Retail Accounting 101: Retail Sales Metrics

KPIs (Key Performance Indicators) are a type of performance measure.They help you to evaluate how well your retail company is doing within a particular activity. You need to have a good understanding of what’s important to your retail company in order to choose the right set of KPIs. However there are some key KPIs that may be useful in your retail organisation:

 
Sales per Unit Area
Sales per unit area is a standard measure of success within retail stores. It’s often expressed in square feet but increasingly it is now being defined in square meters. It can measure your retail stores efficiency in generating revenue with the amount of space available to your retail store.  The higher the sales per unit area the better your retail store is doing at positioning products and marketing. Apple for example has twice the sales per square foot of any other US retailer.  It also allows you to benchmark your retail store against your competitors. Such information can often be obtained from trade unions, annual reports or Companies House.  Remember, factors such as location, layout and amount of inventory can have an effect on your retail stores results.
How to work out sales per unit area:

It’s a simple equation which is often expressed as follows:

£ Sales per period  e.g. £200,000 = £100 per sq ft
Sales floor area           2000 sq ft

It’s a very useful comparison tool, particularly if you have a number of different stores of varying size as it allows you to compare performance.

Sales per Customer/Transactions
You can work out the actual sales for a certain period such (month or year) and divide it by the number of customers/transactions.

For example:

Total sales               = Sales per transaction
No. of transactions

Sales per employee
This is helpful in comparing labour productivity between different retail stores.  It can also help in determining the number of sales your retail store will need to make if you take on new staff. When working out sales per employee you will need to account for anyone who is working part-time. So convert their hours to the equivalent full-time hours.

You can calculate the sales per employee as follows:

Net Sales         =   Sales per employee
No. of employees

Sales/Hour
Sales per hour tells you the speed at with each individual salesperson is selling a product to a customer within your retail store. It’s a great comparison tool to see how well each salesperson is performing in comparison to everyone else.

It’s easy to calculate:

Actual sales         = Sales per hour
Employee hours

 

Pubs go Automatic!

An interesting innovation recently piloted in London is a move towards an automatic pub. Robot Pub Group now offer a table where users can serve themselves from a tap and monitor their bar tab as night progresses. Customers can also order food and make juke box selections without leaving the table. What are the advantages to the publican? Increased sales and reduced staffing. As staffing represents a major cost in all hospitality operations the ability of a single member of staff to handle multiple covers and no queue at the bar both saves money and improves the customer’s experience.

Will we see this as a new trend? It’s difficult to say but in some countries the financial saving from low staffing have seen self service unmanned petrol service stations become popular and perhaps with ever tighter margins the pub trade will be no different.

www.robotpubgroup.com

Looking to setup or buy a pub?

If you are interested in buying pub or working on a business plan to start your own.We found this great PDF which has an array of averages of various different pub formats.

The BBPA guide has been compiled from data supplied by BBPA members for the year ending 31^st December 2010,  who own and rent out pubs on short term tenancies (typically three years), or on

longer term leases (typically fully repairing leases on 10 – 20 year terms)

Click here to download.

Number of pubs within the United Kingdom (1980-2010)

Data courtesy of http://www.beerandpub.com/statistics

They say a picture is worth a thousand words, and we fully agree, however this graph prompts just as many questions.

– Is the pub industry going to continue to decline?

– If so, when will it stop?

– What will the competitive landscape look like?

– Will it present the economic returns required for UK PLC to dominate market share?

We are interested in your thoughts, please comment below.

5 things to look for in a pub accounting system

For publicans, having tight financial control and understanding your performance is critical to running a successful pub.

1. Online/cloud – the days of buying software in a box are over. For small businesses, there are numerous benefits to using online systems. Cloud or online systems mean that the pub operator pays a small monthly fee which allows them to use a web based system through a browser. This monthly fee includes hosting, support, backups and upgrades.  Why pay £200-300 upfront plus ongoing annual update and support payments of £100-£200, when you can pay £20 per month?

