How can you manage cashflow as a franchisee?
Many franchises don’t have the clout or size of bigger businesses who can benefit from scale when it comes to collecting and managing customer’s one-off joining fees, recurring fees, invoice payments from a set or a variable amount, payment plans and debt collection.
While gyms, childcare centres and business to business operations come to mind as the business models most likely to need solutions to this issue, even retailers who operate a lay-by system need to consider how to best process the payments says Rob Baird, CEO of Ezidebit.
“Retailers like the customer to come into the store to pay but this can be done online or by direct debit. If you want to put convenience in front of the customer, this is a great opportunity.”
Big business often offers four payment channels for their customers: BPay, credit card and direct debit, phone payments and web payments.
“We’re offering that level of service to small business. It can be managed through the online portal, or integrated into the franchise software,” Baird explains. “We provide merchant facilities for smaller business.”
FRANCHISOR SUPPORT
Franchisors can work with service providers to deliver a management system for their franchisees. While there are management costs involved in any such service there are issues around data storage to consider, advises Baird.
“Compliance is important for a small business, you have to store credit card or bank details, and there are issues over data storage. If you are operating under a well-known franchise brand there is a reputational risk of credit card fraud that can be a concern.”
Ezidebit, handles clients such as Jetts Fitness and Snap fitness. “We operate at the highest level of PCI compliance. Information is stored inside our system, behind a firewall.”
Franchisees who use a managed financial system can get their money when it’s due, he adds.
“About 96 percent of payments are made on time, every time with the direct debit system. The franchisee doesn’t have to administer this 96 percent and it frees them up to engage with the customer and grow their business.
“It’s important to understand the power of cashflow; poor cashflow can bring on business failure,” says Baird.
CASHFLOW TIPS
1. Consider your customer expectations and how easy is it for them to pay. The easier it is the more likely you are to get paid on time. The range of payment channels are important, online and offline.
2. Think about the nature of your service and ongoing payments. What is the velocity and size of the payments? Larger amounts at one time are less likely than smaller amounts to get paid.
3. Encourage customers to see that recurring payments make the purchase more affordable. There is flexibility in direct debit payments: they can be made through a bank or credit card, with a fixed or variable amount.