Essentials of Franchise Accounting
Starting a home care franchise is an exciting step, but managing the finances can feel daunting, especially if you’re new to the world of business accounting.
This blog breaks down the essential principles of franchise accounting, specifically for home care franchisees in the UK. Whether you’re just getting started or looking to improve your systems, you’ll find simple, actionable advice to help you build a strong financial foundation.
Why Franchise Accounting Matters
Good accounting isn’t just about balancing books, it’s about building a profitable, compliant, and sustainable business.
With proper financial management, you can:
- Track and improve profitability
- Stay compliant with UK tax laws
- Make confident, data-driven decisions
- Avoid cash flow issues and hidden costs
By putting solid accounting practices in place from day one, you’re setting your franchise up for long-term success.
Understanding Key Financial Statements
Here are the three most important financial documents every franchisee should understand:
1. Profit and Loss Statement (P&L)
This document shows income and expenses over a set period – monthly, quarterly, or yearly. This important document reveals if your franchise is making or losing money.
2. Balance Sheet
A snapshot of what your business owns (assets), owes (liabilities), and the value left for you as the owner (equity). This important document helps you understand financial health and borrowing capacity.
3. Cash Flow Statement
This document tracks how cash flows in and out of your business. Even a profitable business can struggle if it runs out of cash.
Managing Franchise Fees and Royalties
As a franchisee, you’ll have unique financial obligations. These typically include:
- Initial franchise fee: Paid upfront to join the network
- Ongoing royalties: Regular payments based on your revenue.
In order to stay on top of this it’s important to record all payments and invoices accurately. Set calendar reminders for due dates and understand how these fees fund brand development, training, and support.
Accurate Revenue and Expense Tracking
In home care franchises, transactions come from many sources and involve varied expenses.
Revenue Examples:
- Client care fees
- NHS/local authority funding – Whilst other care companies may have this type of income, Home Instead will typically work with private clients as we believe that pursuing Local Authority tenders can diminish the quality of our care.
- Additional services (e.g. respite care)
Expense Examples:
- Staff wages & pension contributions
- Insurance (e.g. public liability)
- Medical equipment and supplies
- Rent, utilities, cleaning & maintenance
- Staff training and compliance fees
You may want to organise records weekly and keep digital copies of all receipts and invoices to simplify bookkeeping and auditing.
Budgeting and Forecasting
Budgeting helps you plan for the future and avoid costly surprises.
How to Build a Budget:
- Review historical data or industry benchmarks
- Forecast income and essential operating costs
- Factor in seasonal trends and emergencies
- Revisit monthly to stay on track
Forecasting can also help you make informed decisions about hiring, marketing, or investing in new services.
Tax Obligations in the UK
As a UK-based home care franchisee, you’ll need to meet several tax requirements:
Key Taxes:
- VAT: Register if turnover exceeds £90,000. Note: many care services are VAT exempt.
- Corporation Tax: Payable on business profits (currently 25%).
- PAYE & National Insurance: Required if you employ staff.
Avoid Common Mistakes:
- Missing tax deadlines
- Incorrectly applying VAT rules
- Overlooking allowable deductions
It can help to partner with an accountant who understands care sector specifics and HMRC regulations.
Leveraging Accounting Software
At Home Instead, it is commonplace to use accounting software to make the process far easier. We can make recommendations for tools to use and provide some guidance on correct usage. The features that will benefit your accounting process are:
- Automated invoicing
- Real-time cash flow tracking
- Payroll integration
- Easy VAT and tax reporting
- Bank account syncing
Most tools will also offer mobile apps and HMRC-compatible tax filing.
Seeking Professional Support
While you should understand the basics, you don’t have to manage everything alone. A professional can help you to save time and reduce errors, get expert advice on tax and compliance and help you focus on running your home care franchise and not your books.
You may want to look out for accountants with franchise or care industry experience that are registered members of a UK professional body (e.g., ACCA, ICAEW). It’s also important to consider transparency of fees and good communication.
How Home Instead supports its franchise network with accounting
At Home Instead we understand that franchise accounting can be complex. That’s why we offer every franchisee:
- Access to experienced financial advisors
- Templates and systems for budgeting, invoicing and payroll
- Support with tax planning and financial reporting
- Integration with preferred accounting tools
Our goal is to simplify accounting, so you can focus on what really matters: delivering high-quality care.
Good franchise accounting is essential for success
Franchise accounting isn’t just a box to tick, it’s a vital part of building a successful, compliant, and sustainable home care business.
By following best practices, investing in the right tools, and seeking support when needed, you’ll gain the confidence and clarity to grow your business effectively.
Speak to our Franchise Development Manager Luke Spellman to find out more about what Home Instead offers its franchisees in terms of technology.