In the course of any business there comes a time when the owners think about selling up. If the business is successful they might want to get out at a reasonably early age and enjoy a long retirement somewhere sunny. If the business is very successful, someone may come along out of the blue with an offer to buy them out before they've even thought about retirement. Usually it comes down to age and/or personal circumstances. Nobody really wants to work until they drop especially in a hard business like petrol retailing. Eventually the question that most operators ask themselves is "How much is my business worth?" Usually the next person they ask is their accountant.
How's trading been so far this year for you? While it's too early for any figures, conversations with retailers in both the petrol and hospitality sectors (regular readers will know that at EKW we've had a foot in both camps for many years), suggest that the recent post-Christmas 'quiet period' has been quieter than any they can remember.
Welcome to January, the bleakest of months what with the darkness and the bills arriving after that little self indulgence at Christmas. And that was just in the good times. Following the events of 2016 (think Brexit, Trump, US interest rate rise, etc), the economic outlook is the most uncertain since the financial crash of 2007/08 and the forecourt retail industry won't be immune to whatever happens to the wider economy.
If there wasn't really much drama around the Autumn Statement that the Chancellor delivered on the 23rd of November, there was at least a little of the flavour of pantomime: this was to be the last 'Autumn Statement' because in future the 'real Budget' will move to autumn; so what we used to know as 'The Budget' will be in the autumn, and in its' place we'll have a 'Spring Statement' although the name won't actually change until after the 'Budget' due next March (2017). Confused? Maybe they should just call it 'Springwatch' and 'Autumnwatch'.
The new Chancellor Philip Hammond, in case you hadn't noticed is due to deliver his first mini-Budget, more formally known as the Autumn Statement, in just a few weeks time on November 23. As these things go, there seem to have been remarkably few hints or leaks as to what might be in it. In fact so few, that some cynics are wondering whether he's going to simply make it up as he goes along on the day, much like other government policy since July.
Sometimes it comes as a bit of a shock to end up discussing something as basic as stocktaking with a retailer. We all tend to assume that the principles of stock management including knowing how much stock is really there are so fundamental to any sort of retail activity as to be beyond the need for explicit discussion. Yet it happens typically when we've just produced a set of accounts using the first real stock figures after months (sometimes many months) of book or system stock values.
In every business there comes a time when major expenditure is required just to be able to keep that business going. In the world of petrol retailing that could be new tanks and underground plumbing (maybe every 20-25 years); new pumps or rollover washes (maybe every 15 years); new canopy, fascias and lighting (maybe every 10 years or sooner if the site changes supply or branding); or new POS and EFT equipment (again, perhaps every 10 years).
It seems like a very long time since June 23. Yet as this is being written, the new Prime Minister is still making the last appointments of her new government team and everyone else is still grappling with the possible consequences of the referendum result. So it was quite interesting to have had a chance conversation with a petrol retailer client on the same subject just a few days ago.
Hundreds of forecourts have the same problem: a large and heavy piece of equipment taking up quite a lot of space in its own dedicated area which, although costly to install and maintain, has produced very decent profits for many years. But that was before a no-tech alternative sprang up causing the market for their particular service offering to collapse almost overnight. Today that once-expensive piece of equipment sits under-used (if used at all) and physically decaying.
Some business operators do like to make life complicated. Not just for their accountants, but potentially for themselves. One way in particular is very common among small, owner-operated traders using the business as just another personal cash and bank account.
Whenever we meet someone about to go into business for themselves, eventually the conversation gets down to practical matters: things like business bank accounts, choice of book-keeping system, EFT terminals, etc. A few even ask how long they'll have to keep their 'records'... ]
Rather surprisingly, the Chancellor decided to leave Fuel Duty unchanged in his March 2016 Budget perhaps influenced by the recent upward creep in pump prices- largely due to the pound/dollar exchange rate or maybe he just decided to keep his powder dry and save that option for the future. Of course, that wasn't the only surprise in the Budget: most media coverage has focused on the proposed 'Sugar Tax' on soft drinks, which wasn't expected especially, perhaps, from this government.
Many retailers will doubtless remember that increases in duty were once routine - in fact automatic at virtually every Budget. Between 1993 and 2000, the increases were explicitly intended to be significantly above general inflation, regardless of which government was in office.
Having just passed the annual self-assessment tax return deadline, hopefully your own return was in by January 31. Of course, that particular submission related to your personal tax calculations for the tax year 2014/15. Currently we're in tax year 2015/16, which runs until April 5, 2016.
