Franchise owners in Melbourne have more financial responsibilities than a small business owner as they have to make sure that all the units in the franchise network follow the same standard for accounting. They have to abide by the terms and conditions mentioned in the Franchise Agreement and have to manage the day-to-day operations.
The franchisee has to make sure that he can save his investment and get the desired returns through financial management and bookkeeping. Thus it is imperative that they hire a professional bookkeeper in Melbourne to stick to the specific financial protocols and deal with the taxes, expenses and reporting obligations.
Also, as a franchise owner, they should be aware of the basics of accounting. Thus here are six bookkeeping tips that will help you to avoid financial challenges and maintain the perfect cash flow in your franchise.
1. USE TECHNOLOGY TO STAY AHEAD
With advanced accounting tools taking over the bookkeeping domain, using accounting software has become a prerequisite. It has several automated functions which reduce the burden of manual data entry and save a lot of time. From invoicing to payroll management, the software can do all types of bookkeeping work.
It can be customised to suit the needs of the business in Melbourne. You can choose a cloud-based tool to avoid the risk of loss of data or breach of classified information. Also, a single mistake in the books can make you pay more or less than required. However, there is no scope for making such errors while using a tool.
Another significant advantage of the software is that it offers real-time data access to the financial health of the business to the franchisee and the franchisor. It helps in maintaining transparency and doing away with the need for sending regular information about the financial statements to the Head Office.
2. DO NOT STRAY FROM THE PRE-DEFINED BUDGET
As a franchise owner in Melbourne, you must have a business plan for your entity with a budget that must be strictly followed. To stick to the given expenses, you must be aware of all the ongoing expenditures, such as franchise fee, royalty, salaries, marketing and advertising fee, utilities etc.
Also, you need to keep room for unexpected outgoings, such as an increase in payroll costs due to new hiring. It will aid in managing the cash flow and avoid a capital deficit. An important thing to remember here is that the initial fee paid to the franchisor for using the equipment, trademarks, etc., should be included as an intangible asset on the balance sheet.
So when this initial fee is deducted from the tax return, it must be amortised, which is similar to the depreciation of intangible assets. Your bookkeeper can help you with the amortisation of regular franchise fee and the initial fee.
3. MANAGING DEBTS EFFECTIVELY
A franchise owner has to pay for the initial cost, advertising, franchise fee and salaries, and thus, needs financing to pay for all the franchise-related costs. Most franchise owners apply for a business loan in Melbourne, which needs to be managed efficiently along with the ongoing expenses.
Your bookkeeping company can help you find ways of refinancing with a lower interest rate. Also, they will guide you on boosting sales to improve the earnings and pay off the debt instalments on time without any chances of incurring late fee penalties.
The business credit card debt can also be refinanced or consolidated so that you can reduce the interest rate and bring down the number of payments. Improving payables and receivables also aids in managing the debt without turning it into bad debt.
4. MONITOR THE CASH FLOW
Like any other business in Melbourne, bookkeeping for franchises also needs the supervision of the cash flow. It means that you must be on top of the accounts at all times.
The bookkeeper will reconcile the bank accounts to make sure that all the transactions are recorded accurately, and there is no mismatch of financial data while comparing the bank statements with the financial statements. It is one of the bookkeeping basics that should not be ignored.
The proper flow of incoming and outgoing capital can be controlled by reducing unnecessary expenses. The bookkeeper can elaborate on such expenditures and help to avoid them to stay within the limit of the monthly budget.
For instance, you can opt for leased new equipment instead of buying an expensive machine to avoid tying up the capital. Following up with the clients to get timely payments and paying the suppliers before the deadline is effective in keeping the cash within the organisation without creating an imbalance.
5. FILING TAX RETURN CORRECTLY
The franchise owner has to pay taxes a bit differently than other small businesses in Melbourne as it has to complete specific transactions, such as franchise fee, royalty and training fee. Besides these, they also have pay income tax and Goods and Services Tax (GST) while making payments to the franchisor.
Your bookkeeper will inform you about the Capital Gains Tax, which is applied when you plan to transfer or terminate the franchise. They will assist you in claiming GST credit from the ATO for the GST paid to the franchisor along with all the payments.
You can also claim tax deductions for various expenses. Your bookkeeper can provide support in determining the deductible business expenses and saving money and time.
6. BUILD YOUR CREDIT SCORE
As a franchisee in Melbourne, you have the advantage of using proven business processes and methods, but you will need capital to keep growing. Most franchise owners think that they only need money in the beginning to purchase the franchise. However, a business can face challenges at any given point in time.
Thus you need to be prepared with capital reserves and working capital for the rainy day. In other cases, you might need more cash if the vendors or suppliers increase their selling prices or you need new equipment. Thus you must have a credible credit history to get loans from banks or money lenders in Melbourne.
It involves paying all the debts on time and making sure that the payables are not delayed. It will improve the confidence of the moneylender, and they will offer the loan without causing any trouble or postponement.
Running a successful franchise requires working according to the terms laid down by the franchisor for every aspect of the business, including financial management. Thus you need the assistance of an experienced bookkeeper in Melbourne to make sure that you fulfil all the obligations and develop a financially stable franchise.