Finance and Accounting Support in Franchise Systems

Finance and Accounting Support in Franchise Systems

There has always been somewhat of a love/hate relationship between franchise operators and their franchisees.  While many entrepreneurs elect to leverage a known brand, documented operating procedures, and combined purchasing power that is often a benefit of a franchise operation, the reluctance to “open the books” to the franchisor is largely based upon a fear that “big brother” will use the information to take advantage of the business owner.  

Logic would indicate that both parties would recognize the validity of sharing financial and business performance data for the benefit of the entire system, where benchmark data and performance comparisons can become the basis of tremendous business intelligence.  But some franchisors, as their networks expand in size, find that their success in selling units begins to outweigh their concern for individual unit performance, and the brand value creates sufficient momentum to overcome a few bad business experiences.  Especially in larger systems, the franchisors don’t often consider the benefits of providing back-office and accounting support for their franchisees, because they simply don’t feel they have to. Reliance on quality accounting and financial data, however, may begin to take on an entirely new meaning, given the nature of the economy right now. 

High unemployment and low consumer confidence have caused spending decreases which have impacted even the strongest of established businesses.  With credit markets being as tight as they are, business owners are unable to obtain the financing required to expand their businesses when required, to new locations or with additional personnel.   The 2010 Franchise Business Outlook[1]  suggests that, even as the economy starts to recover, franchised small businesses will continue to face these financing struggles.  The forecast is for “a slow recovery with marginal increases in the number of establishments, jobs and output.”

Looking to Washington for help, a number of small business organizations, along with The International Franchise Association, are “calling upon Senators to include more provisions in new job creation legislation to help small businesses access credit.” [2] The fear is that if credit access for small business isn’t made available now, the best opportunity to create sustainable business and subsequent job growth will be lost.  Reliance by small businesses upon credit is unquestionable.  

According to the IFA, “the depletion of [SBA loan] funds last fall is proof that the SBA programs were, and continue to be, critically important for our nation’s credit-worthy entrepreneurs”.  However, without sound business accounting and provable data, even the most business savvy entrepreneur may find their business “unbankable” and must therefore rely upon personal credit guarantees to support business growth.

Possibly the strongest point in the argument for franchisors facilitating accounting and financial management assistance to the franchisee centers on Item 19 of the FTC and state Franchise Disclosure Documents (FDD)/Uniform Franchise Offering Circular (UFOC).  Item 19 is the Earnings Claim, which are estimates or historical figures detailing sales, expenses, and income a prospective franchisee might realize as the owner of a particular franchise.

The Earnings Claim is often considered to be the single most important factor in buying a franchise.  As with purchasing any business, it is critical to have a realistic and supportable projection of sales, expenses, and profits earned.  Particularly in a case where a potential new franchisee has no experience running a business, or no applied experience in that particular type of business, the earnings claim becomes the only guidance available.  Unfortunately, the only source for this information is the franchisor itself, which often introduces doubt as to the veracity of the data.  It is difficult to determine which could raise more doubt about the sincerity of the franchisor: using unverifiable data, or not providing an earnings claim at all.

When a franchisor elects to provide services to their franchisees, such as back-office accounting support or financial management oversight, then the opportunity to obtain data for the earnings claim, performance benchmarking, and royalties verification become realistic goals.  Further, the ability to verify and substantiate the data can prove invaluable in a tough franchise market where buyers want good, verifiable information, and Item 19 helps sell units.

Offering accounting support to small business owners isn’t a new concept, but the technology to facilitate a truly seamless relationship has only become available in recent years.  As Internet and Web-based application services emerged on the market, businesses flocked to them in order to gain the benefits of anytime, anywhere access to applications and data.  However, the poor performance and lack of features left some business users without the tools they needed to handle all their requirements efficiently, so many returned to manual or local PC-based systems. 

Application hosting approaches offer a technology model which adapts trusted and proven software and systems to a cloud-based, collaborative online working model.   This technology model allows the businesses to continue use of applications with the functionality required to support the business, but improves the IT environment by managing and securing the systems within a secure facility, and utilizes the resources of the service provider to facilitate the ongoing management and support of the systems.  

Owners are able to retain their investments in software applications and processes, while introducing new efficiencies and flexibility in their working model.  The evident benefits are the ability to access information from any location, to have multiple locations work seamlessly together, and to allow outside accountants or other service providers to work seamlessly in the organization.  

