Guest Blog By Nick Sprau
The franchising landscape has changed considerably over the past decade, and the result has been a real headache for some franchise owners trying to keep their books straight and current. Traditionally, a franchise owner was an individual entrepreneur who approached the franchisor, seeking to open one or two locations. More recently, however, individual owners have been selling to a master franchisee to gain economies of scale through consolidation. Now, many franchisees who began with a few stores find themselves with dozens or even hundreds of sites to manage across multiple geographic locations.
As master franchises have grown, so have their expenses, as well as the number of staff required to manage invoices. For example, one master franchisee with hundreds of outlets approached our firm for assistance after its UPS costs had risen to more than $1 million dollars a year just to transport invoices from local franchises to the master franchisee’s accounts payable department. At franchise headquarters, 15 to 20 people worked every week to record and code the invoices in a tedious, error-prone and endless effort.
With paper invoices like these—which are received locally to each franchise but paid centrally—the accounting department may be blindsided. Hundreds of bills are likely sitting on the desks of store managers, and accounting has no idea that this significant financial burden is out there. Furthermore, delays inherent in transferring paper from distant franchises mean headquarters has little negotiation power with vendors and often misses the opportunity for discounts granted for on-time payments, while they often sustain penalties for late payments.
Fortunately, technology has provided a solution that is slashing the cost of invoice processing for savvy master franchisees. Even better, the only skills the individual franchise managers require to use this advanced technology are the abilities to scan and email an invoice. This web-based service allows the master franchisee’s accounting department to receive electronic versions of paper invoices with equal ease from franchises located across town or those across the globe. Here’s how it works:
When a local store receives a shipment, the manager places the accompanying invoice in a scanner and emails it to the accounts payable department at headquarters, where the invoice automatically loads into a web-based solution. Now, by logging into a website, the store manager can view the electronic invoice and verify it, enter data, and code and approve it. If any delays occur in this process, the system issues automatic alerts and reminders.
With the online approach, accounts payable knows every invoice that is in the franchise’s system—no more surprises when they arrive at headquarters. The technology can integrate with the master franchise’s ERP system and provide the kind of insights needed to better predict cash flow. And for some companies, the cost of processing an invoice in this centralized fashion has dropped to just a fourth of the original expense.
For master franchisees and their franchises alike, the web is a great equalizer and eliminates many of the challenges inherent with multiple locations in multiple geographies with multiple people responsible for the different stages of the accounts receivable and accounts payable process.
Nick Sprau is VP of sales and marketing at Metafile Information Systems, a paperless ERP solutions provider for accounts payable, accounts receivable and human resources document management and workflow technology.