2. Easy to use – running a business is hard work, therefore you should look for an easy to use retail accounting system. If the data inputting is not designed for a cash based retail business and is overly complex, then you are looking at the wrong accounting system. Being intuitive and logical are must haves.

3. Designed for a pub – unlike a normal business, pubs do not raise an invoice or offer credit (unless they are trade accounts), therefore most accounting systems are not a great fit for pubs. It is important to look for an accounting system which allows you to input the information from your POS/Till with ease and tracks your cash difference, cash sales and credit sales.

4. Can link with POS – it is possible to import your POS data directly into your retail accounting system. This can deliver savings in cost and time and increased accuracy. To find out more, contact your POS supplier.

5. Reduced accounting costs – by importing your data or using an easy to use manual data entry system to enter data yourself you can reduce the number of hours you are being charged for bookkeeping services, therefore when you submit your data to your accountant for your end of year and taxation – you will benefit from lower fees.

London 2012 Olympics: Pubs in central London suffer as West End becomes “ghost town”

Pubs in central London have been hit by a significant drop in trade as the West End has turned into a “ghost town” since the start of the Olympics last Friday.

Disaster: CAMRA’s Pub of the Year 2011, the Harp in Covent Garden, has seen a 20% drop-off in trade since the Olympics started

It was hoped that London pubs would see a sales boost as a result of the Games but that has not proven to be the case for a number of venues at the heart of the city.

CAMRA’s Pub of the Year 2011, the Harp in Covent Garden, has seen an estimated 20% downturn in trade since the start of the Games.
“It is desperate,” said the pub’s owner Bridget Walsh. “I would say we are probably 20% down compared to a usual week.”

Asked why she thought this was, Walsh responded: “It is very simply because people are being told not to come to London. They are worried about driving in because of the traffic being gridlocked, or frightened that the trains and buses are going to be running properly.

“It is a disaster for the Government and the Treasury, and for me. I had to cancel all staff holidays (for the Olympics). I was concerned it was going to be too busy but it has gone the other way completely.”

Meanwhile, founder of the Bavarian Beerhouse, Sabine von Reth, told the PMA that the Old Street site had seen a 50% drop in sales since the start of the Games.

“Looking around Tower Hill, the streets are empty,” said von Reth.

“I can’t wait to see the back of the Olympics,” added Christine Bateman, manager of Mitchells & Butlers pub the Argyll Arms at Oxford Circus.

“It is absolutely shocking. There is nobody about – it is like a ghost town. I didn’t think that my trade would go up a lot, I thought it would stay the same as people have still got to eat and drink after they have been to the events – but that has not been the case.

“I think if people are out in Stratford they are basically staying out there and heading straight home afterwards, whereas the normal tourists are staying away because they think it is going to be chaos.”

“Friday and Saturday were a lot quieter than usual,” said Dave McLelland, manager of Samuel Smiths’ pub the Princess Louise in Holborn. McLelland said that although trade has been normal so far this week, he was expecting to be busier as a result of the Olympics.

“It is disappointing – I would have thought there would be more people in the area who were not going to the events coming into central London to see the shows and the tourist attractions.”

Finally, Glendola Leisure which has a number of venues in central London also reported a dip in trade with average figures down for the week.

A spokesperson said: “Our London units, including the including Rainforest Cafe did not see any benefit at all from the Olympics over the first weekend (or even last week) and the general consensus is that our regular customers are generally staying away from the West End and Olympic tickets holders are going straight to the venues.

“This should be the busiest time for Rainforest Cafe especially with the school holidays underway. However we are seeing far lower than average figures.

“Waxy O’Connor’s on Rupert Street has seen a similar downturn in business and we are hoping that Tuesday night’s news coverage on the BBC and in the Evening Standard will get the message across to Londoners that the city isn’t as busy as they may think and will hopefully start to come out to our bars and restaurants again.”