Application hosting services also offer centralized management and administration, professionally-secured systems, and deliver reduced costs of IT management, predictability in ongoing IT costs, and an improved ability for the business owner to focus on the business.  Further, the solutions delivered allow for the integration of data with reporting systems designed to assist in the translation, analysis, and comparison of data from a single business to an entire franchise system.

In summary, the franchisor market must look more closely at the fiscal management and reporting systems of their franchisees, and provide avenues to better-address accounting and bookkeeping responsibilities in order to gain credible performance data and useful benchmark metrics.   Only through the ongoing participation of accredited accounting and financial personnel can the business financial data provide the information – and the insight – required to support aggressive business growth in this difficult economy.   

The key is seamless integration, and the technology solution is the cloud-enabled model.

J

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[1] Report that measures the economic impact of franchising in the United States, prepared by PricewaterhouseCoopers (PwC), and commissioned by the International Franchise Association Educational Foundation.  http://franchise.org/uploadedFiles/Franchise_Industry/Resources/Education_Foundation/2010%20Franchise%20Business%20Outlook%20Report_Final%202009.12.21.pdf

[2] Franchise.org Press Release http://www.franchise.org/Franchise-News-Detail.aspx?id=49246



 

QuickBooks POS in a Hosted Environment

entrepreneur.com

QuickBooks Point of Sale in a Hosted Environment

Retail operators and multi-location store owners often face difficulties in attempting to bring cohesion to their accounting, financial, and operational data.  In so many situations, the retail location –  where inventory is sold and money is exchanged – is far-removed from the administrative location where the financial systems and business reporting exist.  It seems that the best case scenario is to create a means for the remote (retail) locations to operate with real-time access to centralized customer, inventory, and financial data from a primary source. Application hosting services can provide this centralization,  and a platform for standardization, of systems.  Further, the application hosting model can deliver security and managed service which ensures that the systems are available and performing as required. 

Even though hosted applications and centralization of the systems and processes in a POS environment may appear to be the right answer, there are caveats and considerations that speak to the realities of today’s technologies.  These caveats should be strongly considered prior to undertaking any reformation of systems and processes relating to the retail locations.

The first fundamental reality which must be addressed is connectivity.  While a retail or store location may enjoy Internet or network connectivity, there should be great consideration given to the wisdom of connecting these locations only and exclusively via remote access systems.  Retail is a dynamic business, and the sale is made when the customer is ready and willing to buy.  Any retail location must be able to process this sale in order to meet the immediacy of customer demand.  If the systems in use are exclusively accessed remotely, then the connectivity to those systems become of paramount importance in the ability to do business.  At the very minimum, any remotely-served retail location should have redundant connectivity options, with local personnel being familiar with the connection failover process.

A second strong consideration for a hosted or remotely-deployed POS or retail system is local device support.  Devices, such as card readers, scanners, cash drawers, receipt printers, etc. typically require local PC/computer drivers in order to function.  When served by a remote system, this connection between the host and the local devices may not function.  Limited device support for POS hardware can significantly impact the location’s accuracy and efficiency.

Another area of consideration for POS and retail systems centralization is integration or synchronization of POS data with core accounting and financial data.  Depending on the software solution in use, this integration may require that the POS software/data and the financial software/data reside on the same computer and/or within the same network.  This may be one area where a hosted implementation may offer a great deal of benefits, but the benefits to be derived are often a function of the design and behavior of the applications integrating.

QuickBooks Point-of-Sale, for example, was designed for use on a single-user PC environment.  The application is not well-suited to a hosted deployment for multiple users, as the software only allows one instance of itself to run on each computer. While there is a “multi-store” option for this solution, the option requires all stores be connected via a LAN/WAN connection to the same network. RDS (remote data sharing) functionality might possibly be used to allow communication between locally-run POS locations and the “master location” at a hosting service provider, but this method of communication has previously been found to be somewhat problematic and platform-specific (see notes following relating to multi-user/store configuration and Vista OS).  Further, the potential poor performance of RDS connections often negatively impacts the value of the integration.  

In many cases, the suitable answer is to keep the POS systems running on the local computers and network, and run the financial applications and the POS integration at the host.  With an installation of the QuickBooks financial application and the point-of-sale solution with the hosting service provider, the core financial data is able to be secured and protected in the virtual environment without risking lost productivity (and lost sales!) due to connectivity failures at the retail locations.  The end-of-day process at each location is to then move a copy of the POS data file to the host system, where it would be integrated with the QB financial data.  In environments where is is desirable to have the POS systems reading customer and/or inventory data directly from the QuickBooks financial data files, the recommendation is to keep an available copy of the financial data file in the POS network, on the local computers.  This copy of the data file provides the point-of-sale systems with necessary customer and product information, and would be copied/updated during the same end-of-day process where POS data is moved up for integration on the host system. 

