The problem with only reviewing financials upon completion of end of year accounts is the data is at best over a year out of date and at worst 21 months!
The problem with only reviewing financials upon completion of end of year accounts is the data is at best over a year out of date and at worst 21 months! If you end up 20% down and retrospective analysis shows with decisive action taken at the right time, you could have ended up 30% up, a lot of hard work will have been wasted through mis-directed effort.
For franchise owners, keeping a close eye on the numbers is essential in both the good times and the bad. A year on, it’s simply too late to realise your cost base needed to be rapidly reduced or if you had ramped up your marketing effort months earlier you could have easily met or exceeded your year-end targets.
Having a clear view of the most up to date figures means timely decisions can be made. The best way to achieve this is through management accounts. This means rather than only doing end of year accounts, profit and loss reports are generated and a balance sheet produced on a much more regular – usually monthly - basis.
Management accounts mean you can get proactive. You can evaluate why one month your franchise did particularly well and replicate this. You can make rapid, positive changes to address any weeks where sales figures have not gone in the right direction or costs have escalated. It can enable you to see the results of any marketing campaigns more clearly (and quickly) and use this information to improve the performance of your franchise moving forwards.
To manage the financial side of your franchise in this way does require time, focus and perhaps a small cost, but it’s time and money well spent. After all, however, much we love the day job, at the end of the day we are all trying to make a living doing it!
As an accountancy practice we find figures are fun, but we also find that often people shy away from numbers. Maybe some of this is born from a deep dislike of the subject at school? I’m not sure but research has indeed shown that students find mathematics is often the most difficult subject to grasp. However, when it comes to real-world accounting and your livelihood, burying your head in the sand is not the answer! Talk to your accountant, it’s what they are there for!
Partly, it’s about understanding your strengths and weaknesses as a franchise owner. If you are a whiz at numbers then great but if like many people, it’s a bit of a challenge then do get help. Understanding your figures and being able to take appropriate and timely action could make all the difference between making a good profit or if not, a sad loss at the end of the year, putting the future of your franchise in jeopardy long-term.
At d&t, our friendly, experienced and proactive accountancy and business planning teams are always happy to advise and help navigate the best way forward for individual franchise owners and franchisors. Our team add value not just numbers and are trusted to provide the most appropriate advice dependent on individual circumstances.
After the challenges of everything COVID, we all want this to be a good year. So, if you do one thing in 2021, start generating and proactively evaluating management accounts for your franchise. It could make all the difference for a better bottom line 12 months from now and we all want one of those!