It started as so many of these contacts do a call from someone who had originally spoken to us about his prospective business nearly a year earlier, but then had gone quiet. This call was slightly awkward for him he'd taken up a friend's offer to 'look after' his accounting and was now a little desperate.
Whatever the eventual fall out from the VW emissions scandal, there is a feeling in the air that we might come to look on 2015 as representing the high water mark of diesel road fuel here, across Europe, and almost certainly in the US.
As regular readers will be aware, each autumn we look at the hourly pay rates of thousands of staff working at hundreds of forecourts around the country, to obtain a picture of real pay rates in the petrol retail industry.
It happened in August. Motorists suddenly found pump prices of diesel were falling more steeply than those of unleaded. By the end of the month the unthinkable had happened on many forecourts diesel was actually cheaper than petrol. For some of the millions of today's diesel drivers this felt like the first time ever.
There's a scenario that often plays out when we first meet a prospective new retail operator: after the usual exchange of pleasantries we listen to their plans for their new business; funding it, staffing and operating it. Eventually the conversation touches on their 'accounting' expectations. Nine times out of 10 their most immediate concern is VAT returns. Most are also sensible enough to realise that they'll need some form of management accounts; they know that trying to manage any business relying solely on annual financial accounts is a nonsensical proposition.
George Osborne presented his first proper Tory Budget on July 8 and, while it left many things unchanged from the earlier March version, there were some announcements that did take commentators particularly various employers' and business organisations by surprise. Probably the biggest of these surprises, and one that naturally hasn't gone down very well with employers, was the announcement of the National Living Wage (NLW). The pre-July Budget scenario was that there were increases to the National Minimum Wage (NMW) due to come into effect from October 1, with the resulting rates becoming:
We've mentioned it before, but make no excuse for highlighting it again: Auto Enrolment is coming your way and you need to be ready for it. We're talking about the legal responsibility of all employers to provide an appropriate, approved workplace pension scheme for their staff. It doesn't matter whether you run a site as a dealer, or as a commission-operator; whether you trade as a limited company or as a sole-trader/partnership: if you employ staff and are registered as an employer with HMRC then Auto Enrolment will affect you. The only question is 'when' and the short answer is 'anytime between now and October 2018'.
The latest round of property valuations for business rates purposes is now in full swing. Since early February, the Valuations Office Agency (VOA) has been issuing questionnaires to thousands of businesses across England and Wales, and a similar exercise is happening in Scotland. The information will be used to update the rateable values of business premises as at a nominal date of April 1, 2015, with this forming the basis of the business rates to be charged from April 2017.
Hardly a day goes by without the sell-off of yet another tranche of forecourts by a major oil company to one of the numerous independently-owned groups in the UK retail market. Almost inevitably there are the associated recruitment ads by some of these same groups, looking for people to join them as site managers or more often commission operators, to run the sites that they're acquiring. This pattern has been going on for a while now, and seems destined to continue until the last of the traditional oil companies sells off its last retail property in the UK.
It was always likely to be a strange Budget coming as it did just seven weeks before the General Election which looks highly likely to end without any clear winning majority. The Chancellor had to stand up and deliver a Budget that somehow appealed to his existing voters but didn't scare off those who might be thinking of joining them on May 7; and do so in the knowledge that he might not be in a position to put his announced measures into practice after that date.
We meet owners of small businesses at many events trade shows, franchise seminars, awards functions and just about anywhere else where business people gather. Being friendly, we speak to them. In oh-so-many instances, our newly-found acquaintance will say something along the lines of: "Mine's only a small business" or "I only run a com-op site" invariably followed by "so I don't really need much accounting" Maybe it's just a polite way of trying to end a conversation with accountants?
It's difficult to avoid using hyperbole when describing the current fall in pump prices: unparalleled is one adjective that springs to mind. Even those of us who've been involved in this business for 30 or more years struggle to remember anything quite like it.
It seemed that many consumer spokespersons and media commentators were in a state of glee with each seemingly daily fall in the price of oil in the closing weeks of 2014. At times there was an almost vicious element to some of the pieces; some celebrating the oil industry getting its comeuppance for causing years of misery, others insisting that because the price of Brent Crude had dropped from $130 to around $60 per barrel, petrol prices still hadn't fallen far enough, fast enough. Unfortunately, the vast majority of the media coverage was written by people who have no idea how any industry actually works, and wouldn't know what a barrel of Brent Crude was even if you tipped one over them.
