Flexible financials provide platform for growth

Like other fast growing businesses, many franchisors are challenged to cost effectively manage their growing operation. Similarly, other franchisors have found that thanks to a solid business infrastructure, they've been able to both grow, and improve service to franchisees without incurring additional infrastructure costs.

In a franchising environment, having a strong financial system and clear back office procedures is very important, as it can play a significant role in deciding the total number of head office staff required to support franchisees.

Many of our franchise customers that are using Microsoft Dynamics GP (formerly Great Plains), report strong benefits from its functionality such as automated invoicing and franchise cost distribution, centralised and store based inventory management, comprehensive reporting, and benchmarking and flexible accounting models.

Streamlined purchasing & automated on charging of costs

There are many different ways that franchisors manage ordering and invoicing processes in a distributed business model. For example, Carpet Choice member stores order product directly from suppliers, but suppliers invoice the Carpet Choice head office, enabling bulk buying rates. The Carpet Choice head office receives one coded invoice then automatically on-charges back to its members. Since automating this process, many hours are saved by Carpet Choice each month, and no additional administration costs were required to deal with the 35% growth rate.

Similarly, franchise-wide costs such as marketing, or store maintenance, may be centrally organised by the franchisor. The automated on-charging to franchisees for these costs greatly reduces the effort and time otherwise required. 

The issuing of franchisee statements can also be automated. By electronically communicating the financial position of franchisees, it is possible to reduce outstanding debtors. Franchisees are also in a better position to manage their own cash flow.

“As well as saving us time,
the system improves accuracy
and has allowed us to
capture and provide
better information.”
Bill Tsiakos, AFL

Inventory management

A significant number of franchises in Australia operate in a retail environment, making stock management a critical challenge. Keeping inventory at the right level, whether at a warehouse or in the store can be difficult. Beacon Lighting has helped its franchisees manage their in-store stock levels by providing a software tool, Retail Analytics and Merchandise Planning (RAMP), as part of its service to franchisees. Beacon Lighting also monitors purchasing patterns and provides reports with this information to franchisees to support their ordering decisions.

Comprehensive reporting and analysis

Having a solid financials platform that provides the flexibility to report on individual franchisee performance and the business as a whole is important for forward planning with all successful franchise systems. Your back office should be more than just an accounting system. In the franchise environment it should offer much greater flexibility and detail around reporting than what some of the basic systems on the market offer. Reports can be developed and customised to suit your particular franchise needs. In addition, the open architecture should enable the financial platform to integrate with many other software systems, to provide a single view across the organisation. Examples of reports that can be provided to franchisees include comparisons to other outlets by sales, geography, or many other variables. These reports can be automatically distributed to franchisees, via email, or alternatively, franchisors can set up secure access to a portal for franchisees to monitor their own performance online.

Flexible accounting models

The franchise market is very competitive, with franchisors looking to recruit quality franchisees. In order to make their proposition more attractive to prospective franchisees, Professional Advantage is seeing a growing trend of franchisors offering more services as part of the franchise model. One example is more comprehensive financial management services, removing some of the book-keeping headache away from franchisees. For instance, Australian Football League (AFL), whose business model in relation to its clubs is very similar to a franchise organisation, identified solid benefits from Microsoft Dynamics GP as its financial platform. This has resulted in a number of clubs coming to an arrangement for their financial management systems to be managed by AFL in a shared or a hosted environment.

There are three main options for franchisors that choose to offer this service to franchisees: 

1. Hosted-only environment: The franchisor makes the accounting system available to franchisees, but does not actually do any book-keeping for the franchisee. Each franchisee can be securely set-up as a separate company, with its own database. Each franchisee can only access its own data via a business portal, with the franchisor managing any related IT issues.
    

2. Combination: The franchisee enters accounts payable information, with the franchisor managing everything else through to the production of profit and loss reports.
    

3. Outsourced financial management: Under this model, the franchisor manages the entire accounting process.

Getting the right fit

Just like finding the right franchisees, it's important to find the financial platform that is going to be right for your business. A simple accounting system might be fine when you are minding your own business, but as a franchise, it's not just your business anymore.

Michael Foertsch is the Microsoft Business Manager for Professional Advantage, a technology consultancy for mid-market Australian organisations. To find out more contact: Amal Rabahi on 02 9919 8913.

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