A centralized bank for franchisee customers

[Quickwindowclean]

In short making sure no Vat is applicable on the higher percentage which is the franchisee's 

My accountant pretty much advised me that its "ok" but he agreed to report on it and give me a quote for a detailed response.

Meanwhile I'm pretty sure some others have looked at it here already.

What I'm wanting to do is rather then have my soon to be franchisee handle all the payments then pay me (the franchise company) upon invoice which is the easiest way, I would rather it the other way around where I (the franchise company) handles all the turnover then transfers the majority to the franchisee but ofcourse is only liable for the small percentage of turnover hence staying well under the threshold and more importantly NOT being liable on the whole cash flow as it isn't all my turnover.

I've also been advised it's probably wise to have a handling LTD and account that handles all the money then it transfers from there to the franchise account (me) and to the franchisee account (he/her) which means in total I would have 3 LTDs 3 sets of accounts that's including my main LTD Which means more costs! And more confusion i have also however been told it may not be necessary that estate agents etc also do a similar thing . But on the other hand been told pie in the sky I may or may not be at risk with vat fines etc..

I'm pretty sure there's a window cleaning franchise company which handles all the payments 

Either way hopefully i made sense 

Looking forward to discussing it here and figuring out what's the best course of action 

 

[ched999uk]

What is the problem you are trying to avoid?

Is it that you think the franchisee wont pay you?

Maybe have a look at Squeegee or Cleaner Planner as then you control the customers details and the franchisees access to them? You also see the turnover etc.

 

[Quickwindowclean]

What is the problem you are trying to avoid?

Is it that you think the franchisee wont pay you?

Maybe have a look at Squeegee or Cleaner Planner as then you control the customers details and the franchisees access to them? You also see the turnover etc.

No I don't necessarily think that. I mean that would obviously be the worst case scenario.. obviously this will be an extra barrier of security even though it's all in the contract and obviously someone who parts with a premium etc is going to be rather serious.

In a nutshell just an extra barrier.

A good point regarding the software . I suppose you always have that extra control there . 

But should it be possible to have a centralized account it would be better none the less?

 

[ched999uk]

No I don't necessarily think that. I mean that would obviously be the worst case scenario.. obviously this will be an extra barrier of security even though it's all in the contract and obviously someone who parts with a premium etc is going to be rather serious.

In a nutshell just an extra barrier.

A good point regarding the software . I suppose you always have that extra control there . 

But should it be possible to have a centralized account it would be better none the less?

I'm no accountant or financial advisor but I see why you are trying to protect yourself but as you say the franchisee will have paid a substantial sum so I doubt they would try and rip you off but you never know. You might find it more difficult to get a franchisee if they think you receive all the money then pass on their share. I would be concerned after paying out to buy a franchise then having to wait for you to pay me for all the work I have done. 

To a degree it's a bit of trust either way but having to wait a month to get the money I have worked for wouldn't make me feel good! 

Ultimately a franchise agreement is only as good if you are willing and can afford the court process and then hoping the franchisee doesn't declare themselves bankrupt or close the ltd company!!!

I think you need to speak to a solicitor who specialises in franchise law. It's going to cost you short term but might protect you long term.

 

[Quickwindowclean]

I'm no accountant or financial advisor but I see why you are trying to protect yourself but as you say the franchisee will have paid a substantial sum so I doubt they would try and rip you off but you never know. You might find it more difficult to get a franchisee if they think you receive all the money then pass on their share. I would be concerned after paying out to buy a franchise then having to wait for you to pay me for all the work I have done. 

To a degree it's a bit of trust either way but having to wait a month to get the money I have worked for wouldn't make me feel good! 

Ultimately a franchise agreement is only as good if you are willing and can afford the court process and then hoping the franchisee doesn't declare themselves bankrupt or close the ltd company!!!

I think you need to speak to a solicitor who specialises in franchise law. It's going to cost you short term but might protect you long term.

Yeah got all that it's in the process the only thing I need to finish up on is the accounting side of things.

You also have to remember unlike bussniess owners people that buy a window cleaning franchise are people who have been usually employed so are used to being paid monthly I mean even me not everyone is quite yet on DD.

Also The franchisee signs the contract as an individual and as a company so he is personally liable regardless of closing his LTD down ;however; Obviously no one wants to go down the legal route if you can avoid it but having a centralized account I think would just be that extra one layer of security incase you sell to a spender lol! 

prepare for the worse but plan for the best is what I'm kind of doing

Like you say paying a premium etc is already a big sign of gaining a serious personality and I will aim for a positive working relationship so slim chance that problems happen but this way you pretty much eradicate that potential slim predicament.

