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Advice sought when accounting for pubs

Advice sought when accounting for pubs

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I am considering setting up a bookkeeping and accounting service for pubs and am aware that this may be a hot potato as far as HMRC is concerned.

As takings are mainly cash and credit cards, this is obviously an area of concern. In addition, there are complications with output tax when accounting for the range of food, drinks and snacks that may be sold.

As this service is offered by a number of accountants in practice, I would be most grateful to hear from anyone who is either able to suggest:

  • some critical success factors, tips or advice when providing such a service, or
  • any good HMRC publications concerning VAT and/or other matters that they raise

Thank you in anticipation

Replies (14)

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By DMGbus
24th Oct 2012 13:40

Cash balancing and bank balancing

First principles for a cash business and bookkeeping are balancing the cash account and balancing the bank account preferably as and when (or before) the VAT returns are prepared - this has several advantages:

VAT errors likely to be minimisedPotential penalties for VAT errors llikley to be minimisedProblems at the year end accounts preparation stage along the lines "the cash don't balance" are minimised (how can a client a year after the event necessarily remember why cash payments and bankings in a particular week exceeded recorded receipts?)

 

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By Jimess
24th Oct 2012 14:27

Agree with DMGbus but would also add....

Provide the client with an easy method of recording weekly cash transactions (I use a receipts and payments sheet set up in Excel) and make sure they understand the importance of:

a) keeping all of the till Z readings as evidence of takings.

b) recording cash counts and where possible ensure the till balancing is done by someone other than the bar staff.

c) Noting till errors as they happen (a post it note with an explanation popped into the till will suffice.  The note should then be attached to the Z reading and the reading or cash balance adjusted as appropriate)

d) recording all cash payments made out of the takings prior to banking. 

I also recommend that pub clients have a regular wet stock check by an experienced pub stocktaker who should then balance the stock with purchases and sales in the period.  This will highlight any stock losses and they can be investigated and nipped in the bud on a timely basis.

 

 

 

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By bernard michael
24th Oct 2012 15:37

Assume the client is fiddling as a default position when reconciling any figures. This is not a criticism of all publicans but just stating the position as I have found it. Pubs are now on my list of clients I refuse to act for as being too much trouble. Good luck in your endeavours

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By Roland195
24th Oct 2012 16:15

Tread carefully

I would not go quite as far as Bernard but I have to agree that in my experience, pubs are a business where the owners are not usually overly enthusiastic regarding tax & accounting compliance.

There may be an opportunity next year with RTI when these places find out that their list of 10 students who earn exactly the same amount every week (and have been students for a worryingly long time) is not a sufficient payroll.

 

 

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By raychidell
24th Oct 2012 16:29

Don't forget the capital allowances!

Pubs are one of the types of business for which capital allowances claims can be very valuable (i.e. for the extensive fixtures in the property). So the same owners who may have imperfect sales records may also be missing out on wholly legitimate CAs claims. (Under the new rules for fixtures, they will have to bite the bullet if they eventually sell the pub from April 2014 onwards, so they may as well get to grips with it sooner and enjoy the tax deductions.)

From your own point of view (assuming, in the light of the earlier comments above, that you still wish to work in this area!) a reasonable understanding of the capital allowance opportunities can be a good marketing tool in trying to attract pubs (or indeed any other businesses with a high investment in commercial property).

Ray

www.claritaxbooks.com

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Chris M
By mr. mischief
25th Oct 2012 08:30

Be VERY selective

Everyone thinks they can run a good pub.  In my view, in the current climate less than 10% of those who think they can run one can actually do so, even fewer if it is a leasehold one.  This is what leads to the dodgy book-keeping and Spanish practices, someone working 80 hours per week to make a loss of £40k a year to the benefit of the brewery eventually gets pissed[***] off.

Any existing or planned publican who comes through my doors as a potential client gets a great deal of scrutiny:

1.  Have you owned one before, as opposed to managing one?

2.  Have you run any sort of business before and if so, how did it do?

3.  How much spare capital have you got after any proposed purchase and refurb.costs?

4.  Is it freehold or leasehold?  If leasehold what beers are you tied to?  (I can tell you whether the beers are any good, this knowledge can be critical around here - the Lake District - as many locals and walkers love real ale, this does not apply in parts of the country with no taste buds.)

5.  If leasehold, what are the main terms of the lease and are you tied to any costs per barrel?

6.  What are the strengths and weaknesses of the other local pubs and bars?

7.  Does this pub have a solid track record of success with no unwelcome police / local council interest?

8.  What is your planned strategy to outwit the local competition and gain market share?

To be brutally honest, the majority of possible pub owners cannot even get to first base on questions like these.  I am extremely happy if I annoy those people to the point where they sign up with rival accountants, the endgame with such clients unfortunately usually involves some blood on the streets.

