Owning a pub, club or hotel means wearing many hats. You need to be on top of what’s happening in the beer garden, the gaming room, membership renewals, hotel check-in and much more. No one day is ever the same, and if you haven’t got your bookkeeping & accounting under control, you can find that things start to get very stressful very quickly.
Here are five tips to make managing your pub, club or hotel that little bit easier:
1. Separate your pub, club or hotel into different business units.
There are so many moving parts when it comes to a business, and it can often get overwhelming. Separate your business into what’s called ‘key business units’. For example, for a pub your key business units could be:
- Dining room (for restaurant, cafe sections etc)
- Beer garden/bar
- Events hire (if private functions are held)
- Accomodation (if your pub offers overnight accommodation)
- Gaming (if you have poker machines)
2. Organise your bookkeeping/accounting system to be structured under each of the different business units.
There are a number of different cloud based accounting systems which allow you to track your business under each of the key business units. For example, here at Dexterous we use Xero cloud-based accounting software for many of our hospitality clients. When recording the bulk sales and purchases for our clients, we use what is known as the ‘tracking’ system.
This means not only do we record the bulk sales/purchase into the accounting software, but we also allocate each item to a business unit. Meaning when we print the profit & loss statement and other performance reports from the accounting system, we are able to see how the business is performing by each of the different business units, rather than solely as a business whole.
Whilst tracking performance by unit might seem obvious, many businesses still don’t do this, or only track business unit performance through sales, rather than by both sales and expenses. Tracking solely by sales can paint an incorrect picture of your businesses performance. Many pubs, clubs and hotels we’ve worked with were surprised to learn that in some cases their biggest unit by sales revenue was often their least profitable or worse, was actually running at a loss. Knowing this information allowed them to isolate costs by business unit and help them build the business unit to profitability.
3. Who are your business unit managers?
Each business unit must have a manager. Apart from being on top of the day to day operations of their unit, does each business unit manager know how their business unit is performing?
Do they know how profitable their unit is?
Do they know what the key expenses in their unit were this month?
Do they know the dollar success of any recent offers or promotions which have been run by their unit?
Let them ‘own’ their business unit success. Involve them in the accounting for their business unit and consider sharing reports with them. You will be surprised by how effective a business can be when your team feels they are a ‘part’ of something. You may even consider structuring their pay to include a bonus component which is tied to the performance of their business unit where possible.
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4. Understand that not all big purchases are deductible immediately and consider this when reviewing your profit & loss statements .
Thinking of buying some new barbeques for the beer garden, or putting new furniture in the dining area? In many cases you will be able to claim an upfront deduction as long as the cost of each asset is less than $30,000 (and your business has a turnover of less than $50 million).
However, if the cost of each of the assets is $30,000 or more, you won’t be able to receive an upfront tax deduction for these items once you purchase them. Instead the cost of these assets, whilst generally paid for upfront, will only be deductible over a number of years. This can often cause confusion when looking at your profit & loss statement.
A key tip is to ask your accountant to produce a separate report, called an ‘asset register’ which shows all the assets purchased for each business unit and how much has been depreciated in total for the assets. This will help you better understand the total costs involved with each of these purchases, and how much of this has been deducted already and is yet to be deducted.
5. Budget and Plan
Use your accounting software to plan and budget. Some businesses are great at putting a budget together, but are terrible at monitoring their performance against their well-prepared budget. Often we find that this happens because of two reasons; they set an unrealistic budget and get demotivated when they don’t reach initial targets, or they get too busy running their business that they don’t prioritise this.
A key tip we use here at Dexterous is to advise our hospitality clients to book in non-negotiables into their diary/calendar. As part of this, each month they should book in time by themselves to review their performance, time with their business unit leaders to review their performance, and time with their business advisor/ accountant or CFO to review their performance. This should be a non-negotiable.
Time should be booked into diaries at a set time each month, and treated just as seriously as a business with a new big client or supplier.
It’s important that recording transactions as a business unit is done at the accounting software level as part of monthly recordings by your accountant/bookkeeper as leaving it until the end of the financial year often means opportunities to improve your hospitality business are missed.
If you need help setting up your accounting system by units, implementing new accounting software, want some advice on how to better manage your business finances, or are after an external CFO for your business, get in touch with the team here at Dexterous. We can help you put a plan together today, Click Here.