Frequently Asked Questions

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CLUB MANAGEMENT

1.   Managing Club Profitability
2.   Managing Club Profitability
3.   Stock Control
4.   Stock Losses
5.   200 Club
6.   Gaming Machine Meters and Payout Ratio
7.   Relief from Rates
8.   Brewery or Bank Borrowing
9.   Banking Relationships
10. General Committee Meetings
11. Finance Committee Duties
12. Advice for Secretaries
13. Weekly Cash Sheet
14. Control over Lottery Machines & Tickets
15. Investing Club Funds
 

MANAGING CLUB PROFITABILITY

It is always a worthwhile exercise for a club’s management committee to step back and review the club’s income and expenditure. The benchmarks and comments noted below are based on the South Wales average social club with annual bar takings of £210,000 net of VAT taken from our annual survey:-

1. GROSS PROFIT

The average gross profit percentage in South Wales including brewery bonuses is some 50% - 51%. To ensure a healthy margin the following should be considered:-

• Pricing – Price increases from the brewery and budget must be passed on to the members, few clubs can afford to absorb these increases; clubs now tend to round their prices in 5p and 10p to reduce change requirements. The stock sheet needs to be studied, for example, some clubs carry lines for which only a few barrels a month are sold, are there more popular and more profitable alternative to the lines sold? Are there lines with a low GP%?

Ensure you know how to calculate the gross profit, as an example, with VAT at 17.5% the formula to calculate the mark up percentage from cost is: -
 

Thus to achieve a 50% mark up the cost price should thus be multiplied by 2.35, a unit costing 90p should be sold for £2.12; the multiply for 52% is 2.4479 resulting in a price of £2.20.

• Efficiency – A professional stocktaker should undertake regular stock checks, all deficits should be investigated.

Line and waste allowances as reflected by the stock sheet should be monitored and controlled. Line and waste allowances should be no more than 2-3% of bar takings, allowances in excess of 3% should be managed down.

Excessive bar stocks should not be carried; stock levels average one month of purchases or less; stocks of keg beers should not be much greater than 7 days;

Consider number of lines carried and the number and variety of spirits stocked behind the bar.

• Buying – the brewery should always be the cheapest for most products, if you get a cheaper price list show it to the brewery rep. To improve profitability maximum advantage should be made of brewery discounts, to achieve this borrowing from the brewery in any form whether by way of loan, advance discount, listing fee should be kept to a minimum or preferably totally eliminated. Many brewery deals include minimum barrelage requirements, when the shortfall penalty is added to the interest charge a headline interest rates of 6% can become a 30% charge.

The committee should consider whether it can afford more than one brewer, usually the greater the barrelage the greater the discounts offered, in addition there should be savings in respect of steward’s time for deliveries and in the waste and line cleaning allowances.

2. MACHINE INCOME

Location of the machine together with changing the machine every two to three years is important to maximise income. As a result of the decline in popularity of gaming machines due to the VAT liability and increases in licence fees many clubs are reviewing the profitability of their machines. For many the gaming machine remains highly profitable for others gaming machines are being removed and replaced with lottery or other types of machine or gaming activities.

3. OTHER INCOME

Clubs are becoming increasingly inventive in raising other sources of income, declines in gaming machine, bingo and entertainment have been offset by gains in lottery income, lottery machines, quiz machines, poker, lucky 4 etc.

In the near future the Equality Act requires male and female members to be treated equally, that includes paying the same rate of subscription. The implementation of this Act should be used as an opportunity to review subscription rates.

A number of clubs have tried catering operations, however, the business model of a husband and wife pub team does not transfer well to a club committee. The downside for losses is large, do you really want to get involved in employing a chef, food suppliers, waitresses, waste and shortages, H&S and members’ complaints. Where a club has a successfully restaurant operation it is usually franchised with the club benefiting from wet sales and a small rent.

4. WAGES

The difference between a profitable and loss making club is often how the wage costs are managed as the costs for bar staff, cleaners, officers etc at 32.5% of bar takings are the single largest running costs of a club. Increased legislation has left many clubs with unsustainable wage costs structures and to return to profitability many clubs have to manage down wage costs. The current averages are; total wage costs at 65% of gross profit; bar wage costs averaging some 24% of bar takings. These averages are too high and do not leave enough surplus to fund other expenditure resulting in losses for many clubs.

