Cloud computing and franchises: raining down opportunities

Franchises are big business. The franchise industry is booming in the UK,
with the number of franchise units increasing by 44% over the last decade.
Franchising accounts for £10.8bn annually in sales. But they are quite a
different operational set-up compared with the average SME. They may operate as
small businesses, but have to report information to another organisation.
Typically, most accountancy practices have not specifically targeted franchises
and, if they have come across them, have found it difficult to explore the
potential of this niche market any further.

However, the changing world of technology is enabling accountants to target
such groups more effectively, including franchises. In particular, online, or
cloud accounting means that it becomes more feasible to support a franchise and
its franchisees, however geographically dispersed.

In the cloud

For the non-technical, let’s quickly remind ourselves what cloud computing
actually means. Rather than software applications and data residing on your PC’s
hard disk, they are stored remotely and accessed over the internet. Updates are
carried out by the software provider and, because the applications and data are
securely stored ‘in the cloud’, there is no risk of them being lost if your PC,
server or hard disk crashes. Payment is usually a flat monthly fee and there are
no software licenses or upgrade costs to worry about. Moreover, even the
smallest SME can now have access to the kind of technology previously only
available to big firms with deep pockets.

Supporting franchises

Cost saving is not the long-term driver for cloud computing and, when it
comes to franchises, it provides the foundation for a whole new way of working
with niche client groups. For example, by having virtual online accounting, you
could offer franchise owners a centralised service that provides a standardised
template of all franchisees’ books, rather than having to interpret different
record-keeping methods. This makes it easier and quicker to spot any anomalies
or problems, then help the franchisee to deal with them. Also, if franchisees
are using the same online accounting tools, then inconsistencies in reporting
are substantially reduced. The economies of scale that this approach provides
can mean that online accounting becomes even more cost-effective.

Franchisors can choose to include online accounting as part of the franchisee
package and, in turn, the franchisor’s chosen accountant can offer their clients
an all-in-one package, including online accounting. This is already happening
and, not surprisingly since most SMEs have to be very cost-conscious, this is an
appealing offer.

Online accounting can also help to overcome the geographic barriers that have
made addressing client communities such as franchises traditionally difficult.
The client and the accountant can have access to the books anytime and anywhere,
so gone are the days of needing to put a USB stick or a bunch of files in the
back of a taxi and goodbye to site visits to the client’s premises. Online
accounting can even be accessed on a Blackberry or an iPhone – and that’s not
just theory: we’re aware of plenty of users who do just that.

Downsides

Too good to be true? Let’s look at the possible downsides. Security is the
elephant in the room here. Many are still too worried about crucial financial
data being hosted away from their own premises and the accessibility that cloud
computing offers also leads to fears that data can be easily stolen.

But, in my opinion, it’s a concern that has had its day. Security technology
has come on in leaps and bounds in recent years and, although I cannot speak for
other vendors, Xero has certainly never had any security scares. Is a CD, USB
stick or a box full of paper any more secure? The latter isn’t even backed up.

Some clients may be wary of their accountants having real-time access to
their financial data and yes, this will mean that some SMEs will want to remain
offline, but this visibility of online accounting is one way in which
accountants can add value to their client relationships; for instance spotting
problems before the year end, meaning that they can be dealt with more quickly.

A final possible negative is cloud computing may feel very new to some
people. There are going to be pockets of franchisees (and other clients) who
aren’t ready for the online world but, equally, I’d estimate that an even
greater number are very familiar with the internet. Most of us use the web and
online services all the time, without being aware of what we are doing. Online
accounting will be a natural evolution for many.

Whether it is to meet the specific needs of franchises or other clients,
online accounting has the ability to help accountants to not only more
effectively address the needs of niche groups, but target these potential
revenue sources, providing new areas of future business.

Gary Turner is UK managing director at Xero

Further reading:

xero.com