact of your investment. Search for value for money, rather than the lowest price, and choose reputable manufacturers and trustworthy retailers.

Flexible staffing options

For many fledgling businesses, paying wages accounts for a substantial portion of the monthly budget. The majority of businesses need to employ staff, but there are alternatives to hiring employees on permanent contracts. You may find that flexible options work better for you, especially if you run a seasonal business, or you take on multiple projects. If you run a construction company, for example, you may want to look for talented individuals to work on specific jobs, rather than employing a team of workers on a full-time basis. If you manage a store that sells Christmas decorations, or you run a business that handles vacation rentals, for example, you will go through busy and quiet periods, which demand different staffing levels. Hiring on a short-term basis will ensure you have access to the staff you need to thrive during busy periods while saving money when sales start to dwindle. You can also save money on wages by starting with a relatively small team and adding new recruits as your business grows.

Another option to consider is whether you could hire a student to support your business? Students will cost your business less to employ but in some cases can do the job just as you require. Many will be looking for a job to support their degree, so if your business is within that field, then their knowledge could be invaluable. Plus, when you hire a student, you could use their student ID when buying their equipment to save some money. If you require them to travel, student ID’s will help reduce the train fair or bus fair depending on who they travel with.

Outsourcing

Outsourcing has become increasingly popular among small and medium-sized businesses, and it can offer a cost-effective alternative to employing new members of staff. Outsourcing involves working with external agencies or hiring freelancers to take control of certain jobs. It enables you to access skills that you might not already have on your team, and you can also free up time for your employees. Examples of tasks and services that businesses commonly outsource include professional cleaning, accounting and payroll management, IT and marketing. If you own a clothing brand, for example, and you want to drum up interest and try and boost online sales, you could outsource marketing, joining forces with a digital marketing agency to draw up and manage targeted campaigns that are designed to increase sales and improve your ROI. By outsourcing, you can save money on hiring while also benefiting from access to expertise you don’t have in-house.

Negotiating with suppliers

Negotiating skills are imperative in business. Whether you sell products or services, it’s highly likely that you will need to engage with suppliers, distributors and logistics firms to get your business off the ground and provide your customers with an efficient service. At every stage, be willing to negotiate on price, but understand the importance of presenting a professional image. There’s nothing wrong with trying to drive prices down, but be realistic and make offers that are reasonable.

Streamlining your marketing strategy

Marketing plays a crucial role in helping businesses to connect with customers, generate leads and increase the chances of making sales. When you launch a marketing campaign, you want to ensure that you have the best chance of achieving your objectives. This is why it’s beneficial to seek expert advice and to link up with agencies or individuals with an outstanding track record. There is a risk of a campaign falling flat, and not every marketing strategy works. You don’t want to invest money in techniques that don’t work or campaigns that don’t reach the right people. Streamlining your strategy can help you pinpoint target customers, generate high-quality leads and promote your brand in the best possible light. Make use of analytics to track progress and use market research and customer feedback to improve and modify your strategy. If you’re targeting young people, for example, advertising and sharing posts on sites like Instagram is going to be more effective than posting on Twitter. If you’re setting up a local business providing services like roofing, dog walking or gardening and landscaping, focus on local SEO and use flyers and local press adverts to connect with residents in the area. Over 85% of people who search for local businesses on a smartphone will either make contact or visit within 24 hours. By focusing on methods that work, you can increase ROI and eliminate expenses related to techniques that have failed to make an impact.


Every dollar counts when you’re running a new business. If you’ve recently launched a startup, or you’re in the early stages, there are ways to lower costs and increase margins. Think carefully about your recruitment strategy and explore flexible staffing solutions, negotiate with suppliers, invest in technology that will enable you to save time and money, consider outsourcing and streamline your marketing strategy. If you can reduce expenses at the same time as driving sales and optimizing performance, your profits should grow quickly.

How to Reduce Business Costs

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Every business will have various costs, which are, unfortunately, unavoidable. While many expenses are inevitable, there are always ways that you can reduce them which could have a significant impact on your bottom line. Even the tiniest alteration could have a considerable impact in the long run, so it is certainly worthwhile making a few changes – provided that it does not impact the quality of the product or service that you offer to your target customer. Additionally, it is important to re-assess your costs regularly to make sure that you are not overspending. Here are a few ways that you can reduce your business costs.

Outsourcing Work

It can be helpful to have employees, and in some cases, you will need staff that you can rely on, but for certain aspects of the operation, you may be able to outsource the work. Doing so is beneficial because you do not have to pay a salary and instead it can be on a per-project basis. This could free up a tremendous amount of cash and drastically reduce your costs without impacting the quality of work (just make sure that you use specialists!). You can also use interns so that you have staff onsite but without the costly salary.

Encourage Remote Working

Another good way to save money when it comes to staff is to encourage remote working. What this means is that you are using much less energy in the office, plus it can also bring various other benefits for both the company and the employee. Technology has made remote working a viable option and should be encouraged by all employers.