We see large differences in wage costs even where clubs are of similar size. The more efficient clubs tend to employ stewards or bar manager on contracts of 47 hours per week or less supported by 3 or 4 bar staff each working some 18 hours. The less efficient clubs tend to have stewards working 65 hours or more; when time and a half, higher pay scales and national insurance are considered these extra 18 hours are costing the least efficient club some £5,000 per annum without increasing the service to members. In addition a good team of bar staff will reduce the costs of steward’s holidays with lower holiday pay and less dependency on relief stewards.

The committee should also review opening hours comparing bar takings with the cost of staffing levels should these above ratios be exceeded.

5. PAYE/NIC

The minimum wage, holiday entitlements together with the revised national insurance limits means that club officers and committee must review the weekly wage records. Attention should be given to part time bar and cleaning staff, many prefer to work less hours and receive the same take home pay, saving the club and employee national insurance and PAYE as a result.

An unexpected Inland Revenue enquiry covering six years can be extremely expensive. Honoraria, committee duty payments, extra labour are all subject to PAYE, the Inland Revenue PAYE inspectors know these are easy targets at clubs. Ensure you know the regulations, checks given for the payment of duties are taxable, free drinks given to members and committee are not. Up to date form P46 should be held by the club for all officers and staff. Failure to follow these procedures will prove costly.

6. RATES

Appeals should only be made using chartered surveyors specialising in commercial property or firms approved by their governing body. Smaller clubs should ensure they are receiving small business rates relief, a number of clubs with sporting links have applied for Community Amateur Sports Club status which gives the club entitlement to 80% mandatory rates relief.

7. HEAT AND LIGHT

Electric and gas cost have doubled in recent years for many clubs, an average one months of the bar profits and now required to cover heating and lighting. There are two aspects pricing and usage. A full review of electricity tariff rates should be undertaken, if you have a price agreement make a note of when it comes to an end, many clubs have found at the end of a contract that they have been rolled on to a new fixed contract at far higher rates. With clubs closing during week days use of the ‘evening and weekend’ tariff can result in considerable savings. Consumption should be reviewed and the use of thermostat and low energy bulbs should also be considered. Separate meters should be installed for the steward’s quarters, if the steward pays his own heating and lighting costs the PAYE tax on these benefit in kind will also be avoided.

8. WATER AND SEWERAGE

Is a problem area with six monthly bills and poor location of meters. Water charges are one of the most variable costs incurred by clubs. While water charges average £1 per £1000 of bar takings annual costs for the typical club can vary between £800 to £4200. A water leak can result in large unexpected bills; the cost of a leak is doubled by the assumption that the water ends up as sewerage. To manage water costs install misers, monitor meter readings and watch workmen with hosepipes – another common cause of a sudden increase in water charges.

9. REPAIRS AND RENEWALS

The income of a club is required to not only meet running costs but also to fund repairs, refurbishments and capital expenditure programmes. Such expenditure cannot be constantly cut back on with short term savings often leading to larger bills in the future.

10. BANK CHARGES

A club should always know where its bank balance stands, bank charges and investments policy should be reviewed annually. It is not uncommon to find a club which has had difficult times in the past left with a high bank charging structure and large sums in a non interest or low interest bearing account. In these circumstances negotiations with the bank can save thousands of pounds a year.

11. ENTERTAINMENT & SKY TV

Entertainment may be a loss leader in clubs making a surplus but can be an additional drain in a club already making a loss. Except for the larger more profitable clubs entertainment expenditure should not exceed 5% of bar takings as expenditure beyond this level is unlikely to result in further profit increases. Many clubs now hire their hall out for functions or parties with periodic ticket shows for members.

As with concerts and artists costs Sky is one of the most hotly debated item of expenditure in many clubs. Whether Sky is a benefit will vary from club to club depending on if the club can afford the expenditure and whether the high costs of Sky results in it bringing enough people into the club to justify paying upwards of £6,000 to £7,000 per annum. Beware of the danger of the leasing of equipment for foreign broadcasts of football.

