Retail Accounting

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Top 10 retail franchise accounting best practices

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  1. Retail Franchise Accounting Best PracticeCloud based system – a cloud deployment reduces the total cost of ownership, lowers upfront costs, and provides a scalable and rapid deployment platform. Furthermore, it provides secure and instant access to data from any internet enabled device by franchisees, their accountants, territory/area managers and head office.
  2. A retail specific system – the system should be designed for purpose, the functionality and features should be focused on solving the unique challenges of retail franchise networks.
  3. Standardised and consistent reporting – all franchisees should utilise a standardised Chart of Accounts to ensure consistent reporting in order to facilitate benchmarking and data analysis across the retail franchise network.
  4. Special purpose vehicle for the franchise operation – to gain insight and transparency of the franchisee’s profitability and financial stability, the franchisee should operate the “franchise” business from a new legal entity.
  5. Monthly reporting – quarterly or annual reporting is insufficient to provide adequate support to franchisees. Therefore franchisees should prepare trading accounts, P&L and balance sheets on a monthly basis in a common format as prescribed by the retail franchisor.
  6. Budgeting – budgeting is critical for franchisee performance management, franchisee accountability, supply chain planning and corporate forecasting. They should be prepared by the franchisee / franchisor upon conception and annually thereafter.
  7. Automation of the accounting process – the accounting process should be highly automated including EPOS, BOS, inter-franchise, inter-company, supplier and payroll transactions, this reduces the costs/time for the franchisee, increases the accuracy of data, and reduces the time lag for month end reporting.
  8. Emphasis on the balance sheet – retail franchisors should ensure they investigate the balance sheet for anomalies such as material amounts within the following accounts: trade debtor, prepayments, accruals, and sundry creditors.
  9. Single centralised database – all franchisee accounting data is entered directly within a central data repository which is immediately available to the franchisor. This reduces the time lag between reports being submitted, need for the data to be re-entered into another database which is predisposed to re-errors, and finally if adjustments be required – it avoids having the accounts resubmitted as the revised accounts are instantly available.
  10. Key Performance Indicators – retail franchisors should monitor indicators such as franchisee remuneration, gross margins, overheads, profitability, net worth and liquidity – including actual, variance and budget.

Author: retailaccounting

CounterBooks is an online retail accounting management suite which is used by retailers across the world.

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