Financing a Franchise, Keeping Records (Pt III)

Date AddedOctober 12, 2009 12:18:25 AM

Author

Category

Continued from Franchise Financing (Pt II)

KEEPING RECORDS

Once the doors have opened and money starts coming into the franchise, a key concept to master early is that cash is not the same as profit. Even though the business is making profitable sales, it can still suffer if the cash is not being converted into money in the bank.

To track this, it's important to invest time and effort into maintaining the business' records. Although it may sound dramatic, a good record-keeping system can be the difference between the survival and failure of a business. Complete records allow the owner to keep in touch with the financial position of the business, its operations and stock levels, and canalso help identify problems before they become major issues for the business.

BALANCE SHEET

The first few weeks and months of a new business are often marked by significant outgoings and limited incomings. Franchisees should be prepared for this and as long as it has been factored in during the planning phase, the business can quickly overcome any initial issues of financial shortfalls.

During this period, franchisees must take the time to get to know their balance sheet inside out and get used to checkirl it on a daily basis. This is a good habit tj get into and will stand the franchisee in good stead for the future.

Checking the balance sheet is an obvious but often overlooked necessity and will clearly display money moving through I the business, providing owners with a I good understanding of their current cash position.

Putting the time and effort into really I knowing the balance sheet and updatirl it on a daily basis is an essential part of I running the business. Getting this side I of things right will provide the platform for franchisees to become operationally excellent and enable them to do what they're best at - providing a product or service to the best of their ability.

INVOICING & COLLECTION

Keeping the cash flowing smoothly through the business is critical. All businesses have billing cycles that worw differently, but subtle changes can have! a significant impact. For example, billing a quarter of customers every week can bring a steady flow of funds into the business, rather than one mass billing m the end of the month. Similarly, sending pre-addressed and stamped remittance envelopes may seem like an insignificail step, but can shorten repayment time and bring money into your business faster.

Franchisees should also think about recommending a preferred method of payment, where applicable. This could entail discounts to those paying via credit card or electronic funds transfer to avoid the time-lag incurred by cheque transactions.

It's worth remembering that a cheque sitting in a desk draw isn't doing anything for the business. Deposit cheques as soon as they are received to inject funds into the cash flow cycle immediately.

To be continued. See: Managing Debtors and Summarizing Financing a Franchise (Pt IV)