12. LEASING

Many clubs have been caught out with leasing scams for door entry systems, air conditioning units, alarms, etc. While leasing may appear a cheap source of finance it can prove expensive in the long run, especially when the equipment has ceased to work long before the lease contract has terminated. All leasing agreements should be reviewed and authorised by the club committee and if necessary advice should be sought from the club’s professional advisors.

MANAGING CLUB PROFITABILITY

We continue our series of articles on managing club profitability by looking at the income component of the ‘club profitability formula’:-

	£
Bar Takings Equal =
1 Membership x
2 Usage x
3 Price	xxx
Add: 4
Other income including events	xx
Total Income	xxx
Less:-
5 Expenditure and bar     purchases	xxx
Surplus	x

This formula provides a tool to help a committee turn around the profitability of the club.  There are basically five ways in which a club can increase profits.  This article looks at maximising income by increasing membership, encouraging greater use  of the club and the management of bar prices.  We looked strategies at managing expenses in May 1999.  The ideas are only suggestions and would not be suitable for all clubs.  Any changes made must be carefully considered by the committee before implementation.

1          Increasing Membership

Few clubs have a strategy or plan for encouraging new members.  Few have an idea on how to obtain new members or where they are likely to come from.

It is not just a question of increasing members they have to be the right type of members.  A member who attends once a year is of little use.  Increase membership fees to £5 or £10 but provide more benefits to the members who use the club regularly.  To encourage new or existing members provide a list of benefits they get from being a member, cheap prices, annual outing, Christmas events, holidays, free checks, games, events, etc etc.

The most progressive clubs give back to members more in checks than the cost of the annual subscription.  Give checks out at the Annual General Meeting to encourage more to attend.  The members need to be shown it is their club.  Poor general meeting attendance is usually the sign of a downward spiral.  This is because it results in committee shortages, lack of officer and eventually to poor management of the club’s affairs.

Many clubs complain about the lack of young members, but do little to encourage them.  What services can the club provide to encourage the right young people to join and stay as active members?  A club provides may social activities and facilities, some can be aimed to encourage the younger member, eg, a club football team.

Life membership rules need to be reviewed and numbers reduced.  Many clubs have a large list of life members who for various reasons never use the club.  Life membership should be a privilege granted to only the minority of loyal members.  An accurate list of active members is a key record for all clubs.

2          Increase the usage of the club by Members

All clubs have a hard core of good members, but more are usually needed.  The most successful clubs have the best facilities, good hall, bar seating, decorations, fittings, etc.  Many clubs have been more adventurous and have added new facilities and services such as canteens, beer gardens, large TV screens, etc.  Solicit the ideas of members as to what facilities they most want to improve.  If it’s practical agree an implementation plan.  Annual competitions, shows, major rugby and football matches can bring in the crowds, especially if food and other entertainment is provided.  Obviously, not all activities will be a success.

3          Bar Prices

Club prices are usually low but changing prices up or down frequently has little impact on the amount of beer sold.  Members often complain if prices rise but provided they enjoy the club’s social life and facilities, tend not to leave provided increases are small.  Similarly, unless exceptionally cheap, lowering bar prices tend not to increase sales.

Projected:-

	£ 000's
525 Members x 350
x £1.24	228
Other income increased with new members	26
Expenditure - bar purchases and wages up	237
Profit	17

Summary – the above gives an example of how small attainable targets, perhaps planned over a number of years, can increase the performance of a club.  Further gains may be achieved by the better management of expenses.  None of the ideas suggested may be suitable for your club, the key is that a plan has been drawn up and agreed.  The ‘club profit formula’ is merely a tool to help the committee develop a plan based on their knowledge of the club and what they think will help reverse a decline in its fortunes.  The club in the example has managed to more than double profits to a level which will provide the club with enough funds to improve services and premises and help ensure the long term success for its members.

STOCK CONTROL

Generally speaking many clubs seem to believe that the process of having stocktaking is to reveal to the committee whether the steward has provided them with a surplus or a deficit and what percentage profit is made on the sales.  However, experience has shown us that there is far more in the stock report which is of importance and it needs close scrutiny.

To supplement the report provided by the stocktaker the following items need checking to ensure its accuracy.