Use Time More Effectively

Wasted time means wasted money so it is worth identifying a few ways that you and your staff can use your time more effectively. This could include:

  • Eliminating unnecessary meetings
  • Minimizing distractions
  • Using software to track time usage
  • Setting goals
  • Incentivizing staff
  • Creating a weekly schedule
  • Using technology to streamline/automate specific tasks

Lease Equipment

Most businesses rely very heavily on equipment and technology for their operation. It can be expensive but often the technology and equipment will quickly become dated, plus there could be maintenance costs to factor in. Leasing equipment will prove to be cheaper in the long run, and it gives you the chance to upgrade to the latest technology when developments are made (which is often in many cases).

Software

Again, most businesses rely very heavily on software for their operation, and this can be a considerable expense. While there may be specific software which is essential for your business, you will find that often there is a free open-source alternative available. This option can sometimes be better than expensive software packages.

Switch To Alternative Energy

In a time where environmental damage is a significant talking point, it is crucial for businesses to find ways to reduce their carbon footprint. One of the most effective strategies for this is to switch to alternative energy. In addition to the environmental benefits, this will also prove to be cost effective in the long run despite the initial price.

Go Paperless

Similarly, going paperless is vital in terms of reducing environmental damage, but it can also bring a few benefits to any business. First, you can cut costs as paper and printing can be costly over the course of a year, but it can also improve the organization of your operation. This is because digitizing documents can free up space in the office and make it much easier to find what you need (just be sure to backup regularly and having a digital storage system in place).

Switch Providers & Suppliers

It is also worth listing all of your utility providers and suppliers to see if you could be making any savings by switching to another company. It can be a complicated process, but if you can make long-term savings, it is certainly worthwhile considering.

Do Your Own Marketing

One of the most significant yet most important expenses is marketing. Every company needs high-quality marketing in order to increase awareness about your brand and to increase your visibility online, but this can be expensive. It is for this reason why it is a smart move to do your own marketing. You can complete an online MBA in marketing which will teach you everything that you need to know to market your business across multiple platforms. This, in turn, should help to boost your sales, making it a highly valuable and worthwhile course to complete.

Purchase Second-Hand Furniture

It is crucial that you create a comfortable and practical work environment for your employees so that they can be productive each day and to keep morale high. Office furniture can be expensive, and it is important to have quality items, but you could make significant savings by merely buying second-hand furniture or by searching online for free furniture that people are giving away.

Insurance

Having insurance in place is an absolute necessity as it could be devastating to the company if you do not have this and something were to happen. There are a few different ways that you can save money on insurance. These include:

  • Comparing providers
  • Asking your current provider to match the best rate that you find
  • Consolidating insurance policies
  • Making sure that you are not overinsured or have duplicate coverage

Downsize Business Premises

It is nice to have a big open office, but this can be a considerable expense and often is not necessary. Especially when first starting out, it is a good idea to opt for somewhere smaller which will still allow you to work comfortably and you could then look to upgrade when you are in a healthier financial situation or if you are going through an expansion.

Every business owner should regularly look at their operation to see if there are ways that they can reduce costs in order to maximize profit. In most cases, you will be able to find a few ways that you are able to cut down on costs and even a small change could have a big impact in the long run.

Expert Tips on How to Create an Investment Strategy That Works With Your Goals

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StrategyDriven Managing Your Finances Article |investment strategy|Expert Tips on How to Create an Investment Strategy That Works With Your GoalsDid you know that the collective worth of the 15 wealthiest investors in the world surpasses $300 billion?

An investment strategy can change your life for the better. Whether you are young or nearing retirement age, you can find an investment opportunity.

One thing about investments is that there are no limits to what you can choose. Also, there are no time limits, and so you can make the right choices at any age.

This guide will take you through the process of establishing an investment plan that works. Read it to make the right financial decisions.

Assess Your Current Financial Status

Your budget should clearly show your total income vs. the total expenditure. If the amount of money you remain with after the expenses isn’t enough, you must cut down some costs or look for more ways to generate income.

If you want a liquid investment, stocks would be the best. For illiquid investments, you can consider real estate investing.

Set Goals

Why do you want to invest? What do you want to achieve?

When you set goals, it becomes easier to attain your target. Maybe you want to buy a car with the investments, or you wish to secure your future.

If you have many goals, write them down and narrow your list according to their importance.

The goals should be measurable. For instance, if your goal is to save $50 every week, then you should evaluate your finances with time to know if you have achieved what you wanted.

The goals should also be realistic and achievable. You can’t plan to save more than $10,000 in a month when you know very well that you can’t achieve that.

Explore Options

The investment you choose should depend on your goals and your personal preferences.

If education is your saving goal, you may consider the mutual funds, stocks, bonds, and other long-term securities. You may also decide to invest in the real estate market or other physical products that increase value with time.

