Bookkeeping for Franchises: Everything You Need to Know

Franchising is an excellent option for business owners and entrepreneurs. It allows small business owners to expand their brands into new markets and encourages entrepreneurs to pursue franchise opportunities instead of starting their own business from scratch.

A franchise provides business opportunities for individuals to own and operate a franchise with low start-up costs and comprehensive training. Starting your own business through a franchise offers the freedom, flexibility, and support needed to succeed in entrepreneurship.

As a franchise owner, your business’s success hinges on effective bookkeeping. It’s about managing your finances and steering your franchise towards success. A robust bookkeeping system is your tool to achieve your goals and turn your franchise into a thriving business.

What is franchise accounting?

A franchise is a business model that allows individuals (franchisees) to operate the locations of a larger company (franchisor) under the company’s brand name, systems, and support. Bookkeeping franchises' accounting responsibilities include financial reporting and compliance, revenue recognition, expense management, financial oversight and analysis, taxation, and audit and assurance.

For example, Payroll Vault Franchising is a nationally recognized franchise that offers a proven business model and resources for running a successful payroll business. Padgett Business Services is another franchising opportunity for entrepreneurs and accountants, providing tax advice, business consulting, financial reporting, payroll solutions, and other business services.

What are the unique accounting needs of a franchise?

When it comes to bookkeeping for a franchise, you need to understand the roles of the franchisor and the franchisee. As the business owner, the franchisor provides the business model that a franchisee can invest in.

The franchisee takes the business to a specific location and runs it there. This way, the company can scale into a bigger market to spread the brand and increase revenue. The franchisor and the franchisee have unique bookkeeping needs that need to be met to build a successful business and ensure the franchise thrives.

What are some of the best franchise bookkeeping services and practices?

Starting and maintaining a profitable bookkeeping business model for franchises can be overwhelming.

Here are some bookkeeping practices that we find are crucial to a franchise's success:

1. Track expenses and revenue

Tracking expenses and revenue is a critical task in franchise bookkeeping. This is no different from other small and medium-sized businesses that need to track overheads, profits, revenue, raw materials, utilities, rent, salaries, and employee scheduling.

2. Franchise-specific costs

However, some franchise-specific costs need to be considered when handling franchise bookkeeping.

a. Initial fees

Initial fees are paid upfront when you invest in the various franchise opportunities. These fees are for using the franchise’s name and branding.

b. Amortizing initial fees

Franchisees can amortize the above initial fees over time. They need to track these monthly fees until they are paid off.

c. Marketing fees

Marketing fees are monthly fees that franchisors and franchisees pay to advertise their business. Marketing is a critical component of a successful franchise.

d. Royalty fees

The franchisee pays the franchisor royalty fees monthly in exchange for using their branding. Royalty fees are a percentage of the revenue.

Whoever is in charge of the books needs to be able to run and analyze the daily financial operations of the individual units and the brand as a whole for a stress-free tax season. Financial technology, such as accounting software, is a valuable tool for bookkeepers. It minimizes errors and maximizes efficiency by automating repetitive tasks, providing real-time financial data, and generating reports. This will simplify your bookkeeping and keep you on top of your finances.

How can you simplify bookkeeping for franchises?

You can simplify bookkeeping for franchises and small businesses by automating receipt management. The best way to automate is to use an app or outsource this time-consuming task to other financial services.

Shoeboxed

Shoeboxed is a two-in-one receipt scanner that over a million businesses use to automate expense management.

Digitizes receipts and documents

Shoeboxed turns receipts into digital data.

Franchises handle many receipts and documents to maintain accurate financial records, ensure compliance with franchise agreements, and support business operations.

Here are the key types of receipts and documents that franchises typically manage:

• Expense receipts for operational expenses, inventory, and supplies

• Sales receipts

• Invoices

• Payroll records

• Employee expenses such as reimbursements and benefits

• Vendor invoices

• Payment records

• Bank statements

• Financial reports

• Tax filings

• Compliance records

• Franchise agreements

• Insurance policies

• Meeting minutes

• Advertising contracts

Digitizing these items greatly reduces paper clutter and manual entry and keeps the documents organized and easily accessible.

Mobile app

To digitize, franchise owners and employees can use their mobile devices and the Shoeboxed app to scan and upload receipts and documents to a designated Shoeboxed account.

Magic Envelope service

Or, if franchise owners don't have the time to scan their receipts, they can outsource receipt and document management to Shoeboxed. Shoeboxed provides a free postage-paid Magic Envelope that franchises can fill with batches of receipts and mail to the processing center, where they will be scanned, human-verified, and uploaded into your account.

Shoeboxed is the only receipt scanner app that will handle both your paper receipts and your digital receipts—saving customers up to 9.2 hours per week from manual data entry!

Email integration

The Shoeboxed Gmail plugin automatically detects and extracts receipts from your inbox and turns them into organized expense records.

Franchisers who don’t have a Gmail account can forward email receipts to their Shoeboxed account for automatic processing and categorization.