1] Your accounts show total shop turnover for the year as £240,000 at an overall GP% of 19%. But your business plan was based on an expected GP of 23% on sales of £220,000. How far off-target is your gross profit against the business plan?
As we've been doing every year since 1998, we've once again taken the payroll data that PAYEPeople processes on behalf of hundreds of forecourt operators across the UK to find the real pay rates that were being paid to nearly 6,000 individual hourly-paid employees, giving a true snapshot of what's being paid.]
There's a scenario which crops up quite often when we're talking with people new to running their own business. We'll be trying to explain something quite well established say, for example, the basic rules covering the treatment of travel expenses in their personal tax returns.
It was interesting to read the feature in July's edition of FT 'Change on the Cards', which highlighted the growing frustration of many dealers with fuel cards. As we've pointed out on these pages previously, the real problem with the terms under which most retailers work with those cards is not so much the margin although that could always be better but the adverse impact that the payment terms have on the retailer's cash flow. Unfortunately fuel cards do now represent a very significant chunk of core volume for many dealer sites (and that really means fuel volume historically fuel cards have generated negligible non-fuel sales). These are customers who still come to fill up even if your pole price is 3 or 4ppl more than the nearest supermarket, so it's very difficult to see how anything will change. The tail now wags the dog.
Every now and again an issue crops up that highlights the changing nature of petrol retailing. Occasionally it surfaces as a small, apparently isolated query which then seems to spread at a rather unexpected rate. Suddenly we have to look at more than just one or two retailers to check whether there may be implications for others. The subject of VAT partial exemption is one such issue and it may affect you.
While many people are off enjoying their summer holidays, July and August see many accounting professionals wishing that they could extend theirs indefinitely rather than going back to the office and trying to sort out the latest 'jumble in a shoe box' that some of their clients hand to them as part of their year-end records.
It happens with almost monotonous regularity another very wealthy celebrity 'outed' as owing the taxman several million pounds because some exotic 'tax-saving' scheme for which they'd signed up has been declared illegal.
Sometimes it's easy to forget that at any given time, there are always a few people who are new to this industry in fact, new to being in their own business at all. Of course, there's some 'churn' in petrol retailing, as in every other walk of life.
Any readers below the age of say 40 might be amazed to hear that until not so many years ago, 'Budget Day' was one of the most eagerly anticipated and busiest days in the petrol retailers' calendar. It was typically preceded by weeks of speculation about how much extra fuel and tobacco to order, on the assumption that both were sure to rise by quite a considerable amount at 6pm or midnight on the day. There would be queues of cars forming on forecourts during the afternoon, and a complete crush at home time as punters took every opportunity to fill up before the dreaded price increases came into effect.
You may have heard of it already, but if you haven't, we're talking about pensions. And it will affect you and every other employer in the country. You need to know about the regulations and make sure that you're ready, since the penalties for failing to do so are quite eye-watering. The scheme started for the largest employers at the end of 2012, but one way or another, it will come to you between now and 2018. That may sound like a long time, but the more staff you employ, the sooner it will be.
T here have been several news stories from the petroleum retailing sector in the past few weeks that at first glance appear unrelated. There was Esso confirming its move towards a wholesale supply mode. Then major supermarket chains admitting that their fuel operations are hurting their bottom line. And now rumours of a possible major new player poised to enter the UK market this year. In the background, we have heard from several retailers currently operating oil company-owned sites that those sites have quietly been put up for sale (again). No wonder many individual site operators are wondering what the implications will be for their own businesses and whether there's a major upheaval about to hit the industry.
January is always a very busy month for accountants, dominated primarily by the need to ensure that clients' personal self-assessment tax returns (SATRs) all get filed by the 31st at the very latest.
The scam email problem is so common that it's almost become a cliché. You receive an email from some individual in a far-flung country, offering a sizeable chunk of their 'lottery winnings'. All you need to do is give them a bit of help to get the money into the UK, and to do so, they just need your bank details. It's an oldie-but-goodie, although that doesn't stop the scammers from trying variations on it even now. But some more recent attempts have been a bit more subtle, and not so immediately recognisable for what they are.
There are several ways of trying to establish average pay rates in an industry or area. You can ask employers what they pay their staff; you can ask employees what they receive. Or you can do what we've been doing every year since 1998 examine the payroll data that PAYEPeople processes on behalf of hundreds of forecourt operators across the UK, and work out the real hourly pay rates that are being paid to thousands of individual employees. Bear in mind that with the advent of 'real time' reporting to HMRC, these figures are based on the same information that HMRC is seeing.