1.      Deliveries recorded in the goods received book need checking against statements and invoices rendered by supplier.

2.      Ensure that all items received free of charge are entered in the goods received book.

3.      Check entries in the allowance book to ensure they are authorised.  Particular attention should be given to claims for waste and
    consideration whether the level of such claims is acceptable.

4.      Check allowance for authorised brewery credits and follow up to ensure credit is subsequently received.

5.      Check the reasonableness of allowances for pipe cleaning and waste.  Fewer allowances can result in more profit for the club.

6.      There will be occasions, due to special events in the club when the six day stock on hand may not apply.

7.      Accuracy of cost prices and selling prices shown on the stock report should be confirmed to ensure correct profit percentages.

8.      Examine closely the level of stock on hand for each commodity at date of stock take.  Most suppliers provide a minimum of weekly deliveries.
    With the exception of spirits which are quite often overstocked due to deals offered particularly at Christmas time, stock on hand should be
    no greater than six days average sales.  This is essential in respect of cask beer which has a short shelf life when tapped, whilst other beers
    and lagers also have ‘best before’ dates stamped on the kegs.  The ‘best before’ dates also applies to bottled beers, mixers, spirits and soft
    drinks and the six day average stock on hand level should remove any future possibility of writing off out of date stock.

STOCK LOSSES

The amount of stock lost by clubs depends on a number of factors each of which affect clubs to a different extent.  An experienced steward exercising care in handling and dispensing beer should be able to reduce losses to the lowest level feasible given the circumstances of each individual club.

The monitoring of losses for keg beer dispensed by gas pressure include:-

Pipe and pump cleaning –The frequency of cleaning depends on the length of the pipes and how vulnerable they are to temperature changes and deposits.  Once every seven days rising to once every five days in hot weather is common practice.  As a guide to ‘line allowance’ the volume of beer piping per ten foot length varies between 0.17 pints for a ¼ inch bore line.

Severy and pilferage – Overfilling of lined glasses can cause a problem and a club should not use over sized lined glasses together with an unmetered pump.  The steward should also guard against fobbing (excessive froth) by ensuring there is not a worn dispense point or excessive gas pressure.

Deliveries – The amount of beer actually delivered to a club as distinct from the amount invoiced to it, has always been a contentious issue.  It is usual for Brewers to ensure that kegs contain at least the quantity charged for plus a small allowance of half to two-thirds of a pint.  However, most clubs without weighing machines have to take the quantity delivered in kegs on trust.

Storage – Provided beer is stored properly it should not go stale in normal use.

Residue unusable – Problems may arise if the kegs content has been subject to excessive gas pressure, the last couple of pints may become froth.  In relation to sediment, certain Brewers have agreed an allowance of up to one third of a gallon per nine gallon keg for the purposes of calculating End Product Excise Duty with Customs and Excise.

Pull-Ups- Is the term for beer that may have become warm and possibly stale in the pipes.

All clubs should employ a professional stock-taker who should be instructed by the committee to make appropriate allowance for stock losses due to beer spoiled or wasted in the course of dispensing and storage.  If a deficit then occurs on the stock account it should be investigated immediately.  It is common practice in most clubs for a stock deficit which cannot be satisfactorily explained to be reimbursed to the club by the steward.

200 CLUB

These draws, together with variations such as 50 or 100 clubs are becoming increasingly popular.  The 200 Club will normally fall into the ‘private lottery’ category and its associated

Restrictions will apply.  A typical scheme would work as follows:  200 people all of whom must be existing club members pay £1 per month, each participant is given a number which is then drawn monthly for cash prizes.

Prizes vary according to the amount you wish to make – about 50% of the takings is usual.  There are usually two prizes per month, one for say £40 the other for £20; in addition there is a further prize of either £100 or £200 every three months.  Total prize money is £1220 (12 x £20; 12 x £40; 3 x £100; 1 x £200) gross income is £2400 resulting in a surplus of £1180 per annum less administration expense.

While this appears straightforward such a result demands a great deal of time and effort.  The steps to follow are as follows:-

1.      The organiser must be a club member authorised in writing by a committee resolution duly recorded in the minutes.

2.      Estimate the number of members likely to participate and calculate the prize structure.  As a precaution against failing to reach the planned
    membership the advertised prize list should make provision for a reduced prize structure.

