Running a franchise can be challenging enough if you are a new owner. However, throw in all the extra year-end accounting requirements from your state and federal governments and paperwork to the franchise owner, and it’s enough to send you into full panic mode. Let’s look at some of the complexities that make it worthwhile to hire an outsourced bookkeeping firm to deal with your end of the year responsibilities.
Paperwork Owed to the Franchisor
The franchisor sets guidelines you are legally bound to fulfill. These include special assessments or discounts you have to add or subtract from total sales, and they affect gross sales on your franchise’s year-end profit and loss statement.
Failing to measure these makes it impossible to generate accurate year-end reporting required for franchise compliance. This can also get you into hot water for IRS compliance reasons and impact internal reporting that relies on accurate revenue and expense data.
The above example impacts the profit and loss statement. On the balance sheet, when you buy a franchise, your initial investment, loans, other assets, and liabilities must be categorized and reported properly. Otherwise, there’s an issue with year-end tax deductions.
Tangible and intangible assets are deductible over a graduated period, to reduce the tax burden on your franchise. Many unknowing businesses put these on the P/L instead of the balance sheet. This causes a legion of problems and discrepancies that make it hard to generate accurate tax returns, procure funds from a lender, or get an accurate valuation of your business for potential investors.
Choosing the Right Outsourced Bookkeeping Firm
There is no shame in getting help to keep all the paperwork straight. If you are a new franchisee, it’s essential to hire an outsourced bookkeeping firm to make sure everything is in order from the very beginning.
An outsourced bookkeeping firm will know what gross sales numbers you should report to the franchisor and the IRS to stay in compliance. They file the quarterly and year-end employment tax payments necessary to keep you in compliance with state and federal law.
Penalties for getting this wrong are sometimes severe since state and federal governments target franchises for purposeful misconduct. At the same time, the franchise agreement could include penalties if you make mistakes on the financials.
A reputable outsourced bookkeeping firm like BooXkeeping can help you get everything in order quickly. Click here for a quote!