As a franchisor or a franchisee, knowing where your business’ financials stand from a “big picture” perspective is far more valuable than the snapshot offered by the Balance Sheet for any given period.
To that end, there are several financial reporting components that should be incorporated into the Best Practices of any franchise system to help decrease costs, maximize efficiency and improve the bottom line.
These best practices should include several key elements:
Complete Reporting – Relying solely on Balance Sheet data does not provide decision makers with enough information to make sound business decisions. The Balance Sheet is important but it will not highlight cash flow issues which are a concern for everyone in a franchise system.
Cash Flow Reports – With an up-to-date Cash Flow report that is accessible for both the zor and the zee, it is much easier to determine where potential issues exist and address them proactively. Since it is in both parties’ interest to maintain a positive cash flow, this report, when combined with the Balance Sheet, is critical to understanding whether a business will be successful or not.
Effective Software – Software that is cloud-based and allows for daily syncing (automatic or manual) of financial data across all units is critical for making informed decisions at the local, regional, national or even international levels. Without this ability, decision-making is challenging as some units will invariably report late and provide outdated or even inaccurate information. With the use of a good financial reporting software, these and other issues can be easily eliminated.
Benchmarks – Using reporting software to set benchmarks for a system based on the Top 10-20 percent of zees is highly effective. And, when the data is being collected automatically, the benchmarks are more likely to be accurate, achievable and relevant.
With all of this said, the goal for zees should be to establish procedures that result in the collection and analysis of accurate, reliable and up-to-date financial data. Without it, it is difficult to make informed decisions to improve operations and grow their business.
By choosing the best reporting program for their needs, a franchise will be able to boost the performance of underperforming units and set them on a path to success. Additionally, it will help the top performers to continue growing which does just as much to benefit a franchise system’s overall financial health.