Tag: accounting

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Finance and Accounting Support in Franchise Systems

Finance and Accounting Support in Franchise Systems

There has always been somewhat of a love/hate relationship between franchise operators and their franchisees. While many entrepreneurs elect to leverage a known brand, documented operating procedures, and combined purchasing power that is often a benefit of a franchise operation, the reluctance to open the books to the franchisor is sometimes based upon a fear that “big brother” will use the information to take advantage of the business owner. The two sides of the business model aren’t always operating in sync, even though a deeper level of finance and accounting process support might benefit both greatly.

Logic would suggest that both the franchisee and the franchisor would recognize the validity of sharing financial and business performance data for the benefit of the entire system, where benchmark data and performance comparisons can become the basis of tremendous business intelligence. But some franchisors, as their networks expand in size, find that their success in selling units begins to outweigh their concern for individual unit performance, and the brand value creates sufficient momentum to overcome a few bad business experiences. Especially in larger systems, the franchisors don’t often consider the benefits of providing back-office and accounting support for their franchisees, because they simply don’t feel they have to. That is changing to a degree, and reliance on quality accounting and financial data takes on entirely new meanings in an environment where franchising is increasingly more complicated and competitive.

High unemployment and low consumer confidence cause spending decreases which impact even the strongest of established businesses. With credit markets being as tight as they are and without qualify financial information to support the request, business owners are often unable to obtain the financing required to expand their businesses when required, to new locations or with additional personnel. The 2010 Franchise Business Outlook[1] suggested that, even as the economy starts to recover, franchised small businesses will continue to face these financing struggles. The forecast is for “a slow recovery with marginal increases in the number of establishments, jobs and output.”

Looking to Washington for help, a number of small business organizations, along with The International Franchise Association, are “calling upon Senators to include more provisions in new job creation legislation to help small businesses access credit.” [2] The fear is that if credit access for small business isn’t made available now, the best opportunity to create sustainable business and subsequent job growth will be lost. Reliance by small businesses upon credit is unquestionable.

According to the IFA, “the depletion of [SBA loan] funds last fall is proof that the SBA programs were, and continue to be, critically important for our nation’s creditworthy entrepreneurs”. However, without sound business accounting and provable data, even the most business savvy entrepreneur may find their business “unbankable” and must therefore rely upon personal credit guarantees to support business growth.

Possibly the strongest point in the argument for franchisors facilitating accounting and financial management assistance to the franchisee centers on Item 19 of the FTC and state Franchise Disclosure Documents (FDD)/Uniform Franchise Offering Circular (UFOC). Item 19 is the Earnings Claim, which are estimates or historical figures detailing sales, expenses, and income a prospective franchisee might realize as the owner of a particular franchise.

The Earnings Claim is often considered to be the single most important factor in buying a franchise. As with purchasing any business, it is critical to have a realistic and supportable projection of sales, expenses, and profits earned. Particularly in a case where a potential new franchisee has no experience running a business, or no applied experience in that particular type of business, the earnings claim becomes the only guidance available. Unfortunately, the only source for this information is the franchisor itself, which often introduces doubt as to the veracity of the data. It is difficult to determine which could raise more doubt about the sincerity of the franchisor: using unverifiable data, or not providing an earnings claim at all.

When a franchisor elects to provide services to their franchisees, such as back-office accounting support or financial management oversight, then the opportunity to obtain data for the earnings claim, performance benchmarking, and royalties verification become realistic goals. Further, the ability to verify and substantiate the data can prove invaluable in a tough franchise market where buyers want good, verifiable information, and Item 19 helps sell units.

Offering accounting support to small business owners isn’t a new concept, but the technology to facilitate a truly seamless relationship has only become available in recent years. As Internet and Web-based application services emerged on the market, businesses flocked to them in order to gain the benefits of anytime, anywhere access to applications and data. However, the poor performance and lack of features left some business users without the tools they needed to handle all their requirements efficiently, so many returned to manual or local PC-based systems.

Secure remote access and application hosting services are a technology approach which adapts trusted and proven software and systems to a cloud-based, collaborative online working model. The server-based application model, which is essentially a hosting approach delivered from on-premises computers or offsite hosting infrastructure) allows the businesses to continue use of applications with the functionality required to support the business, but improves the IT environment by managing and securing the applications and data within the confines of the host. This eliminates the need to install or maintain applications on different computers and eliminates the need to have data copied or sync’d to different computers and devices.

