The decision on who you employ as an accountant can be as important to your future as the choice of which pub you run.
Choosing an accountant is one of the most important decisions you need to make when you consider taking on a pub, almost as important as choosing whether or not to work in the industry in the first place, or which pub to live and work in. You would not choose a pub without preparing a business plan and visiting it a number of times. The choice of your accountant is equally important in laying the foundations for your success.
Prepare a list of the issues raised by this article, and visit a number of accountants before making a decision. If you were looking to recruit a new member of staff you would always set up interviews for all the applicants and choose the one that suits you best. You need to take as much care over the selection of an accountant.
Your accountant should be someone with who you can establish a long-term relationship, someone who will remain a constant throughout your career. Over time, he or she will be privy to personal information about you and your family. Your accountant will probably know more about you than anyone else but your immediate family, from the money you make when times are good, to the problem periods, your retirement plans and even your will.
Your accountant will also be the one person who will stand with you when the Inland Revenue or Customs and Excise come calling. You should look for someone with who you feel comfortable and relaxed and with who, over time, you feel will be able to build a special relationship.
However, this first consideration is not in itself enough. Your accountant must be skilled and knowledgeable. Skilled in the rules and legislation covering VAT, accountancy and taxation, but equally important is a knowledge of the licensed trade. You would not expect your local doctor to perform a brain operation; you would be referred to a neuro-surgeon. Likewise, among accountants, a licensed trade specialist is always preferable. Avoid the jack-of-all-trades. Instead, ask around among local successful licensees, or choose an accountant with associations with trade organisations such as the British Institute of Innkeeping or your local Licensed Victuallers Association.
An accountant who has enough other pub clients:
- will be able to properly advise on issues such as gross profit percentages
- may be able to successfully argue a rent review with your landlord, based upon comparative statistics from the rest of their accounting practice
- has a client base which enables them to give you advice about how you are performing compared to the norm. Is your growth in takings as good as the rest? Are your wage costs high or low for the type of pub business you run?
It is one thing to be told that your food gross profit percentage has fallen. How much better to have as your accountant someone who can suggest the practical reasons why this might have happened, who can work with you to identify the actual reason or reasons and agree with you a strategy to maintain your profitability.
In any industry, one of the most frequent reasons for business failure is the belated recognition that a problem exists. Many business people keep all their documentation and send it to their accountant once or twice a year. Sadly, it can sometimes be 15 months after they started up in business before they learn the reality about how their venture is performing. Any bookkeeper can total your receipts and deliver them back to you nicely packaged, or summarised on a computer-generated spreadsheet. You will need this information as a basis for your annual accounts.
However, as a business person aiming to make a success of a pub, what you really need are regular management reports that enable you to know exactly what is going on in your business. You need information which keeps you in control - information which tells you whether you can now afford to invest in that new piece of kitchen equipment or whether next month you have to clean your own windows.
It is probably best to keep your own simple weekly profit and loss account and get your accountant to provide you with management accounts every month, or at least once a quarter. He should be able to show you how to do this weekly exercise. Equally importantly, your accountant should be willing to visit you each quarter and spend time discussing your results with you. This may appear to be more expensive than historical bookkeeping, but the added value of these discussions and advice will easily pay for itself in the long run.
The idea of being your own boss is often one of the most appealing reasons for taking on a pub. However, you will also be very much on your own. We all need the opportunity to think through issues and problems, and often the presence of someone to talk to as a sounding board is a great help - someone who can guide you through to the correct decision for the business. The old adage of "a problem shared is a problem halved" is often true. Your accountant is best placed to provide that service. Your accountant's only interest is in your continued and growing success, as the better you fare, the better a client you are for him. If he can bring his knowledge of your finances together with an understanding of the pub trade, his guidance will be of a higher quality.
Being your own boss is also time consuming. Being a licensee, you will be doing much of the day-to-day work yourself. Over time, you will become skilled in taking time out in order to release these pressures. If your accountant can provide you with a "one stop shop" you will be able to use your time more efficiently.
Using the same firm to do your stocktaking, bookkeeping and annual accounts and taxation saves time simply through better communications and control of paperwork. But licensees need other services as well: payroll, licensing, advice on a pension or making a will. Your accountant should be able to provide these services for you, or at least refer you to a specialist who will. Ideally, your accountant should also be able to advise you on rent and rate appeals, raising finance and other financial services and even in such areas as purchasing deals and "menu engineering".
Only an accountant who fulfils all or most of these criteria will be able to provide you with the cost effective and high-level service that you will require to help you succeed in your business.
By Stephen Savill, director of development at Austens; consultants, accountants and stocktakers to the licensed trade. The company provides the BII's free financial helpline on 0500 121926