3.      Consider the method of payment.  Monthly collection in cash soon becomes a major chore, monthly standing orders involve bank charges,
    annual payment if possible is best.

4.      Canvass all club members to join.

GAMING MACHINE METERS AND PAYOUT RATIO

Customs and Excise have recently won an important case concerning the assessing of VAT on gaming machine receipts, ‘Hanslope Working Men’s Social Club’.

The club’s gaming machine meters recorded the number of ten pence coins paid in and the number paid out as winnings.  The machines payout ratio were set at 72% of ‘coins in’.  the readings on 30th July 1996 corresponded to this ratio, but they indicated shortages since the machines were installed.  Subsequent checks over a week and test plays by Customs Officers showed that the meters appeared to be reading correctly.

Customs & Excise were successful in winning their case because they showed that over the entire period since installation the meters showed the correct payout ratio.  For the meter readings to be wrong both meters would have had to have failed at the same time, which was unlikely, let alone to have failed on both machines owned by the club.

Customs and Excise were successful in their case even thought the club had controls over the emptying of the machines and the tribunal accepted that the club’s officers were responsible persons and honest witnesses.  To ensure compliance with the law and to protect against accusations from members, club officers need to adopt strict  procedures when emptying machines.  Set out below are recommended procedures.

1.      The key to a gaming machine should not be held by one person.  At least two officers should be responsible for emptying and counting the
    cash from machines.  Each time a machine is emptied and counted a member of the club selected at random should be asked to oversee the
    procedures.  The count should be undertaken in full view of the membership.

2.      Before the count is undertaken the machine tubes should be refilled to the same level each time.  Unless this is done it will not be possible to
    subsequently reconcile the meter readings.

3.      A ‘machine income’ book should be kept to record the count.  The book should be signed by all parties involved in the count.  A separate
    record needs to be kept for each machine together with the relevant meter reading.

An accurate count will help the officers of a club to monitor the performance of a machine and help detect problems at an early stage.  Poor returns may mean the machine’s location or the machine itself needs to be changed.

RELIEF FROM RATES

The Local Government Finance Act 1988 makes provision for relief from the payment of business rates.  Where the relief is discretionary obtaining assistance is dependent on, the rules of the local authority, the constitution of the club and the nature of facilities provided.  Application of the rules varies greatly from one authority to another.

Section 43 – charities and other organisations are granted mandatory relief of 80 per cent.

Section 47 – the local authority may grant discretionary relief for a property used wholly or mainly for recreation, and all or part of it is occupied for the purposes of a club, society or other organisation not established or conducted for profit.  The chances of relief are increased if the club is involved in local charitable activities and saves or complements the facilities provided by the authority.  For example, the use of the clubhouse by the local football, bridge teams etc.

Section 49 – the local authority has discretion to grant a reduction in rates payable where the ratepayer would sustain ‘hardship’.  The club needs to apply, supplying prior years accounts and background information on why hardship relief is being requested.

Business rates are calculated on the annual rental value of a club’s property.  Set rules of appeal apply.

BREWERY OR BANK BORROWING

A number of clubs have a brewery or bank loan. Clubs should compare the cost of borrowing from a brewery or bank very carefully to ensure the maximum benefit is obtained for members.

The advantage of borrowing from a brewery is that the brewery is more familiar with the club and will often lend greater sums and under circumstances where commercial banks will not lend, or even foreclose. In addition the brewery loan is often interest free and capital repayments may be taken out of future bonuses or discounts provided certain barrelage quotas are met. However, beware of agreeing to deals with high unrealistic barrelage quotos, should a barralalge shortfall in future years could make the deal very expensive.

The disadvantages of borrowing from the brewery is that the club becomes tied and will not be in such a strong negotiation position to obtain the best barrelage discounts. A situation can result whereby it becomes worthwhile for the club to borrow from a commercial bank to repay the brewery and enter into new barrelage negotiations.

For example, a club may have accumulated brewery debt on the loan and trade account of £60000 and as a result may be receiving no or little discount. To borrow £60000 from a bank would involve repayments over ten years of approximately £8000 a year at 6% or £8800 a year at 8%. Assuming 400 barrels a year, a discount of £20 a barrel with interest rates at 6%, or £22 at 8% would be required to meet the loan repayments. The increased discount provides extra income more than sufficient to repay the interest and capital repayments to the banks.