Organizes and categorizes

Once the data is scanned and uploaded, Shoeboxed automatically organizes and categorizes critical information into tax or customized categories, helping franchisees track spending, file taxes, and manage budgets effectively.

Franchise owners can create custom tags and categories tailored to their specific business needs.

Digitized receipts become part of a searchable database, enabling quick retrieval of specific documents when needed.

This auto-categorization saves the franchise's time and reduces errors.

Expense reporting

Once the data is categorized, Shoeboxed generates detailed expense reports, providing insights into spending patterns and helping with financial planning and analysis.

Franchise owners can track financial performance across different locations, helping identify trends and improvement areas.

These reports simplify tax preparation by providing organized records of deductible expenses.

Integrates with accounting software

Shoeboxed integrates with popular accounting software, such as QuickBooks, Xero, and Wave, allowing easy data transfer and synchronization.

Compliance and audit readiness

Shoeboxed stores receipts in a format accepted by the IRS, making tax preparation and audits smoother.

The platform provides a clear audit trail, ensuring all financial transactions are well-documented and easily verifiable.

Mileage tracker

Shoeboxed has a mileage tracking feature that logs business trips so franchisers can claim mileage deductions.

Detailed mileage reports can be generated to track and claim mileage deductions.

Business card management

Franchisers collect many business cards from vendors, industry colleagues, financial institutions, and potential customers.

The Shoeboxed mobile app takes photos of business cards. It then extracts and digitizes the contact information.

All digitized business cards are stored in a central cloud-based database, making contact information accessible anywhere.

The contact information that was extracted becomes searchable, so you can quickly find specific contacts when needed.

Shoeboxed allows you to export contact information to various CRM systems so all your business contacts are organized and accessible within your preferred customer relationship management tools.

Contacts can also be exported as CSV files and imported into other contact management systems or email clients.

Free sub-users for team collaboration and multi-user access

With Shoeboxed, you can set up an unlimited number of sub-users for free.

Multiple team members or your accountant can access Shoeboxed, facilitating collaboration on bookkeeping tasks.

Different levels of access and permissions can be set for various users, ensuring the protection of sensitive financial data.

Centralized cloud storage

All receipts and financial documents are securely stored in the cloud, making them easily accessible from any location.

Shoeboxed demo

How can franchise owners implement Shoeboxed?

1. Account setup:

• Create a Shoeboxed account and set up the mobile app for receipt capture.

• Configure email forwarding for digital receipts.

2. User management:

• Add team members as sub-users and assign roles and permissions based on their responsibilities.

3. Expense categorization:

• Customize expense categories and tags to suit the franchise’s specific needs.

• Regularly review and verify categorized expenses for accuracy.

4. Integration with accounting Software:

• Integrate Shoeboxed with the franchise’s accounting software for seamless data transfer.

• Regularly sync data to ensure financial records are up-to-date.

5. Monitoring and reporting:

• Utilize Shoeboxed’s dashboard and analytics to monitor financial performance.

• Generate and review detailed expense reports for financial planning and tax preparation.

By leveraging Shoeboxed’s features, franchises can streamline their bookkeeping processes, ensure accurate financial tracking, and focus more on business growth and customer service.

Frequently asked questions

Do franchises have special bookkeeping needs?

Franchises have special bookkeeping needs, such as the following:

• Consistent reporting across all units

• Compliance with franchise agreements

• Royalty fees

• Revenue recognition of initial franchise fees

• Point of sale system integration

• Shared expenses

• Centralized purchasing

• Benchmarking

Can I write off franchise fees?

Franchise fees are considered “intangibles” under Section 179. So you can deduct the initial and ongoing franchise fees from your tax return.

In conclusion

By managing receipts and documents effectively, franchises can maintain accurate financial records, ensure compliance with legal and regulatory requirements, and make informed business decisions.

Tools like Shoeboxed can help automate and streamline the management of these documents, making bookkeeping more efficient and reliable.

Whether you do the books yourself or use franchise bookkeeping services, the end goal is to set up a bookkeeping system that will support the franchise’s success from the franchisor to the franchisee.

Caryl Ramsey has years of experience assisting in different aspects of bookkeeping, taxes, and customer service. She uses a variety of accounting software for setting up client information, reconciling accounts, coding expenses, running financial reports, and preparing tax returns. She is also experienced in setting up corporations with the State Corporation Commission and the IRS.

About Shoeboxed!

Shoeboxed is a receipt scanning service with receipt management software that supports multiple methods for receipt capture: send, scan, upload, forward, and more!

You can stuff your receipts into one of our Magic Envelopes (prepaid postage within the US). Use our receipt tracker + receipt scanner app (iPhone, iPad and Android) to snap a picture while on the go. Auto-import receipts from Gmail. Or forward a receipt to your designated Shoeboxed email address.

Turn your receipts into data and deductibles with our expense reports that include IRS-accepted receipt images.

Join over 1 million businesses scanning & organizing receipts, creating expense reports and more—with Shoeboxed.

Try Shoeboxed today!