Specialist News Articles for the Licensed Trade from Pub Plan Accountants

Articles for the Licensed Trade

How to keep your Accounts

A big decision when you take over a pub is "when to employ an accountant". The answer to the question is very easy. You should employ an accountant before you take on a pub. You should seek their advice relating to the viability of the pub. Indeed, the real question is whether you should take on the pub at all.

I have often been faced with the situation of new publicans coming to see me after a short time in residence and asking my opinion on their new adventure. The reason they have come to me is that they are losing money and the pub is not achieving the turnover that they expected.

By this time it is too late. They have usually bought their free house or signed up for their lease/tenancy and they need a solicitor to help them and not an accountant.

I recently took on a client, a married couple, who were taking on their first pub. He had been made redundant in January 2009 yet she gave up a well-paid job as a Bar Manageress as they had always wanted a pub of their own.

They inspected the pub and it was quite modern and well presented. They were told it was turning over in excess of £4500 per week. They were given certain incentives to commence including subsidised rent for the first three months.

The turnover for the first week was £1475 and after substantial personal efforts they managed to increase this to £1800 by the second week. In addition, the personal living accommodation was appalling.

There is no doubt that they have been naïve. They have followed their dream. They did not ask to see the records of the pub before occupation or contact an accountant to ask about the pub's viability and to establish a break even level for the pub. Their financial investment to date has not been substantial, for which they should consider themselves fortunate. They are currently extremely disillusioned.

Hopefully they will in time build up the trade but at what cost to themselves. They are now getting some support from the brewery and the pub does have some potential. Hopefully their story will have a happy ending.

Assuming that you have seen an accountant, you have to decide on your trading style. Should you trade as a sole trader, partnership or as a limited company? Again professional help is useful but the essential difference is that a limited company restricts the liability of your new venture to that company and not to yourself. A limited company is a different trading entity from yourself and your personal exposure is constrained to this company. If you have trouble understanding the concept, take professional advice.

The costs of operating a limited company are greater. It is often worth the extra costs to provide you with the extra security of limited liability.

Once your business has commenced, there are certain matters that need to be dealt with:

1) Notify Her Majesty's Revenue and Customs (HMRC) of your date of commencement and details of your business. These are forms CWF1 for a sole trader or partnership and CT41G if a limited company.
2) Notify HMRC - PAYE (Pay as you Earn) of your business and ask for a wages pack. Do not operate this yourself unless you have a good knowledge of payroll.
3) Notify HMRC - VAT (Value Added Tax) of your business and register for VAT purposes. The registration level is an annual turnover of £68,000>. Again do not attempt to complete VAT returns yourself unless you have a good working knowledge.

Each of the above will be dealt with by your accountant, which might make your life a lot easier.

The other major issue to consider at the commencement of your business is that of record keeping. Can you do this yourself or do you need outside assistance? Once this decision has been made, which system do you use?

1) Manual records
2) Computer spreadsheets - Excel
3) Accounting software

This decision depends on your personal bookkeeping skills, but many new operators have little or none and need assistance at the outset of the business. It should be stressed that the maintenance of good records is fundamental to the success of any business.

Entering the licensed trade at present is a significant step. Seek professional advice!
For more information call us on 0161 655 2000.

Unfair Dismissal - Don't Get It Wrong

You may have had to cope with a whole host of personnel-related issues over the years, and almost certainly played it by the book. However, even experienced employers can get it wrong. Here is a case in point.

Pushing the boundaries

An employee's performance and attitude were deteriorating and so she was spoken to by her manager. Six months prior she had suffered a miscarriage and although distressed had returned to work and appeared her usual self. Another 'pull your socks up' chat ensued three days prior to her announcing she was pregnant again.

Now, not only was her work rate particularly slow, but her punctuality was wanting.
She worked part time on Friday, Saturday & Sunday but booked all her ante-natal appointments for Fridays. This was apparently the only time her midwife was available. She would arrive at work at 9am, and then leave at 10am for her appointment and not return until lunch. At the time there were eight people working at various times, so her absence at such short notice caused significant issues. Furthermore, when she had time off due to sickness, she failed to produce a sick note, maintaining that her doctor refused to until she had recovered!

She was written to by her employer on numerous occasions but never responded and even when disciplined failed to react.

After yet another bout of sickness, she was asked to attend a 'return-to-work' meeting. This was not a disciplinary hearing and was never described as such. When questioned by her boss regarding her behaviour, she simply sat smirking and produced a letter for her manager to read. Although reluctant her boss finally agreed and left the office to read this letter. On returning she told her employee that she did not appreciate her accusatory tone and then sacked her!

In the letter the employee made several allegations professing that she had been discriminated against because of her sex and pregnancy. Her boss had been pushed to the limit and on returning to the meeting was unable to think rationally. But by dismissing her without following a procedure, the damage had already been done.

The employee as expected claimed unfair dismissal and discrimination. With regard to the unfair dismissal the employer was guilty as charged and acknowledged this. However they strongly denied any discrimination or victimisation. Sadly, they were confronted with a real issue here as they had stated that they never intended to dismiss her at the meeting and it was the allegations towards them that pushed the boss to do so. The tribunal considered the letter to be the reason for her dismissal and she won.

TIP: This above case proves how vital it is to not allow emotions to impede decision making. Always stick to the correct procedures, even if it pains you to do so!

Declining with the recession
Advice to counter the present economic climate

The economy is uncertain and risk is ever increasing; many people have never encountered the rocky ride that they are currently facing. Experts say this is only the beginning - a result of many years of virtual stability and economic growth with low interest, consumer demand, available finance, and property growth. The situation is rapidly changing with-

1. Pressures from customers to cut what they perceive as discretionary spend
2. Personal and business credit tightening but rising prices
3. Simplifying of credit assessment and funding by banks and lenders, but reduced access to money
4. Supplier payment terms being stretched resulting in difficulty getting paid

None of these factors are new. They simply come faster and thicker when the economy is uncertain and combined can swiftly weaken confidence, stretch cash flow and be a hidden time bomb.

Businesses at a higher risk in these circumstances are those with-

1. Dependence on one/very few customers and suppliers
2. Poor or unstructured communication - resulting in a perception of poor service or lack of control with key customers, suppliers, backers etc
3. Disaffected or de-motivated staff who are not looked after.
4. Weak structures that have not been examined for change (too much debt payable short term, high fixed costs that could be made more flexible etc)

A drop in confidence understandably occurs when the economy is in recession. Seeking practical advice and support from financially experienced people can help put these difficult issues into perspective and divert the risks.

Key Tips:
1. Act, confront the truth and do not constantly defer difficult decisions
2. Stay alert; do not assume you can just trade out of problems - work out solutions and options to problems so you can discuss remedial actions with creditors and banks - deals can be negotiated
3. Cash is king; businesses fail without it so treat it as the most important tool in your business
4. Do not hold old stock, it ties up cash; discount it out and turn over to new and relevant stock that customers want now- but do not discount prices unnecessarily
5. Be open with your trusted advisors and treat them as a partner so you can get the best of other people's experience and contacts; listen to ideas as they may produce unexpected leads

For further advice call 0161 655 2000 or contact us via the website.