The key to a successful re-funding policy is the negotiations with the banks and the brewers. To be successful with the bank the borrowing requirement needs to be for a sum and presented in such a way that it is an acceptable lending risk for the bank to take. Without brewery borrowing the club should be able to negotiate discounts from a position of strength. Beware, failure to comply with the conditions of the current agreement in operation with the brewery may result in penalty or interest clauses coming into operation.

Clubs should avoid a situation where it borrows from both a bank and a brewer or even two brewers as the club may find itself in a situation where it has the disadvantage of both types of borrowing. In addition we have seen a number of situations that in the time of need neither the bank or the brewer is willing to advance further sums.

For those clubs where bank lending is appropriate significant benefits can be achieved, with the club having more funds to reinvest in premises or to provide services to members.

BANKING RELATIONSHIPS

Banks are facing great change and in recent years the industry has been described as one in crisis.  One reflection of this is the disappearance of the local bank manager who knows his customer and is able to commit the bank to lend.  Against this background a club needs to be more professional in its dealings with the bank.  If the club is looking for a new loan for refurbishment or to replace a brewery loan with a bank loan it is useful to look at the club’s proposals from the bank’s viewpoint.  A neat mnemonic to remember what banks are looking for when the lend is ‘CAMPARI’:-

Character:  The essential here is trust.  Background details on the club are considered, the club’s borrowing history, the track record of the current committee and management are essential.  Banks are particularly cynical if you want to move from another bank so make sure your reasons for moving are valid. 

Ability:  Are you able to do what you are planning?  Are you capable?  Does the plan make sense?

Margin:  A big margin never made up for a bad loan.  The banks are seeking better returns but the margin remains a matter for subjective judgement and negotiation.  A well managed and supported members club has many strengths over other types of organisations; these strengths should prove attractive to banks if part of a well presented plan.

Purpose:  There must be a clearly stated reason for the finance presented in a practical and simple plan.  In addition is the split of the club’s funding structure between members funds, brewery loans, term loans and overdrafts well thought through.  An overdraft is the most frequent form of bank debt, however, it is often abused by both borrower and bank.  An overdraft is supposed to be temporary, for example, to provide finance to cover the purchase of stock for a peak sales period.

Amount:  Neither too much nor too little should be requested.  Too much reflects on the committee’s confidence in their plan, too little could result in future funding problems.

Repayment:  The banker must achieve repayment first and foremost.  The term of repayment, say, five or ten years must be realistic in relation the proposal.

GENERAL COMMITTEE MEETINGS

The following is an example of the order of proceedings:-

1.      Minutes of previous meeting:  These should be read by the secretary and, if agreed as correct, signed by the chairman.

2.      Finance Committee report:  This report should cover:- 

•     All receipts and expenses
•     Cash in Hand
•     Details of accounts owing
•     Steward stocktake
•     Confirmation that the cash book has been compared with the bank statement.

3.      Accounts to be paid:  All accounts payable should be checked and approved by those responsible.

4.      Stock report:  Their report upon the condition of the stock and surplus.

5.      Election of new members:

6.      Reports:  These may be presented by:-

a)   The secretary
b)   Sub-committees
c)   Delegates.

7.      Correspondence:  All notices and letters received should be reported and read, and such action taken as necessary.

8.      Intervening general Meeting:  Business arisen out of a General Meeting which requires discussion by the committee.

9.      Motions:

FINANCE COMMITTEE DUTIES

The Finance Committee should meet regularly, preferably weekly to ensure that the following matters, are kept under close scrutiny.

1.      The Finance Committee must check and agree the records:-

•     The cash balances on hand held by the Steward, the Secretary, the Financial Officer or other officers or
       employees.

•     The Bank Reconciliation Statement between the balance shown in the Bank Statement with the balance 
       shown in the Bank Cash Book.

•     That all cash receipts have been banked promptly.

•     No payment has been made by the club without full authority.

2.      The Committee must ensure that:-

•     All cash balances are collected together and counted at one time.