A valuable aspect of providing secure remote access and centralized access to applications and data is the ability to then integrate with reporting systems designed to assist in the translation, analysis, and comparison of data from a single business to an entire franchise system.

Deploying server-based (hosted) computing models with remote and mobile capability means owners are able to retain their investments in software applications and processes while introducing new efficiencies and flexibility in their working models. The evident benefits are the ability to access information from any location, to have multiple locations work seamlessly together, and to allow outside accountants or other service providers to work seamlessly in the organization. Adding commercial hosting of the server expands on centralized management and administration with professionally-secured systems, greater predictability in ongoing IT costs and an improved ability for the business owner to focus on the business.

In summary, the franchisor market must look more closely at the fiscal management and reporting systems of their franchisees, and provide avenues to better-address access and support for accounting and bookkeeping responsibilities in order to gain credible performance data and useful benchmark metrics. Only through the ongoing participation of accredited accounting and financial personnel can the business financial data provide the information – and the insight – required to support aggressive business growth in this difficult economy.

The key is seamless integration, and the technology solution is the cloud-enabled model.

Make Sense?

J

[1] Report that measures the economic impact of franchising in the United States, prepared by PricewaterhouseCoopers (PwC), and commissioned by the International Franchise Association Educational Foundation. http://franchise.org/uploadedFiles/Franchise_Industry/Resources/Education_Foundation/2010%20Franchise%20Business%20Outlook%20Report_Final%202009.12.21.pdf

[2] Franchise.org Press Release http://www.franchise.org/Franchise-News-Detail.aspx?id=49246

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Success in the Finance Department: Better Data and Analysis

Success in the Finance Department: Better Data and Analysis

CFOs and corporate controllers are beginning to recognize the increased value they can deliver to the organization when they take a more holistic and comprehensive approach to data reporting and analysis.  The key is in delegation of duties, and establishing the controls and connections which ensure proper (and complete) flow of information throughout the enterprise.  The finance department can easily become overburdened if not structured properly, but can be as easily undervalued if the sole focus is getting the numbers right.

An article on CFO.com discusses some of the elements of structuring the finance department for greater success, and identifies the value of taking a proactive, consultative and analytical approach to business finance.

“For a CFO, “success is not just about getting the numbers right, but also uncovering the story behind the numbers: taking raw accounting information and creating cogent and compelling management discussion and analysis,” says Eileen Kamerick, managing director and CFO at investment bank Houlihan Lokey.

Those who take the big picture into account are more likely to develop an organizational structure that isn’t merely reactive. That will allow staff to come up with more ideas and, ultimately, help drive revenue and run the business. “You have to create an organization so you aren’t in the engine all the time,” Kamerick notes.”


This is a great article… read the entire post on CFO.com here

You’ll find that it makes sense.

J

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No Fear and Loathing in Accounting

It’s not my father’s accounting firm any more.

Nobody’s bringing in paper forms and shoeboxes full of stuff, or plastic tubs full of paperwork, and we’re not trotting off to the bank to pick up a lot of bank statements, and we’re not manually reconciling checks and that sort of thing anymore.  It’s not like my father’s accounting firm any more.  We’re beyond that.

You’ve got to be, maybe, 50 plus years old to remember what it was like to do things with the old computers, the batch processes… or before that, when everything was done with paper forms, and almost everything was done completely manually.  Even with computers, you had to re write-up the check register, you actually had to write-up all the information, so you could input it into the computer and come up with a trial balance, and then do the rest of the work from there.

But anybody who’s maybe 55 or less (you see a focus on these people in a lot of technology awards programs – like the 40 under 40 and those sorts of things)… these are the guys that look at network and running the programs on your local computer as being the “old” way, and these are the guys that have adopted the technologies and work with the clients who demand the capabilities that these technologies can afford.  These people are more competitive, they’re more agile, they produce a higher quality of service to the client, and at the same time they’ve been able to leverage these technologies to increase the efficiency of the practice to the point where they’re not working harder, they’re working smarter.

They’re taking advantage of the fact that the technology does a lot of the work and the mechanical processing, allowing the professional to really use the talents and skills they’ve developed in providing insight and guidance to their client businesses.  And it is these people who have adopted the technology and who have adopted the way of thinking that’s going to allow them to continue to be more relevant and more important, more critical, to their client businesses, and to the market in general, on an ongoing basis… because these people know that there’s no fear and loathing in accounting.