This process is very similar to the way in which a localized system might be utilized, where the POS application runs at the front counter and the accounting application and data run from a back-office system.  In this scenario, many businesses elect to simply log off from the front counter system so that they can launch the POS application from the back-office computer, and then integrate the POS data with the QB financial data on that same computer.  Even in remote network configurations (WAN configuration), this is often a method which delivers better performance and stability than utilizing the remote data sharing service.

J 

CRM Solution Gets High Marks from QuickBooks ProAdvisors

Results CRM offers robust features, yet is simple to use for small business users

Results CRM Solutions offer more functionality and features than most CRM solutions oriented for small businesses.  In most cases, a robust solution like this would require lengthy configuration and training efforts in order to make the system useful.  With Results CRM, however, a business can be up and operational within minutes.
 
The solution was recently reviewed through Intuit's ProAdvisor program, and got a rating of 9.75 out of 10!

From the review:
Results is extremely full-featured. Products with this level of functionality often have a complex architecture making them hard to learn and use. With Results, navigation and search functionality are simple and allow you to easily and rapidly access the data you desire.

Migrating Business To The Web

Every business has similar, fundamental business problems to solve. In most cases, the business applies technology (computers and software) to facilitate the solution. The fundamentals that each and every business must address include: keeping score, accounting for their business operations; producing information, for internal and for external use; and communicating, with co-workers, team members, clients, and vendors.

Once you get beyond those fundamentals, however, every business has something unique to address in terms of how they actually operate. Supporting the operational aspects of the business - managing people, resources, information, processes, etc. - is the next step in enabling the business.

Within each business there are different kinds of processes to facilitate, creating the demand for software developers to build systems to address specific processes or to deliver specific functionality to the many and varied businesses in the world. Even within an industry domain or realm, there are likely numerous solutions available for any given business problem. For most organizations, selecting the right applications for the business often requires that those applications integrate, or work together in some manner.

But here's the issue: not everyone programmer develops software the same way or using the same tools. What ends up happening is that each software product has its own "footprint", and behaves differently. Some packages are written well and offer flexibility in how they are implemented; and some not. Disparity in application design and operating platform requirements can significantly increase the complexity of not only integrating the solutions, but managing the software and platforms to keep those integrations running. For these (and other) reasons, application integration (or data integration) is not always easily accomplished in a small business.

At an ever-increasing level, users are also now demanding remote and mobile capability from their software. The market has generally accepted the value of remote/mobile access, and businesses need to offer their workers the flexibility to work from a variety of locations (at the office, from a remote office, from home). Now the enterprise has to figure out a way to fit that square peg (the software they currently use) into a round hole (mobility!) It really starts to matter if the software products in use are all designed to run differently. Can the organization's selected applications be oriented towards remote or mobile access? Generally, the answer is "YES" (but with caveats).

The Application Service Provider model, or hosted application model, was developed to provide remote access capability to applications that traditionally don't work in that capacity. Additionally, the ASP model was designed to improve application management and administration for the subscriber, reducing or eliminating the complexities of handling multiple integrated solutions. Allowing a business to "migrate" to the web gives that business new capability and, potentially, a new working model that could easily include remote offices and mobile users. Migrating with the existing in-use applications allows the business to benefit from the new working model, but avoids the difficulties of transitioning to and learning new software.

Application hosting isn't a new concept at all, it's just gaining in popularity for several key reasons:

• Broadband is plentiful. You can get high-speed internet service now just about anywhere. That wasn't the case just a few short years ago.
• Localized IT solutions are getting more complex. Bundled solutions (like a Microsoft Small Business Server) make it easier to purchase an array of technology solutions for your business, but there's nothing in the package that makes it easier to set up and manage over time.
• Remote and mobile access is critical. More businesses operate with a home-based workforce ("home sourcing"), or with multiple business locations. The Internet has made it a global economy, and remote and mobile access is what helps a distributed enterprise work as a collective or unit.
• SaaS solutions, such as online banking, have raised awareness of the possibility of secure Internet-based computing. So, as new SaaS solutions emerge, the market is beginning to recognize the value of hosting and is building trust in the model.

Once the business has adopted the new working model and has gained trust in Internet-delivered solutions, then the business is poised to take advantage of new Web-based solutions that might become available. Breaking the adoption into two parts - managed service first, Web-based or SaaS conversion second - allows the business to move forward with a minimum of disruption to systems and processes.

Joanie Mann