10 ways to manage the finances of your franchise during the pandemic

Top tips from experienced franchisor Brody Sweeney

If I have any good advice to give around running the finances of your business, get a Shabu to come to work with you.

From the beginning, working with me as a part-time accountant, Shabu Mani took charge of the money - making sure we kept our books up to date and that we knew exactly where we were at a given time. He also sense checked me when I wanted to try something and became quite mean when money was tight - exactly what you need with an accountant.

Making sure your cash doesn’t run out is arguably one of the most important things you have to do with your new business. Inevitably, things cost more than you think and business takes longer to pick up. If you run out of cash while this is happening, the game is up.
Here’s my best thinking about how to make sure you don’t run out of money before your business gets established:

1. Stop the bleeding
Even though we are well into the crisis and you would imagine that all costs have been cut as much as they can, reality is only now setting in for many business owners - and particularly that the recovery may be in the distant future.

If you haven’t stopped the bleeding, you won’t make it. Income supports and grants have given many a false sense of security, but you’re paid to be a leader and putting off tough and hard decisions is not being a leader. Act now - you owe it those whose jobs can be saved.

2. Make a plan and adjust as you go - early and often
Having a road map out of the coronavirus crisis is a vital step to getting your business to a steady and profitable state.

And even though you know intellectually that your plan won’t work out exactly as you think - there are so many things you can’t control - it’s still better to have a plan that you continually adjust to achieve your objective.

The plan you may have prepared at the start of the pandemic is by now probably completely out of date and you need a new one, reflecting the new realities as soon as you can.

Preparing a new plan starts with an honest analysis of where you are today, not three months ago. Look at the four main areas of your business - finance, marketing and sales, operations, and HR - and be hard. Tell it as it is.

From this honest analysis should come a detailed vision of where you now think the company could get to with a reasonably fair wind - under the same four headings - as well as a detailed plan of what the business needs to do over the coming 12 months to make concrete progress towards your new vision.

Knowing things won’t work out as planned means you need to be prepared to adjust as you go and keep adjusting - daily, weekly or monthly - until you are on track to achieve your objectives.

3. Constantly update your running cash flow
Running out of cash is how most businesses grind to a halt and in the fast moving and highly unpredictable environment around the virus, you need to keep on top of where you are with your cash.

Making predictions as new information comes to hand, and you see your actual trading performance, allows you to update your projections and anticipate cash problems before they happen so you can act.

4. Find out about and use available support
Refresh yourself as to what support is available to help your business during the crisis.

The obvious ones, such as pandemic payments and tax warehousing, you will probably be aware of, but there is a plethora of new state supports, including restart grants and online retails scheme, as well as cheap ways to borrow money with a partial state guarantee, that may have been introduced since you last looked.

5. Don’t pay yourself too much
No one likes taking a pay cut and what’s obvious to you may not be as obvious to an ill-informed employee. So lead by example and take the largest pay cut yourself, if that is necessary.

6. Get a good money person around you
Having the comfort of someone good with money at your side during a crisis makes life a lot easier. The wise counsel and unemotional help with decision making is very valuable.

If you’re not blessed with one already, do yourself a favour and make it a priority to find the right person.

7. Communicate with everyone affected by your financial decisions
Now is the time to overcommunicate with anyone who may be affected by your financial decisions.

At the outset of lockdown, we cancelled all our direct debits and communicated this and the reason why with our suppliers. As soon as it became apparent our business was not being badly affected, we reinstated them and communicated this and the reason why to our suppliers.

We communicated with staff about wage cuts, with the bank to reassure them we were okay and with landlords as we needed. We made it a priority to talk to our staff, who were worried about losing their job or getting sick. It removed a lot of the unnecessary stress and worry they may have had.

8. Run weekly profit and loss accounts
Keeping a close eye on the financial performance of the business, not just cash flow, enables you to make decisions that reflect the business that you are actually doing, as opposed to what you projected.

In our business, we run weekly profit and loss accounts for each restaurant. These are a tool with which we can measure the effectiveness of our decisions and the wisdom of our managers. If we were not measuring that frequently, bad stuff could be building up that we could be too late to act upon.

9. Measure your key performance indicators and act on them
Understanding the effect that lower sales are having on your KPIs is no-brainer information for your business.

It is a fact that model margins for labour, for example, are much harder to achieve with lower sales. Most businesses have three or four key numbers that indicate their health. If you are not running those numbers at least on a weekly basis, you’re not running your business properly.

10. Double down on pockets of current or future growth
While your traditional business model may be in trouble during the pandemic, resourceful companies are exploring new ideas and ways of doing things.

This is a time for speed over perfection. As you find pockets of business that are doing well - for example, takeaway meal kits have worked well for some restaurants that were unable to do dine-in business - double down on these new and unexpected sources of revenue.

These are taxing times for many companies and keeping control of your finances seems obvious. But with so many other aspects of business occupying your thinking and time – such as losing track of the money or indeed running out - it can bring the whole pack of cards down.

Good luck and stay safe.

The author
Brody Sweeney is founder of Camile Thai Kitchen.