Finance: Be calculating

Related tags Gross profit Mathematics

Make this the year when you take back control of your pub accounts by calculating the actual costs and running expenses says Phil Mellows.Publicans...

Make this the year when you take back control of your pub accounts by calculating the actual costs and running expenses says Phil Mellows.

Publicans are, it is often said, people people. And so they should be. The problem is that when it comes to numbers many of them tend to go all woozy and hide their heads under a bar towel. This, as you might guess, is highly dangerous behaviour.

Pubs are a cash business and failure to exercise tight financial controls can lead an independent operator to go belly-up before you can say double-entry book-keeping.

Price vs profit

Financial control means being totally aware of both what's coming in and going out of the tills and you must have a firm grip on how the prices you set affect the profits you make.

It's not astrophysics but neither is it as obvious as it might first appear. When you calculate gross profit, for example, you have to make sure you deduct VAT. And if you are running a cut-price promotion on a particular product, it is important to know how much of it you need to sell to make your money back.

For the mathematicians among us it's easy-peasy. For the majority, though, it can be a time-consuming, and sometimes maddening, task. If you get it wrong, it can prove very costly.

Then there's the simple matter of not setting your prices right in the first place, or not passing on your increased costs because you feel it is only a few pennies and might scare off your regulars. Before you make that sort of decision you must calculate exactly how much you stand to lose.

Another common problem occurs when licensees think they can boost their business by offering special deals. It's not until they see the next set of accounts that they discover that in trying to attract some extra custom they have actually put themselves into a position where they are mysteriously out of pocket.

It's clear to see how a publican might run more promotions to get the money back, make the same mistakes and enter a spiral of decline as the business flies out of control.

Yet the basic calculations for gross profit are the same for everyone. The logical thing would be to produce a ready-reckoner. And that's just what Annie and Colin Marsters have done.

Calculating gross profit

Stocktakers Annie and Colin, who have run their own pubs in the past, came up with their Innmate ready reckoner as long ago as 1992. It has since been used by 14,000 licensees and is now being relaunched to a fresh generation of publicans with the help of marketing company Drinks Brokers.

At the core of the Innmate Licensed Trade Profit Pack is a ready reckoner kit for bars which enables you to calculate gross profit percentages without needing to resort to a computer programme.

All you need to know is the cost to you of a pint of beer, glass of wine or shot of spirits and what you are selling it for to enable you to read off the profit you are actually making on each drink.

Also in the pack is Innmate 2 for restaurants to help you price menus and wine lists and Innmate 3 where you can compare profits under promotions with existing profits.

There is a CD wizard, too, to help you produce pricelists on your computer.

Over the coming months the Marsters will be focusing on various profitablity issues in Your Business, starting with an analysis of happy hour promotions - click hereto find out more.

Menu holder included

The Innmate Profit Pack costs £99 but, in a special offer to readers of The Publican, Innmate is throwing in a free menu holder.

To take up the offer write to Simon Hardy at Drinks Brokers, Neatmoor Hall, Nordelph, Norfolk PE38 0BY, phone 01354 638310 or email simon@drinksbrokers.com quoting The Publican, reference 240105.