•     All payments into the bank which have not, at the date of the meeting, been credited by the bank in the 
       Bank Statement are substantiated by bank Paying in slips properly stamped on behalf of the bank.

•     All subsidiary records of monies received should be examined and checked into the Bank Cash book.  These subsidiary records will include:-

      -      Steward’s Bar Takings Book
      -      Subscription Receipts
      -      Billiards Room Meter Readings Book
      -      Telephone Call Box Book
      -      Gaming Machine Book
      -      Bingo Receipts Book, etc

1.      Duties in relation to the payment of monies out of club funds are equally important.

•     All payment requests are substantiated by a statement from the supplier concerned, together with the
       supporting invoices and delivery notes which have been properly initialled by the responsible persons to 
       show that the goods have been received and that the prices and calculations are correct.  All  
       statements, invoices and delivery notes passed for payment must be marked that payment has been 
       made.

•     Wages Books have been properly completed.

•     Petty Cash expenditure is of a proper nature.

•     All books relating to payments are initialled after examination.

2.      The Finance Committee should review and check the stock report prepared by the club’s stocktaker.  The committee should review and make enquires into:-

•      Surpluses, all deficits must be investigated

•      Reasonableness of allowances

•     Gross profit margins, overall and for individual stock lines.

See separate articles on stock control.

ADVISE FOR SECRETARIES

FOREWORD

All items of income and expenditure must be recorded as a basis of maintaining proper records and for this purpose, listed hereunder are the various books etc which need to be kept, together with a narrative explaining the function thereof.

GOODS RECEIVED BOOK

All resaleable goods, including free stock given by suppliers, must be recorded in this book by the Steward from the suppliers delivery notes.  This book detail is then used by the Stocktaker to assess purchases made during the stock period.

The Committee should also check entries in the Goods Received Book against suppliers invoices at least monthly to ensure that

a)         The Steward has correctly entered details of all goods received and

b)         That what the supplier is charging you is exactly what has been received

STOCK SHEET ALLOWANCES BOOK

Items in this book can be varied in nature, details ranging from line cleaning, waste, breakers, raffle prizes, brewery credits, checks etc and the Committee should examine this book, at least monthly, to ensure that items claimed are those authorised by them and that claims for waste are not excessive.

BAR TAKINGS BOOK

Takings must be entered therein on a daily basis and at the end of each week Till “Z” readings must be taken by the Steward and handed to the Secretary so that the total bar takings for the week can be authenticated and any difference to the total entered in the bar takings book can be investigated.

The till “Z” readings need to be filed and retained for a minimum of three years to be available should they be asked for at any Customs and Excise VAT inspection.

SUNDRY INCOME

There is a need for all Sundry Income to be recorded in some form of primary book or form designed for that purpose and the entry should be signed by those persons assisting in the emptying and counting of monies.  It will be seen that this procedure will eliminate any possible accusations of funds being misappropriated.

Items of sundry income falling into the above categories are:- Fruit Machines, Juke Boxes, Telephone Coin Boxes, Pool Tables, Snooker Clocks, Lottery Machines, whilst other Sundry Income such as Bingo Entrance Fees, Concert Admission, Open the Box, Bingo Tote and Weekly Tote etc are usually covered by consecutively numbered tickets which, invariably can be controlled by recording opening and closing numbers.

COLUMNAR BOOK  

This book contains multi columns in which all the financial transactions of the club are entered and which forms the basis from which the clubs accounts are prepared.  On the INCOME side receipts from varying sources need to be entered in the designated columns and totalled in the bank column and agreed with amount banked.  On the PAYMENTS side cheque payments should be entered in chronological order in the bank column and allocated across the page in to the designated column for which expense was incurred.  At the bottom of each page each column must be totalled and cross-casted to agree with total of bank columns and then carried forward to next page culminating eventually in a final total for the six months (if the subject to half-yearly audits) or for the twelve months if on a annual audit basis.

If both on the INCOME and PAYMENT sides of the book there is no column which identifies with the source of the entry, the figures should be entered in the sundry column with a narrative to explain it.

It is good practice to keep the COLUMNAR BOOK entered up each week, which, when done will not be a time consuming job.