What I know is some of the older customers ( the ones I'll sell) will definitely continue to pay my company which is Vat registered but obviously I'll be transferring it to the franchise company and sure as hell dont want to pay vat on his turnover.. I know this because when I went limited I had a similar problem customers paying my personal account for months on end it was like 50 50 so again had to transfer the money across you can only remind them so often ..

But it's obviously a small amount of money I'll be bookkeeping as income not vatable the problem would be if I did do the centralized bank account and I had all the money going through there eventually and given the big percentage which goes to the franchisee, then somehow being landed with a massive vat bill and fines would be utterly nasty so need to ensure Its researched. 

Along with waiting for my account to finalize his report I think I'll have to ring HMRC myself and see if I can speak to someone regarding vat and exactly what I'm hoping to do and where I would stand.

 

[Graylin]

Hi, you mentioned 3 Ltd companies. That means you would become a group and complete audit mandatory. Not small business audit exempt. Therefore, extra expense. 
Good luck speaking with HMRC! When I used to do accounts for people I would ring HMRC several times before I got the answer I wanted. They are not accountants and you will get different answers. A good knowledgeable accountant is the way to go.

There is surely a simpler solution. This seems complicated way around it.

Good luck! You will get there ?

 

[Quickwindowclean]

Hi, you mentioned 3 Ltd companies. That means you would become a group and complete audit mandatory. Not small business audit exempt. Therefore, extra expense. 
Good luck speaking with HMRC! When I used to do accounts for people I would ring HMRC several times before I got the answer I wanted. They are not accountants and you will get different answers. A good knowledgeable accountant is the way to go.

There is surely a simpler solution. This seems complicated way around it.

Good luck! You will get there ?

Easiest way is traditionally allow the franchisee to collect payments and then invoice them once a month. But I would rather I control the payments part ideally.

Otherwise just the one account but obviously book keep the turnover I can obviously prove it's not my turn over that's not a problem but wonder where it would stand down the line.

 

[Quickwindowclean]

Easiest way is traditionally allow the franchisee to collect payments and then invoice them once a month. But I would rather I control the payments part ideally.

Otherwise just the one account but obviously book keep the turnover I can obviously prove it's not my turn over that's not a problem but wonder where it would stand down the line.

Oh yes and the other option would be one account being called the client account.  That account transfers money out to franchisee and to the royalty franchise account. 

The third account would only be my seperate business which is currently running so does that mean only 2 accounts?

 

[Pjj]

Oh yes and the other option would be one account being called the client account.  That account transfers money out to franchisee and to the royalty franchise account. 

The third account would only be my seperate business which is currently running so does that mean only 2 accounts?

I know nothing about franchising but surely the customer pays the franchise and then they pay you the royalties ??? Maybe @Damo could offer some advice he has several franchisees 

 

[Damo]

I looked into a centralised bank account and it has many advantages. Problem is when I spoke to a VAT specialist and my accountant it was border line employment. 
 

Essentially each week you’re going to be paying them or a LTD company is going to be acting as an “AGENT” this is where it got a bit iffy for my liking.

There was lots of examples like temp work and taxi drivers etc but each time it was still a risk.  
 

I don’t think you’ll have a problem but I’ve done everything to make sure my guys are independent from me as possible, as I don’t want them to be classed as employees. 
 

 

[Quickwindowclean]

I looked into a centralised bank account and it has many advantages. Problem is when I spoke to a VAT specialist and my accountant it was border line employment. 
 

Essentially each week you’re going to be paying them or a LTD company is going to be acting as an “AGENT” this is where it got a bit iffy for my liking.

There was lots of examples like temp work and taxi drivers etc but each time it was still a risk.  
 

I don’t think you’ll have a problem but I’ve done everything to make sure my guys are independent from me as possible, as I don’t want them to be classed as employees. 
 

Hi damo if you remember you gave me a few ins and outs a while ago. Took me ages to actually pull the trigger , I recall we touched up on it but now that I'm at the stage I need to decide . Yes my account mentioned something like that too being an agent or something and will report for me soon.

I'm pleased you seen this post was going to PM you for a chat ? however since you're here , what I wanted to ask was does anyone ever not pay you or pay late ? I'm assuming you've not had a problem at all and they take it all very seriously? My concern would be some people (and I know many of them) unintentionally can't stop spending and would say oh I haven't got it this month! Just want to try to avoid that scenario..

