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Practical Tips for Managing Cash Flow as a Franchisee

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Practical Tips for Managing Cash Flow as a Franchisee

October 26
14:00 2022

It’s enough to drive a bright-eyed entrepreneur to close the tab and never consider setting up a business again. While it’s true that around 20% of new businesses fail in their first year, franchises are regarded as a safer investment than going it alone because franchisors provide support and access to networks.

The risk of owning a franchise will always be present. However, several techniques to reduce the risks and position your business for success. One of the most significant advantages of having a franchise is to increase cash flow aside from investment and expansion prospects.

Securing cash flow today will ensure a prosperous tomorrow, whether your franchise investment is in retail, medicine, fitness, or IT.

When Should You Hire Outside Help?

Working through these financial exercises with a reputable accountant if unfamiliar with reading financial documents or generating financial estimates. Don’t overlook this crucial aspect of your research. If the numbers come out as less than ideal, Owners may find working longer hours than expected with very little in the way of salary or profit to show for it.

Any business’s goal is to generate positive cash flow, but it’s not an easy task. It will take some effort up front, but structuring and developing financial outlines that report financial health can give a clear and detailed picture of the franchise’s overall health. Businesses can’t afford to throw money away in the age of Big Data, business intelligence, and analytics when already have the tools to maximize success.

Make a cash flow statement for your business.

Cash flow statements are a reliable tool for prioritizing actions and objectives. All planned expenses and income for 12 months should be included in the statement, including salary, loan repayments, inventory, and accounts receivable. If a business needs some assistance getting started, numerous cash flow statement templates are available online to help you.

Also Read: How to Start a Cell Phone Business The Right Way!

Understand the Differences Between Revenue and Cash Flow

Although it may appear simple, many business owners get this crucial information jumbled up. The total amount earned from the sale of goods and services is referred to as revenue. Your company’s money inflows and outflows are referred to as cash flow. While revenue is a solid sign of a company’s health, it is not the same as cash flow. Cash flow tells how much gas is left in the tank and how close is to fill it up. The cost of entry for running a successful franchise is knowing exactly what your finances are and comprehending the difference.

Make Use of the Resources Your Franchisor Provides

One of the most significant benefits of owning a franchise is that the business is an already established brand. This allows to leverage the franchisor’s tools and resources, including marketing, research, and data. Some franchises even include inventory and equipment in franchise fees. This allows cutting costs in ways never could as an independent business.

Also Read: Best Practices for Expanding from Online Store to Retail

Calculate the profit and loss potential.

Maintaining positive cash flow necessitates the creation of a profit and loss statement. A profit and loss statement depicts your company’s revenue, costs, and spending over a given period. Like a cash flow statement, a profit and loss statement can be prepared for a 12- or 24-month period. Both statements, when combined, present a comprehensive picture of your company’s performance. It’s also a straightforward technique to find losses that may be lying in plain sight. These templates are also available on the internet.

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