Archive for November, 2014

So how much accounting do you need and when?

November 18, 2014

Freestone-Webb-certificate-of-incorporationWhen you start up a new business, whether it be a stand-alone, a franchise or a licensee, you won’t necessarily be worrying about when you should engage an accountant and what for. As a franchisee you should hopefully have been provided basic bookkeeping advice and perhaps installed accounting software, either as part of the package or as a recommendation. But you don’t need to worry too much about your final figures until a full 18 months have passed since your ‘Limited’ company incorporation date. There would appear to be a great deal of other things to turn your head to…

After the first eighteen months of your business, you will need to file some accounts and it is probably at that time that you will first consider the need for an accountant. Probably though, the accountant will be contracted only to file your year-end accounts at Companies House and to prepare your year-end tax return to HMRC for corporation tax. Indeed apart from your year- end  accounts and advice perhaps on credit control, payroll and funding, you won’t need an accountant for much else.

 

Another-SpreadsheetAs your business develops and you take on staff; you will hopefully find that you have more time to actually develop and manage the business.  Perhaps you have started to generate monthly spreadsheets which show where your business was in relation to last month, last year etc. Again, as new projects start and the business begins to gather momentum you probably find you have less time rather than more time to monitor those accounting trends and yet bizarrely the need for them grows. Perhaps now is the time to consider the appointment of that first accountant. But wait do you really want to? You don’t mind taking on new staff where you can see that there employment will actually generate income for the business. More sales staff, more warehouse staff, more customer service staff, but an accountant? What part of their role actually helps to generate business for the company? And it is all still about growth isn’t it? Actually perhaps the time when you actually do need an accountant, is when your business enters a stage when perhaps ‘profit’ and not ‘growth’ is the major player. Control of costs and the supply of information becomes critical to decision making and to strategic thinking. Surely now you must employ an accountant?

profit-growth

Actually, you could consider taking one on at a much earlier stage. Who would think that your accountant could actually play an active part in the operation and growth of your business? Could his monthly information packs allow you to make those strategic business decisions in the knowledge that you are armed with the most up to date information possible. Could the analysis of costs help you to recognise that when benchmarked against your competitors you are charging too much for a core product or service? If you adjust the price, could this generate more sales? In this way and many others, your accountant or finance manager becomes a key member of your operational team and he will be knowledgeable too; there are few other staff members with an overview of the whole companies functionality, other than perhaps yourself of course. Small wonder that many Finance Directors take over the reigns as CEO, when the  MD retires…

Of course, your business does not need an accountant or finance manager until it reaches a certain size and that size differs from sector to sector. But information is king and whilst there will be others in your organisation who can provide you with figures; e.g. your Operations Manager or your IT Manager, neither will have a grasp of the whole…  So my advice? Bring an accountant in early and make the work that he does pay for your business…  And consider other options too. Perhaps you can employ an accountant part –time or engage a freelance accountant, to work for you a few hours a month, with the number of hours growing as the business does.

A business is the sum of the people that it employs. You need good sales staff, good operational staff and good processing staff, but despite the lack of importance attached to your accounting in the first few years of your business, you will one day find that your business can not operate at the top of its game without a good accountant… But be wary. One day he may be after your job.

 

 

 

FRANCHISEE DATA COLLECTION AND BENCHMARKING

November 10, 2014

How many of your franchisees provide you with theirbenchmarking-document-review financial data in compliance with their franchise agreement? Probably not many based on my experience. Even if they do, once you have the data, does anyone actually do anything with it, or do you just rely on the declarations made each month to quantify how your franchise network is doing? Not surprised if you do.. business priorities and all that…

Those of you who know me and have worked with me before will know that CBCS already offers a comprehensive franchise audit service to help you monitor your network and keep on top of levels of under-declared sales or rogue franchisees. Many will know also that we offer a data collection service to allow you to keep on top of your franchisees financials, without antagonising the franchise relationship by requesting an audit be carried out. We have now taken this offering a step further with our Franchisee Data Collection and Benchmarking Service…

In the attached example : A fictitious case, we have collected basic financials and VAT declaration details. From here we have determined a summary of the network  which shows amongst other things: Top 5 overall performers, Top 5 Net Profit and 11 franchisees with over £7k of under-declarations.

Obviously you can add a whole multitude of benchmarking metrics to be analysed, ( e.g. rates per hour, staff costs and advertising costs) potentially reducing your costs and time, site visits and those of your franchisees too, with all the data collected and analysed for you. Once you have all the data, you can incentivise your top performers by perhaps offering a discounted MSF or a reduced advertising levy or presenting a coveted prize at your annual conference. This way your franchisees can see a material benefit to providing you with information.

The benefits to the franchisor are clear:

1 Collect data from franchisees to ensure adherence to franchise agreement for reporting of                               company accounts etc.
2 Analyse data from franchisees
3 Determine under-declarations for potential future audit
4 Look for areas where franchisee underperforming to ensure adequacy of future support
5 Benchmark against network
6 Incentivise based on full network results
7 Data Collection helps makes franchisees clean up their act

More information is on CBCS’s website, in addition to the Franchise Audit services already offered.

 

 

 

 

 


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