In this case study, Engela van Loggerenberg, Group Financial Manager of Cash Converters SA, reveals how they help their franchisees deal with the business accounting function.
In our franchise business, our customers are our franchisees so we need to ensure that we offer them added value in return for their commitment to our brand. By 2012, it was clear to us that a lot of our franchise owners had bought into the brand because they thrived on the operational side of the business and loved and understood the business model.
Like many small business owners, though, they often found maintaining the management accounts and keeping up with statutory submissions a burden.
A new solution was needed
The specialised processes and three different income streams of our business model make it more challenging to outsource this function effectively.
We wanted a solution that would reflect how, as a franchise operation, we are all part of a team focused on our shared success. With a new franchisee, we can be with them from the start, beginning by setting up a new company for them and ensuring it meets all compliance requirements, including registering with the National Credit Regulator and for Workmen’s Compensation.
True Accounting was launched as an optional service to our franchisees. Today almost 90% have taken up the solution. The few exceptions usually entered the franchise with a well-established accounting relationship elsewhere or had the skills internally.
A separate business evolved
We established True Accounting as a separate service department at head office, offering a turnkey package that went beyond normal accounting offerings such as handling salaries, depreciation and tax services. An important extension, for example, was the daily journals of all our buys, retail and pawn business.
Another was that we recognised how our fast-moving business benefits from weekly analysis of key statistics such as these journals. That allows rapid review of day-to-day results against the franchisee’s business plan, highlighting anything that is not to plan or problems such as staff fraud. These figures also feed into the dashboards tracking sales against budget and gross profit on the different income streams, for example, with which we extend the standard management accounts pack.
In this way, True Accounting offers franchisees a living diagnosis of the health of their business. Ultimately, the high-quality appearance and content of the financial documents provides an excellent track record when a franchisee wants to approach a bank for finance or to sell the store.
Training and support
We offer franchisees classroom training on understanding, reading and interpreting these figures so that they can use them effectively to make good business decisions.
We also support and guide franchisees at two levels. Each franchisee is allocated a True Accounting team of a senior and a junior accountant to call on for any queries or clarifications. This personalises the relationship, enabling them to build a shared business history, understanding and trust.
The senior operations management team visits each store quarterly and will request to see the management accounts, discussing positives and negatives with the franchisee. This enables the franchisor to assist the franchisee to get back on track or to highlight what is working well and what could be built on further by the franchisee or even across the brand.
The accounting process is built on the software foundation of IQ Retail with a general ledger package built for retail. We continually enhance the True Accounting offering and recently added an option for independent stocktaking. This encourages further uptake and organic growth.
In 2017 True Accounting was established as a separate company in its own right, working for Cash Converters and its franchisees but independent so we can also offer similar services to franchise brands into the future.