The key here is to diversify. As a beginner, you only need to dip your toes as you test the market. That’s why you should diversify the assets no matter how little they are.

This is the essential step for planning; thus, you might need to involve a financial planner. The planner should listen to your ideas and advise you on the best high rate investments to consider.

Check the Charges

Every investment includes some charges. If you decide to invest in stocks, you will need to hire a broker who will require a service commission.

If you choose investment funds, you will have to pay the fund manager too. The same case applies to real estate where you must pay a real estate agent.

Don’t commit yourself to any investment plan without knowing the charges. Ask the firm to explain to you all the possible costs that you will incur for the investment.

In most cases, the higher charge translates to better quality. But still, you should compare the price of getting a similar service somewhere else. You may be lucky to get the same quality service at a reduced price.

Do Your Research

Don’t invest blindly. As an informed investor, you should research the most profitable types of investments. You should always consult an educated professional, like Daniel Gordon, before making any big decisions in the financial market.

If you choose to invest in the financial market, you need to research on the best markets.

Currently, many firms are offering the same service. Some are legit, while others are not. Unless you are careful and do in-depth background research, you can quickly lose your fortunes to scammers.

If possible, check the reviews of the firm you choose to know what other people think about the firm. Don’t put your investment in a firm with too many negative reviews.

Understand the Risks

Every investment is risky. Young investors are more likely to fail because they are still green. Before you invest, you should familiarize yourself with the risk associated with your investment strategy.

If you plan to invest in the stock market, then you should know the possible risks of that industry. It’s possible to lose all money or even get abnormal profits.

With knowledge of risks involved, you can easily come up with a proper risk management strategy. For instance, you can diversify the assets to stay safe just in case one of the investments fails.

Be cautious with the investments which promise high yields only. There is no investment that does not have a risk. Unless it’s a scam, there will always be the drawbacks that you should understand.

Monitor the Investment

Don’t invest and leave your money there. You should monitor the progress of your investments.
Is everything going as expected? Are you depositing excess money into the investments? The progress of the investments should help you make the next step.

At times, it’s better to withdraw your investments if the plan is not profitable. After all, it would be useless to keep on investing without seeing the results of your hard-earned cash.

Choose the Best Investment Strategy

The right investment strategy should be cost-efficient and profitable. The ideal approach should also be simple and easy to manage.

So, don’t stress yourself finding the most complicated investments that promise the highest returns. Start small, and move to the more profitable ventures once you learn the basics.

StrategyDriven helps entrepreneurs make the right decisions for their businesses. Our help comes in the form of well-researched articles written by business experts. If you just started your business, or wish to create one, read our blogs to know more about the most important business aspects.

What Happens If You Make A Mistake On Your Tax Return?

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StrategyDriven Managing Your Finances Article | What Happens If You Make A Mistake On Your Tax Return?

Contractor accounts can be just as complicated as any other kind. There will be incoming money as well as outgoings, and there may even be subcontractors to pay. A tax return accountant will be able to organize all of this into a coherent tax return. You will know it is time to complete a return when you receive a form.

What Happens If You Make A Mistake?

Mistakes can easily be made on a self-assessment tax return if you are not used to completing one. Contractor accounts can be made up of many different elements, and it could be that something is missed out. Something that is easy to rectify – and notice – is if the address on your return is wrong. If you have moved, you should let the government know immediately so that they can update their records. If you don’t, you should let them know once you realize there is an error on the form.

Other mistakes may be harder to identify. If you do realize something is wrong, the government need to know straight away. Otherwise, you could be penalized and if the government believe you used the wrong figures on purpose, you can even get a criminal conviction.

Checking and re-checking your tax return before you send it off is essential. Or, if you are worried that you might make a mistake (and it does happen easily), engage an accountant to complete the return for you. Many people leave their tax returns until the last minute because filling it in is a hard task, and a laborious one too. But getting in touch with a contractor accountant will make the work much quicker and easier, and will prevent you from getting a fine or worse. It makes sense to hire an expert to get the job done, leaving you with much less worry. You would hire experts for other aspects of the business, so why not this one? This is especially important if you have gone through a year of change, for example, if you are in the process of acquiring a competitor or you have a second income coming from a different source.

Is It Possible To Avoid Penalties?

If you miss the deadline for sending in your self-assessment tax return, you will generally be fined. However, if you have a ‘reasonable excuse’ for being late, you may be exempt if it was entirely out of your control. Hiring an accountant should mean you never have to have this problem, but if you do your excuse must be made as soon as possible. Examples of reasonable excuses could include documents being lost due to a fire or a flood. Equally, if documents are stolen and you are unable to replace them, this may also count. If you suffered from a life-threatening illness and you had to stay in hospital and where therefore unable to complete your tax return, this will usually also count. So too does the death of a partner just before the filing date (although you may be asked to show that you had started preparations to complete the return before it happened).