AccountingWeb

Two pints of lager and a packet of credit crunch: Helping publican clients

With around 27 pubs closing per week, these are hard times for those in the Licensing trade, as any accountant with publican clients will surely know. But, by following certain steps, landlords can still keep the taps from running dry.

As funds dry up social drinking is often the first luxury that is sacrificed, and this clearly has negative connotations for those involved in the Licensing trade. While bar chains may be able to absorb losses, large numbers of individual bars, pubs and restaurants may find it difficult to find a way through the current economic slowdown.

It is therefore critical that licensees devote time to financial planning. It may not be possible to influence the downturn or gauge when it will end, but it is possible to shape the finances and forecast the future of an individual business.

Landlords need to understand that cash is king in any business, but especially so in an environment of economic stringencies. Therefore it is certainly a case of looking after the pennies and the pounds will look after themselves.

ACCA suggests highlighting the following points to help landlords and licensees during the crunch look after those pennies and more generally operate their business on a sound footing.

• Tax deductibles – Claim everything possible back, find out exactly what is tax deductible, and if Capital Allowances or rural rate relief are available. There may also be additional support or even grants available if the premises provide additional essential services, such as village stores or a post office. Check the HMRC website to find out exactly what relief is available.


• Where you make a tax loss make sure a claim is placed straight away with HMRC in order to recover any overpaid taxes in the previous years. You can usually carry losses back in to previous profitable years and recover some or all of the tax in those years. It also goes without saying that outstanding tax refunds on sumbitted claims need to be follwed up to ensure swift repayment.


• Customer service – Regular customers generate regular income, so it's more important than ever that service should be exceptional. Customers need to be given a reason to come back again and again. As a trusted business advisor, suggest that any landlords on your books monitor and assess their staff to ensure that service quality is not compromised, especially if they are having to down size their work force.


• Avoid advertising costs if possible. Any business can generate PR, and more importantly they can do so for free. Suggest to pulibcans that if they haven't already it is now a good time to try hosting events. Open-mic nights, theme nights, and even social groups all offer good mileage here. All information should be posted onto the pub's website as soon as possible, and should it be at all newsworthy, the local media should be informed. If your publican clients don't have a website, you should defintely suggest it.


• The smoking ban has clearly hit the licensing trade. With many smokers not prepared to stand outside to smoke, they are staying at home instead. Stress the importance of designating a comfortable, warm and dry area for smokers. If staff levels allow it, drinks could be served to tables outside.


• If a client is likely to need funding due to cash flow problems or because he or she has tax to pay then start talking to the bank right away. Don't let your clients leave it until they are up against the deadline for settling debts.


• While credit is tight it is still available to those with a good track record. Therefore you should stress the importance of not getting a bad record by missing repayments or running up costly unauthorised overdrafts. With clients whose record is good suggest looking around for loan and overdraft rates rather than just sticking with the current lender.


• The best way to obtain funding is to improve credit control. Therefore it goes without saying that your clients should know they must take the maximum time available to them when paying bills. As pubs are largely a cash business there shouldn't be too much credit outstanding but clearly payments for functions and receptions should be paid upfront wherever this is feasible.


• This is not a great time to let customer 'tabs' proliferate. In the current climate it is better to wean amenable patrons off such a notion before cash flow is dented, or they themselves become victims of the credit crunch and fail to pay up.


• Overall, the paramount consideration is to keep track of outgoings. This may be simple enough for some clients, but for others it will be an opportunity for an accountant to really deliver added value.

If these tips are followed, and (hopefully) in a year or two’s time the economy has found its way out of the credit crunch and on to better times, your publican clients will be looking far healthier.

Then their customers will go back to ordering the usual two pints of lager and a packet of crisps.