How long should month-end close take for a franchise group?
Benchmarks put a good close at about 3 to 7 days. APQC's 2017 benchmark, as reported by Numeric, gives a median of about 6 days, with top performers under 5. Numeric suggests private companies aim for 5 to 7 calendar days, and notes smaller teams often report around 14.
Spacetil customers close in 5 days. The difference is less about working faster at month end and more about how much is left to do when the month ends.
What has to happen before the month ends?
Daily work decides the close. Every store's POS and delivery sales should be matched to bank deposits each day, vendor invoices captured and coded to the right location as they arrive, and bank and card accounts reconciled continuously. By the last day, only true period-end items should remain.
- Sales and deposits matched daily, by store, net of card and delivery-app fees.
- Invoices coded to the right entity and location as they arrive, not in a month-end batch.
- Bank and credit card accounts for every entity reconciled weekly or better.
- One chart of accounts and one close calendar for every entity.
- Intercompany charges, such as management fees, booked on both sides at the same time.
What happens on each day of a 5-day close?
Day 1 finishes cash and cutoff. Day 2 books accruals for payroll, royalties and invoices not yet received. Day 3 handles leases, fixed assets and intercompany. Day 4 reviews each unit's P&L and consolidates the group. Day 5 is senior review, sign-off and the reporting package.
- Day 1, cash and cutoff: finish bank and card reconciliations for every entity, confirm the last days of sales and deposits, and close the payables cutoff.
- Day 2, accruals: accrue payroll and payroll taxes earned but not paid, royalties and ad fund on the month's sales, utilities and invoices received after cutoff.
- Day 3, balance sheet: post ASC 842 lease entries, depreciation and prepaid amortization; reconcile gift card and other liabilities; match intercompany balances between entities.
- Day 4, review and consolidate: run a flux review of each unit's P&L against last month and budget, investigate outliers, eliminate intercompany and consolidate the group.
- Day 5, sign-off and reporting: senior review of reconciliations and the consolidated statements, sign-off, and delivery of the per-unit P&L, group statements and franchisor and lender reports.
How do you handle intercompany across many LLCs?
Book every intercompany charge on both sides at once, using paired accounts that map to each other, and settle balances on a regular schedule. At close, confirm each pair nets to zero, then eliminate them in consolidation, as ASC 810-10-45-1 requires for intra-entity balances and transactions.
The usual intercompany items in a franchise group are management fees from the management company to each store, shared payroll, cash sweeps to a central account and loans between entities. Each one should have a documented basis, such as a percentage of sales or a fixed monthly fee, so it can be checked.
What should the month-end package include?
A franchise group's close package should include a P&L for every unit, consolidated group statements, a flux commentary on the largest variances, reconciliation sign-offs, and the reports owed to the franchisor and lenders, such as sales reports and covenant calculations. It should arrive on the same day every month.
| Report | Who uses it |
|---|---|
| Per-unit P&L | Operators and district managers |
| Consolidated P&L, balance sheet and cash flow | Owners, investors and the board |
| Variance commentary | Leadership, to act on outliers |
| Covenant calculations | Lenders |
| Sales and financial reports in the brand's format | The franchisor |