Checking your business pulse with a self-audit
Checking your business pulse with a self-audit
You’ve said goodbye to your old career and your consistent pay packet and taken the amazing and rewarding leap into small business ownership to purchase a franchise.
Thrilling? Absolutely. Terrifying? Yes, well, that too.
As you continue to work in and on your business, it can be challenging to know exactly where you stand and assess where this business, that has so much riding on it (maybe your house), is really at.
Assuming you’ve done your research prior to signing on the dotted line and been properly inducted into the franchise system, you’ll have a reasonable understanding of what you expect from your franchisor, as well as what is expected of you.
How can you be sure that you are seeing this business for what it is, and doing everything that you should and could be doing to make it as successful as possible? Conducting a franchise self-audit on your business by taking a step back and looking objectively at the key compliance and performance areas is the first step.
When most people think of the word ‘audit’, they think of the Australian Taxation Office going through your deductions to ensure everything is above board. A franchise selfaudit is similar. It is a check to ensure that every element of your business is financially and operationally sound, compliant and wellmanaged in everything from marketing to human resources.
“When a franchisee buys a new business, it can be tempting to see the business where they think or hope it is rather than perhaps how it truly is performing,” says Andrew Harvey, Audit Specialist at FC Business Solutions. “A self-audit is a great option for franchisees to assess the health of their business, give them opportunity to fix things that need fixing or take advantage of areas of strength.”
Andrew suggests franchisees should consider all facets of their business when conducting a self-audit to ensure the health and viability of their business.
“Franchisees should put everything on the table – forewarned is forearmed.”
The first area of focus should be on the franchisee’s business goals and financial performance. Andrew suggests that the basic business management tools are critical here – a clear business plan, a budget and forecast, a profit and loss statement, and a cash flow report. Using the cash balance of your bank account should not be relied upon as a measure of success or profitability.
It is then important to assess those items against specific benchmarks and financial performance indicators of:
- your business in previous years;
- within the franchise network; and
- the industry and sector as a whole.
Jessie Caudry, Franchise Support Systems Specialist at FC Business Solutions, warns that franchisees though shouldn’t just focus on the financial side of the business.
“A full self-audit should go beyond just the financials to look at all areas of compliance and regulation,” says Jessie. “This is critical with regular updates across such requirements as Industrial Relations (IR) and Consumer Law frameworks and tools. Elements such as pay rates and consumer protections may change significantly and can expose the franchisee to risk if they are out-of-date or not best practice.”
While it is important for franchisees to focus on the hot topics of IR and Consumer Law compliance, there are also a range of other regulatory responsibilities including superannuation, OHS, ASIC, and taxation obligations to ensure you are on top of, along with industry-specific regulatory requirements that are also critical to include in any auditing process.
“If you are in hospitality, you may have various compliance needs in terms of food storage and handling, or if you are in retail, you may have policies for returns or refunds consistent with Consumer Affairs regulations,” says Jessie.
While many policies and procedures within a franchise may be guided by compliance and regulation, Jessie suggests the self-audit is also an excellent time to review procedures important to your business but not necessarily issues of compliance.
“The delegation of key tasks or internal communication processes are simple things that should be reviewed to ensure that the franchisee and the employees are using their time efficiently and effectively,” says Jessie.
With the business’s financials and compliance angles checked, what else should franchisees look at to ensure their business is in the best shape it can be? Andrew suggests that franchisees should look beyond their own business to ‘audit’ the franchisor.
“Franchisees pay good money for their business and should therefore expect service and support from the franchisor, as well as peace of mind and assurance that their franchisor is continuing to innovate and grow,” says Andrew.
Key areas for franchisees to consider when auditing the franchise include ensuring there are frequent updates to systems and operational manuals to ensure processes are best practice, efficient and ahead of the pack in their industry.
Branding at a national level should also be consistent to ensure individual franchisees are well-placed to capitalise on national marketing initiatives and brand awareness.
“Franchisors should also be providing support to their franchisees by way of at least annual audits of each site and support in analysing performance, benchmarking and KPIs,” says Andrew. “Productive and useful visits from the field team are a must to ensure that franchisees are gaining industry knowledge, business analysis, support and coaching.”
For many franchisees, the idea of such audits can be overwhelming but there is support available by way of auditing tools and information from authorities such as the ATO, ASIC or Fair Work Australia. However, sometimes it is wise for a fresh set of eyes to review things, says Andrew.
“Sometimes when franchisees are emotionally and financially invested in their business it can be hard to see exactly what is happening,” says Andrew. “An outsider can often quickly assess what is working or not working, what requires streamlining, minimisation or a new approach.”
“Regardless of where you are, an audit can put you back on the right track or simply provide you with assurance to make that next move.”
Top 5 franchisee self-audit areas:
- Compliance with relevant Modern Award and other Fair Work Act obligations
- Alignment to the franchise brand and systems
- Business goals have been set, assessed and revised
- Staff are trained and onboard with the businesses systems
- Financial performance is analysed via the figures, benchmarks and KPIs.
FC Business Solutions is the only integrated consultancy focused exclusively on the franchise community. Our team of professionals has been providing specialised and expert services to franchises for many years.
The FC Business Solutions team are actively involved members of the Franchise Council of Australia regularly attending events, participating in committees and assisting in raising the profile of franchising in Australia.
FC Business Solutions is a business which has proudly been certified in accordance with the internationally recognised ISO 9001: 2008 management system which focuses our business on delivering a consistent level of quality to our clients defined by regularly reviewed processes and procedures.