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If you’ve ever dreamed of owning a business of your own, there may be no better time than the present to do so. According to a recent annual report from Babson College, almost one in every five Americans has either become their own boss in the last three and a half years, or are planning to do so soon. This surge can be traced back to the pandemic, when the intersection of commerce and industry was severely disrupted, causing many employees in the U.S. to reconsider their priorities in life.
This entrepreneurial interest has been a boon to the franchising industry – with participation levels at all-time highs. The advantages of following a proven business model, comprehensive training, and ongoing support are just too good to pass up. But that’s not to say that becoming a franchise owner doesn’t come without its challenges. Once the grand opening is done, and the ribbon has been cut, several key concerns begin – such as franchise accounting issues.
To get started on the right foot, here are four key small business accounting mistakes to avoid as a new franchisee.
1. Missing Out on Key Tax Breaks
Not every new franchisee has prior business ownership experience. In fact, most do not. They may be used to preparing and filing personal income tax returns, but businesses taxes can be much more complicated – especially for the untrained. One crucial mistake that many new franchise owners make is neglecting to deduct their franchisee fee over the lifespan of the agreement – which can easily lead to overpayment. As a franchise owner, you’re entitled to significant tax breaks. Make sure you take advantage of them.
2. The DIY Attitude
As a new franchise owner, you’re probably going to be wary of any unnecessary expenses in the first few months. But if you insist on handling everything in a DIY fashion, even the company’s books, you could encounter trouble down the road. Some franchise finances are intricate – especially taxes and bookkeeping – that might be better left to the experts. The time savings alone is often well worth the cost.
3. Comingling of Funds
Again, newly minted franchise owners with little accounting knowledge may believe that it’s OK to combine personal and business funds – especially where expenses and deductions are concerned. This is an avoidable mistake and can easily lead to the kind of legal tax filing issues you don’t want to encounter.
4. Hiring a Generic Accountant
Leaving the accounting, bookkeeping, and tax work to professionals is a highly advisable strategy. But it also calls for hiring the right professionals. Generic accountants, most of whom handle work for hundreds of personal and institutional clients, may not be the best solution. Especially when there are accountants who only specialize in franchising. Don’t just pick the first option you find on a Google search. Accounting firms seasoned in franchising can offer you tailored advice and compliance. It comes down to the old adage – you get what you pay for.
Book a Free Consult…
If you happen to be a new franchise owner, congratulations! You’ve embarked on an entrepreneurial journey in which your hard work and effort will finally pay off to your own benefit. If you’d like to explore the benefits of having your accounting needs handled – all for an affordable, flat monthly rate – let’s set up a free consultation and see how Ledge Accounting can help. We’re a turnkey provider of accounting, bookkeeping, and tax services that operates exclusively in the franchising industry. There are no contracts, and no hidden fees. With personalized, one-on-one service, our qualified CPAs can handle all your accounting needs and provide you with accurate monthly statements – reconciled down to the last cent. To find out why more than 550+ franchise owners trust Ledge Accounting, select a convenient time and book a free consult on our calendar or email us at: contact@ledgeaccounting.com.
For more information, we invite you to visit our website at www.ledgeaccounting.com.
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