YEAR–END ACCOUNTS

What are year-end accounts?

Year-end accounts are a summary of your business transactions that shows what profit (or loss) you have made, and details your assets and liabilities. Your profitability is shown in a ‘profit and loss account’ and your assets and liabilities are shown in a ‘balance sheet’. Your accounts are normally drawn up by a qualified accountant who will also be dealing with your tax matters.

As a sole trader or partnership you are not required by law to have a formal profit and loss or balance sheet drawn up, but it is still good practice to do so as the information will be required for your self-assessment tax returns. Well-presented accounts are also important if you want to raise money or sell the lease or freehold of your pub. They also provide you with a clear indication of how the business is performing.

Who needs to see them?

In the case of a sole trader or partnership, no one needs to see your accounts legally, but you will have to submit tax returns which amounts to supplying the same information that is displayed in your accounts.

In the case of a limited company or a limited liability partnership, you are required to have formal accounts drawn up, which must be submitted to HM Revenue and Customs, and Companies House. Small companies and limited liability partnerships can submit unaudited, abbreviated accounts to Companies House if they meet certain criteria (which pubs operating in these ways are likely to meet). There are strict deadlines when accounts must be submitted to HM Revenue and Customs and Companies House, and failure to adhere to these can result in substantial fines and other penalties.

When are they drawn up?

Accounts are drawn up at the end of your financial year, which is normally a 12-month period; however, they can be shorter or longer than 12 months in some circumstances. The choice of your financial year should be discussed with your accountant, taking into account taxation and operational issues.

Presenting your business records to your accountant promptly and in a well-organised way will help prevent any delays in preparing your accounts. If your accountant has to chase lost invoices or bank statements this will hinder the process and possibly cost you more money in the long run.

Understanding your accounts

It is important to understand the information presented in your accounts. Rather than simply having your accounts posted to you, ask your accountant to go through them with you and explain what the figures mean and how things can be improved for the future. Learning a little about accounting is very useful. You do not have to become an expert, but it will give you a greater understanding of your business as well as the confidence to ask your accountant or book-keeper questions about your financial performance.

When finding out is too late!

The time between starting to run your pub and receiving your first year-end accounts can be up to sixteen months. Your results can come as a shock. If your accounts state that you have lost money or have not made as much as you anticipated, it’s too late to change the situation. This is why it is important to have some way of monitoring your performance on a regular basis, allowing you to try to improve things, if necessary, by making adjustments to the way you run your business.

At the start, drawing up a profit and loss report and monitoring your cash-flow on a monthly basis is essential. As you become more established, you may feel that a quarterly profit and loss report is adequate. (Cash-flow should continue to be monitored monthly.) Your accountant or qualified book-keeper can prepare this information for you if it is not something you are able to do yourself.