Spare a moment for some sympathy for the BP dealers who’ve had two rather unfortunate experiences related to plastic money in recent months. First, at the end of May, many of them discovered that they owed the oil company significant amounts of money for Allstar card-handling charges over the previous three years. Then, in early July, they suffered a failure of EFT systems which caused complete chaos on around 1,000 forecourts. These things happen and not only to BP dealers, of course. While the immediate impact of either happening is pretty obvious they also have a later impact when it comes to trying to account for them in the site’s records.

At this point some readers may wonder how any large, modern organisation can fail to charge its customers for anything over three years and how the customer (ie the site operator) can fail to notice it happening for just as long. Actually, it’s more common than you might realise and has been happening for years.

Even back in the old days when each oil company had hundreds of their own staff in their own UK head offices, it was quite a regular occurrence. Mobil Oil, for example (when they had their own retail network in the UK) were quite notorious for failing to collect fuel invoices from retailers by direct debit. Some retailers owed them several tanker invoices for months or years on end. And that’s before we even think about the ’promotion’ schemes that went for years without the appropriate invoices going to sites.

As for why site owners apparently fail to spot the fact that they haven’t been charged for a service that they’ve received, well sometimes they (or their accountants) do notice it eventually, and might even try to account for it. An accountant who’s used to the specific paperwork at each fuel site is likely to notice that some regular charge hasn’t been invoiced for a while. They’ll then ask the site operator whether anything has changed as far as the oil company is concerned. The accountant might then try to accrue for the missing charges ie they’ll try to calculate the ’missing’ cost and put it into the accounts to keep the profit and loss report realistic. However, after several months or quarters like this, the accountant can have accrued quite a significant balance which just keeps growing. If there’s no sign of any invoices actually being received, there’s the possibility that perhaps the system has changed that in fact there’s no real charge to come.

Crunch time

The crunch time for reviewing these accruals is at the site’s financial year end. The tax accountants and HMRC both look carefully at accruals on a business’ balance sheet since they can be there merely to depress the reported profits and tax bill. If a few months or quarters have passed since the year end and there’s still been no sign of any invoices arriving, there’s a natural suspicion that the accrual may be unnecessary.

What makes the whole process uncertain is a lack of clear information. Taking the BP/ Allstar issue as an example: how many dealers would know exactly what charges they should have been paying for Allstar transactions as distinct from say Agency transactions which may well form part of the same monthly statement? In other words, if the dealer still sees some form of EFT-related charge appearing, are they likely to notice that it doesn’t include a particular element? Chances are that they won’t.

lack of information

This complaint about lack of information has been heard again from those dealers who’ve found out that they’ll be debited for the outstanding fees over three months. There’s apparently little in the way of calculations that they could check against site records just a statement saying they owe ’£X’. And again, this isn’t unique to BP. Over the years oil companies have frequently produced statements of account or remittance advice without making the underlying invoices available particularly when there’s any degree of ’controversy’ surrounding the charges.

For the affected businesses, if no accrual was made for these fees over the last three years, they would have over-stated their annual profits for that time; and therefore may well have paid too much tax on the basis of those years. Re-paying the outstanding fees over three months is one thing, but it will take longer to recoup any overpaid tax. And for some smaller businesses, suddenly realising that they have made lower profits than they thought might be the final straw.

It can be hard to account for the unexpected.