Think back just a few months to the global news story about US and UK electronic snooping on email and other internet traffic. The revelations at least served to illustrate just how vast the data capture and information processing abilities of government agencies have become. Of course, there were the usual reassurances that this was all necessary for our protection, and the standard secret policeman's line of 'Why worry if you've nothing to hide?'. So we stopped worrying and went back to business as usual.
It's been a little odd to watch the whole card processing cost saga increasingly dominate the news pages in Forecourt Trader over the past few months. At EKW (and particularly through this column), we have been pointing out the effect of retail percentage merchant fees on rising fuel prices for many years, and were warning about the current situation a long time ago in fact from a time when pump prices were less than half of the prices typical at the moment!
When you trade as a sole trader or as part of a partnership, strictly speaking you do not have to prepare or send a copy of your business accounts anywhere! That may surprise some operators who've always assumed that they were paying their accountants to do just that, and we'd be the last people to recommend trying to run a business without preparing annual accounts (at the very least). However, the accounts are only used to establish the owner's income. Obviously if HMRC questions the income that is declared by an individual, it is useful (to say the least) to have a proper set of accounts to support what you're telling them.
As accountants specialising in several retail sectors (forecourt, convenience, hospitality and even opticians' practices) we're involved in a great many new business start-ups. In recent years, a large proportion of these new businesses have come under the generic heading of franchises, and it's quite routine for franchise-type businesses to be operated through limited companies. Naturally, many people taking such franchises have already been running small businesses of their own for some time usually as sole traders. But we find that there's a considerable amount of confusion, and many misapprehensions, concerning the practical differences between working as a sole trader (or in partnership), and suddenly being a 'director' of their own company. So if you're in the position of considering a 'franchise'-type operation, or are about to start trading in a limited company set up, here are some of the basic distinctions to be aware of:
Readers who occasionally watch any of the documentary channels on TV might be familiar with the warnings that our highly-automated and interlinked society is really rather fragile. One large solar flare or a heavy ice-storm, and power supplies and communications links suddenly fail, bringing normal activities to a grinding halt. It doesn't necessarily take a global catastrophe to prove just how much we rely on technology for things to work smoothly, the lack of immediate alternative fall-back positions and the consequent chaos if the technology fails. A recent incident at one client's place was far less dramatic, but still provides a small-scale illustration.
Every retailer reading Jac Roper's page in last month's issue should have been horrified by the prospect of a major electronic funds transfer (EFT) processor changing their debit card handling fees from a 'per transaction' cost to a percentage of turnover. That's because this was an attack on one of the few payment options available to fuel retailers which wasn't subject to the punitive 'turnover tax' based on pump prices levied by the card companies, or the high costs of cash-handling charged by the High Street banks.
After what went down in history as the 'omnishambles Budget' of 2012, the contents of which had been leaked in advance all over the media only to be embarrassingly reversed in the following few weeks, this year's effort was at least kept pretty closely guarded right up to March 20. According to some of the more cynical commentators, the reason why there was little advance disclosure this time around was really quite straightforward even the Chancellor himself had no idea what he was going to be able to put into Budget 2013, since his economic options were so limited. With that background, perhaps it was not surprising that the March 2013 Budget speech was one of the shortest in memory, and provided relatively little real news for the next day's papers. However, in case you missed it, or have forgotten it already, here are a few of the main points that might affect you and your business.
It sounds almost friendly doesn't it? No hint of a threat of any big investigation into your financial affairs, or any penalties. But don't be complacent about it. For all of the soft PR in which this campaign's been cloaked, there's still an iron fist within the velvet glove, and if your VAT accounting isn't up to date, you could find yourself in big trouble.
At almost the last minute, the government cancelled this month's intended rise in fuel duty. The pressure groups and special interest lobbies claimed a victory; George Osborne looks like a politician who's listening to 'the people'; the petrol retail industry avoids another rise in costs; and consumers avoid another hammering that they could barely afford. Everyone's a winner. It was the right result, so why does it still feel like a ridiculous way to deal with something as important as the price of a basic commodity that is essential to a 21st century economy? Perhaps it's because we've now seen this pantomime several times a year recently and, according to the official timetable, we're due for yet another performance in the run-up to the next scheduled duty rise on September 1.