Although we’ve written frequently about the problems encountered when someone suddenly moves from operating one or two sites to a multi-site operation, we make no apology for returning to the issue. This is because some of these operators are about to hit their first accounting year-end.
Our experience has been that despite availability of technology, individual business people who are used to doing virtually everything on site themselves almost invariably drown in a sea of paperwork and administration when the size of their business increases three- or four-fold in the space of a couple of weeks. That’s not a reflection on their own abilities or hard work - it would happen to any business that multiplied in size to that extent overnight without a great deal of prior preparation. Unfortunately very few operators are in a position to make any significant preparations, and are further handicapped by the almost total indifference shown by some of the oil companies towards the administrative costs of running a small business in 21st century Britain.
For a great many years we have been advising retailers that they need timely management information in order to know the profitability and solvency of their business. Traditionally that meant producing detailed financial and operating reports within a couple of weeks of each month end so that, for example, the December figures would be produced during January and the operator would see them before another month had been completed. Perhaps naively, there was once a belief that computers would speed that process up so that retailers could produce financial information almost on a ’real-time’ basis, just by pushing a button on their back-office PC at the end of a trading day. The reality has been rather different, and even those days of ’monthly information by the following month’ are now starting to seem like a lost ’golden age’. Instead, what has actually happened is that today many retailers are permanently working three, four or even five months behind with their paperwork and hence management information.
Why? Well it’s not rocket science to work out that someone who spent perhaps two hours a day doing administration for one site would have to spend perhaps six hours a day doing the same for four sites, and maybe eight hours a day for six sites. Basically, there are very few economies of scale when it comes to administration for multi-site operations.
The consequences of this ongoing time lag in management and financial information are quite severe. Typically each individual site will only be operating on the basis of a target bottom-line profit of maybe £13-15,000 a year, so running blind for three or four months in between accounting reports could allow the expected profit to evaporate before any remedial action can be taken. Then of course there’s the VAT issue. The vast majority of operators still have to make quarterly returns (and payments) to HMRC. Missing those quarterly dates, or continually using ’estimated’ information, is likely to prove costly in the long term. On top of that, the oil companies themselves still require periodic performance reports of varying complexity from operators in order to compare ’actual’ results against ’forecasts’ and make any corresponding adjustments to the bottom line. Finally, there’s the question of year-end accounts and tax returns. Here again HMRC sets deadlines by which they need to see information, and failure to meet those deadlines can result in penalties and interest charges on any overdue tax. If your financial year end is January 21, 2007, but you’re still working on your paperwork from September 2006, you have a problem.
Are there any answers? Well first of all retailers in this position need to realise that they’re not very likely to catch up with their backlog on their own. So, they have little choice other than to seek additional resources in the form of administrative staff. But they must be aware that even a full-time administrator won’t be able to magically catch up with several months of paperwork overnight. In the longer term the oil companies need to be persuaded that administration is an unavoidable part of operating any business, and that suitable financial allowances need to be built in to multi-site deals to allow retailers to get back to retailing instead of chasing lost time.