Also the VAT man isn't out just to shaft people I'd like to think at least? if you can prove you have all the contracts and the funds are going to the correct persons account and they examine the bussniess model should they even decide to flip the turnover on me it would contradict everything, I'd also get corp tax refunds and be running at a loss they would know it wouldn't make sense. Id like to think in this scenario they use they common sence! There are plenty of examples but I can see why you're keeping it simple. 

 

[Damo]

Hi, My guys pay weekly and wouldn’t entertain monthly at all. Most of our customers are on DD  and hopefully by the end of 2022 everyone will be on DD. So they always have the money to pay me. As for late payments from them, never an issue. 

 

[Quickwindowclean]

Hi, My guys pay weekly and wouldn’t entertain monthly at all. Most of our customers are on DD  and hopefully by the end of 2022 everyone will be on DD. So they always have the money to pay me. As for late payments from them, never an issue. 

Ok weekly sounds good I'm assuming cleaner planner works it all out.  Does it invoice on actual paid funds or the amount of work they done? so for example they turn over £1000 in a week but only actually collect £300 in which case if you're charging 20% in that senario they would pay £200 and be left with only £100 then need to chase the rest?

 

[Damo]

Ok weekly sounds good I'm assuming cleaner planner works it all out.  Does it invoice on actual paid funds or the amount of work they done? so for example they turn over £1000 in a week but only actually collect £300 in which case if you're charging 20% in that senario they would pay £200 and be left with only £100 then need to chase the rest?

Work done, as I said in the previous post. Most of our customers are on DD and then new customers are DD only. 
 

My guys don’t live one week at a time on money, at the start of the franchise journey my % starts lower then builds up to 20-50% depending on what package they have chosen. 
 

So waiting for payments to come in so they can pay me isn’t a “thing”. 

 

[Quickwindowclean]

Work done, as I said in the previous post. Most of our customers are on DD and then new customers are DD only. 
 

My guys don’t live one week at a time on money, at the start of the franchise journey my % starts lower then builds up to 20-50% depending on what package they have chosen. 
 

So waiting for payments to come in so they can pay me isn’t a “thing”. 

Yeah I totally get you.

Apart from the obvious phone call how would handle it should one of the franchisee's not pay one week then the following and then the following. ? 

It's probably something you wouldn't experience but it's good to be prepared in the unlikely event

 

[Damo]

Yeah I totally get you.

Apart from the obvious phone call how would handle it should one of the franchisee's not pay one week then the following and then the following. ? 

It's probably something you wouldn't experience but it's good to be prepared in the unlikely event

I would want to know why obviously and just deal with it and fix the situation. My guys basically pay me first then the other bills it would see or I’m just really lucky.

I do really look after my guys though with free brushes, fittings etc etc when I want them to trial stuff for me and I haven’t got the time.

They don’t always get free stuff, the best extra I do is some of the first cleans for them. I have had a £25 job take me and a helper just over an hour todo. So I massively loose out on that but it’s all part of the big picture/end goal. 
 

 

[Quickwindowclean]

I would want to know why obviously and just deal with it and fix the situation. My guys basically pay me first then the other bills it would see or I’m just really lucky.

I do really look after my guys though with free brushes, fittings etc etc when I want them to trial stuff for me and I haven’t got the time.

They don’t always get free stuff, the best extra I do is some of the first cleans for them. I have had a £25 job take me and a helper just over an hour todo. So I massively loose out on that but it’s all part of the big picture/end goal. 
 

Yeah absolutely.  Infact I have a similar idea regarding helping out for first cleans etc want to make em feel the difference being part of me or being alone wont be just collecting royalties. Will want to add value .

I know the contract are very clear and financially bad for any franchisee to mess about but if the franchisee doesnt have any assets I guess he doesnt have much to loose well in my case their will be capital required was thinking of requesting a home owner but maybe at this stage that's too much to ask. I think some sort of capital commitment is important imo 

Anyhow I suppose that's something you've never had to do or deal with. But I suppose it would be prudent to know exactly what course of action you would take should you have a problem like a process I mean the worse no payments no communication no answer at the door lol it sounds like I'm only talking about a potential problem . I'm well aware providing the work is profitable and you're doing your job right and supporting everyone problems are probably very unlikely it's just covering Every Corner that I'm trying to do in advance. So shouldn't happen you know exactly what to do is what I'm trying to find out as I think I might also do what you're doing have them pay me it just sounds so much easier... 

 

[Damo]

I have a perk system in place now. So every year they unlock a new perk. It’s all about adding value to their loyalty I guess. 
 

The franchise is doing really well but I’m at such an awkward stage of the business. I haven’t got the energy to push at the moment as had a lot of issues this year to deal with.