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What are the best invoicing policies for franchises with different payment frequencies?

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Invoicing is a crucial part of any business, but especially for franchises that operate under a common brand and offer standardized products or services. However, invoicing can also be challenging for franchises that have different payment frequencies, such as monthly, quarterly, or annually. How can you ensure that your invoicing policies are consistent, accurate, and efficient across your franchise network? Here are some tips to help you create the best invoicing policies for your franchise business.

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Tomi Akinwale ACCA, ACA, ACTI, B.TECH, FMVA, AAT.

Tax | Deloitte | Financial Reporting | Unlocking Your Career Potential

1 Understand your franchise agreement

Before you set up your invoicing policies, you need to understand the terms and conditions of your franchise agreement. This document specifies how much you have to pay to the franchisor, what services or support they provide, and how often you have to report your financial performance. You also need to know what fees, royalties, or commissions you have to pay, and how they are calculated. Depending on your franchise agreement, you may have to pay a fixed amount, a percentage of your sales, or a combination of both. You also need to know when and how to pay these amounts, and what penalties or consequences apply if you miss a payment.

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Tomi Akinwale ACCA, ACA, ACTI, B.TECH, FMVA, AAT.

Tax | Deloitte | Financial Reporting | Unlocking Your Career Potential
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Understand and Consider business types and models. Different franchise types within your network might have varied revenue streams and operational expenses, affecting their preferred payment timing.

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2 Choose the right invoicing software

One of the best ways to streamline your invoicing process is to use a reliable and user-friendly invoicing software. This can help you automate your invoicing tasks, such as generating invoices, sending reminders, tracking payments, and reconciling accounts. Invoicing software can also help you create customized invoices that reflect your franchise brand and identity, and comply with the invoicing standards and requirements of your franchisor. Moreover, invoicing software can help you integrate your invoicing data with your accounting system, and provide you with reports and insights on your cash flow and profitability.

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3 Align your invoicing cycle with your payment frequency

Another important factor to consider when creating your invoicing policies is your invoicing cycle. This is the period between the date you issue an invoice and the date it is due. Your invoicing cycle should match your payment frequency, which is how often you have to pay your franchisor or receive payments from your customers. For example, if you have to pay your franchisor monthly, you should invoice your customers monthly as well. This way, you can avoid cash flow gaps and ensure that you have enough funds to cover your franchise obligations. However, if you have different payment frequencies for different customers or services, you may need to adjust your invoicing cycle accordingly, and communicate clearly with your customers and franchisor about your payment terms and expectations.

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David Elvis Matlala GTP (SA)

MD:Pula Yana Investment Holdings Pty (Ltd)
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Adjust your invoicing cycle accordingly, and communicate clearly with your customers and franchisor about your payment terms and explanations.

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4 Set clear and consistent invoicing policies and procedures

It is essential to set clear and consistent invoicing policies and procedures for your franchise business. These should include how to create and send invoices, accept and process payments, handle late or disputed payments, issue receipts and acknowledgments, maintain and update invoicing records, and report and share invoicing information with your franchisor. Moreover, the policies and procedures should be aligned with your franchise agreement, your invoicing software, and your invoicing cycle. It is also important to document them, communicate them to staff, customers, and franchisor, and review and update them regularly in order to reflect any changes or feedback.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the best invoicing policies for franchises with different payment frequencies?

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1 Understand your franchise agreement

2 Choose the right invoicing software

3 Align your invoicing cycle with your payment frequency

4 Set clear and consistent invoicing policies and procedures

5 Here’s what else to consider

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