 

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By Canary Boy
25th Oct 2012 07:57

As a pointer

we had 13 pubs clients about 10 years ago, today we have two, and they are both freehouses.

As stated above we are very selective now as you can put in a lot of work in the early days only to find the publicans cannot make a go of the business in a shortish period of time.

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By Jimess
26th Oct 2012 11:07

Upfront fees

I have had the same experience as Canary Boy and now only have 1 pub client out of 6.  They are very time intensive and when the going gets rough the accountant is the last to be paid unless you get the fees upfront.  Get the client on to monthly standing order - preferably get the money in before you start the work each month.  If you get asked to do additional work - i.e management accounts that the Brewery companies tend to insist upon every time they make a change to the beer pricing agreements or rent agreements, then quote the work and get your fees in before you start.  It is a very volatile trade and not one that the banks are happy to lend to, the breweries tie landlords in to agreements that are completely unworkable in real commercial terms so when things get tough at the pub, very often bankruptcy follows very swiftly. 

 

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By ccassociates
26th Oct 2012 11:33

Balance the cash monthly at least, watch the payroll costs, and keep a tight control on stock. Ensure that the client recognises that a well run pub with little or no food will rarely make more that 10% net profit, and a badly run pub will probably make a loss, because the landlord dosnt pay for his tipple the staff are all on the take and waste records are non existent.

Everyone coming into the game thinks its a licence to print money, I once had an appointment with a chap who was giong to give up a 40K job to run a back st pub until I convinced him that the cellar was not big enough to hold enough stock which would give him a £40k profit and that the average gross takings of the pub he was buying was 2.5k a week.so his net profit would probably never be more than 12-13k

tell the publican to keep an eye on the staff, I was told by a successful entrepeneur years ago "cash makes a thief of an honest man" and have applied this thought consistently since.

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By bernard michael
26th Oct 2012 11:49

Just a couple more.

Tell the client under no circumstances allow tabs to last longer than the customer is in the pub that day. Watch out for over popular staff who may be giving thier friends free/discounted drinks. eg Big rounds underscored in the till

When the publican of your favourite pub doesn't pay you or feels you've overcharged him/given him advice he doesn't want to hear the bad PR locally can be horrendous. as him badmouthing you will be all over the district

I repeat my earlier advice which appears to be supported by most posters

- Don't touch publicans they're trouble you don't need.

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By ccassociates
26th Oct 2012 12:15

We now

Only have 1 pub on our books we did have 5 the other 4 went bust, the remaining one is a major PITA especially when it comes to VAT returns. Trouble is they tend to see all the money as theirs and want to earn 30k pa but pay no tax or VAT. Cash never balances stock is always down, and "I paid for that from my own money" is the standard response to overdrawn cash.

We now will not consider taking on pubs.

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By philfromleeds
28th Oct 2012 18:39

All the proceeding is correct

I do the books for a members club. If they had to pay a proper rent, (They own the building) they would not be around. The members club does not now pay committee members wages for not doing anything. Because of that they are now keeping their head above water. Does any one have clubs who's officers earn wages from the club and is it legal?

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By DMGbus
28th Oct 2012 21:18

Stewards OK, Clubs not

I have a colleague who deals with several Clubs (mutual members clubs).

A common factor seems to be, in most cases in recent years, a Steward who gets well paid (as in makes more money than a pub proprietor and sometimes receives free accomodation too) plus a Club that's losing money. 

Some stewards are lazy and almost bankrupt their clubs by using excessive amounts of bar assistance staff at the Club's expense.   Some guidance of staff costs vs takings ratios exist (eg. via the CIU) which can point to this being an issue. 

A bad steward will bust a club.  Sometimes the hidden agenda of a bad steward (can't be sacked as employment protection laws prevent this) is a steward who might want to take the club over and run it as his commercial venture - buy it on the cheap as the Club's financially busted by the Steward's incompetence or deviousness.  Having a family member on the committee helps in this scenario.

Regular independent stocktakes are an absolutre must with Clubs (but watch that all purchases are booked by the Stocktaker, sometimes annual accounts show higher purchases than the total of twelve months' stocktakers reports because of poor control of bar purchases).

Some Clubs only survive by selling off surplus land, not a sustainable situation.

In conclusion a Club like a Pub is an endangered species.

 

 

 

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7om
By Tom 7000
29th Oct 2012 15:12

top tip

get paid in advance..avoids all the bad debts.....you cant pay your bills if you dont make any money..and you will be one of the bills

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