Strategic affairs director for the Association of Licensed Multiple Retailers, Kate Nicholls, said: “There is no doubt that operators in central London are seeing the Olympic effect – and it is not always positive.

“Those tourists who are in London are at the Olympic venues and outlets close by are undoubtedly getting a boost – I was in Kingston for the cycling time trials yesterday and the pubs beside the route were busy and making the most of it – but for food-led businesses in the heart of the West End, that is not sufficient to compensate for the drop in normal trade and commuter footfall and normal tourist business is definitely down.

“The weather is also undoubtedly contributing to that and so far, all the signs are that there is a London vs rest of the country divide. Pubs remain a great place to get the atmosphere of a live sport event and many people are choosing their local to be a part of the national celebrations.”

http://www.morningadvertiser.co.uk/General-News/London-2012-Olympics-Pubs-in-central-London-suffer-as-West-End-becomes-ghost-town/?utm_source=newsletter_daily&utm_medium=email&utm_campaign=Newsletter%2BDaily&c=54QTDz2oxBReX2daeKoafiCruV6zF7JD

Bookkeeping in Pubs – Last orders for “wet” and “dry”

In the past the typical tenant of a small pub may have been a retired serviceman with a military pension or factory worker who had invested a redundancy payment to buy and run their dream business. In both cases they expected to have a simple business they could run through into their sixties. At the time wet sales dominated and a customer in need of solid rather than liquid sustenance might be able to buy a ploughman’s lunch and a bag of crisps. There has been a large reduction in the number of wet led pubs over the last twenty years with the recent smoking ban being the final death knell for many. This has in turn resulted in more sophisticated offerings with food sales now dominating and driving the success of the remaining establishments.

Unfortunately although the businesses are now larger and more sophisticated in many cases the standard of bookkeeping would be familiar to anyone running a wet pub 50 or 60 years ago. Often cash records are hand written on a scrap of paper for the week and bundled up with any invoices and the bank statement to be sent to the accountant. The accountant then tries their best to reconcile the “paperwork” with a bank statement. Eventually a set of accounts is produced with sales split into “wet” and “dry” and a large number of suspense items due to enigmatic cash payments and missing invoices. As an outsider to the trade one might imagine that the process is designed to hide as much information as possible rather than determine the profitability of the business.

This needs to change for the following reasons:

1. Ever more complex POS/BOS systems to manage the sales, stock, staffing rotas, advance bookings etc. make it easier to produce accurate detailed accounts. This data can often be imported directly into the accountancy software.

2. “Wet” and “Dry” although still good broad measures of performance can now easily be broken down into Ales, Lagers, Ciders, Wines, Spirits, Menu, Specials etc. so that the pub operator can see exactly where their profit is coming from and optimise the offering.

3. Unless satisfactory accounts can be presented showing the performance of an establishment or across the estate it is not possible to raise finance. It is less and less likely that a retired seafarer or redundant factory worker will have a large cash investment available and the new style of operator will need to obtain a loan to invest in, and operate, their business. No accounts means no loan.

At the moment a large number of Cloud solutions are becoming available to handle all the functions of a pub-restaurant. Couple these with a Cloud accountancy package such as CV Retail’s CounterBooks and you have the perfect basis for managing a single pub or a large tenanted or franchised estate. The benefits are:

1. Initial capital expenditure is low as the most recent applications often run on a touch screen tablet (typically android of iPad) costing a few hundred pounds.

2. Monthly rentals are often less than for equivalent traditional equipment and services.

3. For the operator, they have access to up to date accurate accounts rather than waiting for weeks or months for their accountant to provide them with management reports.

4. For the estate, the head office can monitor the performance of each establishment and compare the overall performance of their territory managers.

5. Accurate transparent valuations of the financial performance allow operators to obtain loans for improvements and estates to generate funds for expansion.

6. Should a business need to be disposed of an accurate valuation will be easier to agree with any prospective buyer.