These people know that accounting is exciting

Accounting is every aspect of the business.  Accounting is process automation, it is data collection and control, it is business analysis.  Accounting in today’s cloud economy is a cornerstone of making the most of every asset and every resource and every capability that the business has.  It starts with the professional practice, and once the professional practice adopts this mindset and this way of approaching business, then the mindset will flow down to the clients, and the professional practice will be in a position to grow the small business clients into midmarket clients and into enterprise clients and beyond.

Make Sense?

J

What’s up with the bunny feet?  Well, it’s all about the bunnies.  You know… like being able to work when and where it’s right for you; being able to work from home or on the road or on vacation – or at the office if you really have to.  But mostly it’s about mobility and access and being able to work in your bunny slippers.

Just remember: they can’t see your feet on a conference call 🙂

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The Cloud is Not the End of ERP

With the emergence and general acceptance of “cloud” technologies and services, many in the information technology industry have begun to wonder if the traditional approach to enterprise software – the ERP solution – is nearing its useful life.  Is this the end of ERP?  Well, the hype sometimes becomes the reality, and businesses are moving in droves to software-as-a-service to find the cost and efficiency benefits promoted in the sales materials, and they’re finding them.  Look at Sage’s acquisition of Intacct as an expression of increased focus on cloud-based solutions. This activity around the cloud and cloud-based software-as-a-service represents a major change in how people access and consume information technology and business services, a change that’s being driven by the huge momentum of the overall growth of “cloud”.  The market is moving to a customer-centric subscription model, where the legacy approach was more in tune with the “purchase it once and use it forever” mentality, and customer relationships were largely centered on upgrade cycles.

“As an economy and a culture, we are rapidly moving away from owning tangible goods and, instead, gravitating towards becoming members of services that provide us with experiences  – such as listening to a song, using a car, watching a movie or collaborating with our colleagues.

Of course, this cultural transformation has profound implications for business models. Why? Success is no longer gauged by counting how many units of your product you have sold. Rather, success is measuring how many customers are using your service on a recurring basis and how successful you are monetizing those recurring relationships.”

Forbes.com guest post written by Tien Tzuo http://www.forbes.com/sites/ciocentral/2012/02/09/the-end-of-erp/

While it sounds like the cloud is the right approach for everyone, looking at the variety of real business situations in the market suggests that, as always, one size does not fit all, and more “traditional” ERP solutions may well continue to be the right foundation for many enterprise operations.  Particularly when considering that many businesses already significant investments in platforms and infrastructure, software and data integrations, and operational process support, cloud software solutions may not provide the necessary functionality to support existing business.  Further, integrations that may be available and supported with legacy systems are often not available with cloud-based counterparts, while different integrations based on cloud standards may be present.

For smaller businesses and those in emerging markets, subscription-based IT models may make more sense, especially as popular traditional software makers have introduced their cloud-based counterparts which will likely incorporate the features or functionality of their legacy systems, while taking advantage of the capabilities introduced through cloud integration and interoperability standards.  Strong consideration should still be given to “traditional” ERP solutions, however, as there may be a level of stability, usability, or process support desirable by the business.

Utilizing these traditional ERP systems does not mean eliminating the potential for the business to benefit from cloud solutions.  Rather, cloud platforms and hosting solutions, as well as cloud-based integrations and extensions, are enabling mobility and collaboration around legacy systems, delivering cost and efficiency benefits just as significantly as those who have adopted a full-on “cloud” approach.

“It also makes sense to explore “edge” investments. […] there are significant innovation opportunities outside of core operations. Look to take advantage of the ERP platform’s capabilities in these spaces. Or implement low-cost, smaller-footprint solutions – even if on an exploratory basis. If they are fully adopted later, you can integrate them into the ERP backbone and expose standardized data and processes to the edge.”

from Deloitte’s Tech Trends 2011 report titled “the end of the “Death of ERP” 

So, what does this mean for your business?  It means you need to consider all the possibilities.

First, evaluate cloud-based options, and balance features with cost, time-to-value, and operational requirements.

Then, selectively innovate.  Figure out which areas of the business give you a competitive differentiation and innovate in those areas.

The traditional thinking, which is in line with the traditional ERP approach, is that all of the business functionality has to be incorporated into a single platform solution.  This is certainly no longer the case, and businesses are finding that they now have an ability to take advantage of the benefits of their existing systems while extending and innovating through the use of cloud services.