BANK STATEMENTS

Bank statements are consecutively numbered and arrangements should be made with your Banker’s to see that they are issued, preferably on a weekly basis and certainly no longer than once a month at the close of the month.  They can be reconciled, after taking into account any Standing Orders, Direct Debits and Bank Charges, also making any adjustments for cheques that have been issued but not yet presented to the bank and any bankings which have not been credited to your statement with the totals in the COLUMNAR BOOK.

Casual staff for whom you have no coding notice should complete a form P46 which sets out their personal circumstances and the instructions contained in the form complied with.  Failure to carry out the correct procedures could cost the club money at the end of the day.

GENERAL ADVICE

STOCKTAKER’S RETURNS – See separate appendix issued as a bulletin by R H Jeffs & Rowe.

OFFICE MANAGEMENT – Tidiness is all important; a clear desk is essential and therefore a good tip is when opening the mail, sort out the junk mail and bin it.

A further consideration is the introduction of a weekly income and expenditure sheet (specimen attached).  Invariably the coinage from sundry income is either deposited with the Steward and included as part of his banking or exchanged with him for notices and passed to the Treasurer to do a separate banking.  Similarly what is expended from the Steward’s Bar Takings ie wages marvic snacks and other items is reimbursed him by the issue of a club cheque.

Adopting the system of a weekly income and expenditure sheet would eliminate the need to issue a cheque to reimburse the Steward’s takings, also create the situation of one overall banking for the week.  

This system could save on bank charges, perhaps not a great sum but nevertheless a saving.

Additionally a properly designed weekly income and expenditure sheet would also accommodate some of the safeguards mentioned under section SUNDRY INCOME.

CONTROLS OVER LOTTERY MACHINES & TICKETS

Lottery Machines have proved to be a good and growing source of income for many clubs. However, we have encountered a number of problems with Lottery Machines where, instead of the expected guaranteed profit for the club, losses have been incurred. Problems include:

• Boxes not being used in order with new boxes being opened once the highest prizes have been won. This results in the club not achieving the desired profit with the tickets with the club share being left unused in the box.
• Opened boxes are not kept in a secure location but are left open in an unsecure room. This can result in batched of tickets being taken, prizes being claimed but no income for the club.
• Winning tickets from one club with similar machines being reused at another club. Whilst the name of the club is printed on the ticket it can frequently be removed with the detachable pull tag.
• Lack of controls over the reimbursement of winnings with payment to the Officer or employee of the club being made without support and a check on the winning tickets.

Clubs should be operating the following control procedures:

• Do not over-order boxes; once ordered they should be locked in a safe location; the boxes should be used in order and not opened until the all the tickets in the previous box have been used.
• A sheet should be maintained of the serial numbers of the boxes of tickets bought by the club. This should be posted in a convenient location and sequence number of the larger wining ticket checked to the list to ensure it came from a box bought by the club.
• The Steward or Officer responsible for paying winning tickets should use a black marker to draw a line across a winning ticket so it cannot be reused.
• The wining tickets should be retained and in due course passed to the Secretary in support of the claim for reimbursement of winnings paid out.
• As with all machines located in the club there should be segregation of duties with the keys to open the machine not being held by one person, the machine should be emptied by at least two people who should record the take in a small ledger book at the time of counting the money in the machine. The book should be signed by the counters.
• The Secretary should monitor income earned from the machine and compare it to winnings paid out. Over time income should exceed monies payout and the club should achieve the desired profit share.

If the above procedures are followed Lottery Machine often provides a good source of income for most club.

INVESTING CLUB FUNDS

With the decline in interest rates we are frequently asked by clubs where the best place to invest their surplus funds are. We would offer the following advice:

1. The first place to start is the club rulebook and the power of the committee and club to invest surplus funds.
2. Consider the risk of any potential investment. As a club investing member’s funds the committee should adopt a low risk investment strategy with minimum risk of loss of capital. For practical purposes this will limit most investments to banks, building societies, national savings or government bonds.
3. Consider the ‘term’ of the investment and the likelihood that the club will need the funds at a future point in time.
4. Obtain details from banks, building societies, national savings and compare interest rates.

The following point should also be considered:
1. You should ensure the club receives interest gross (without deduction of tax)
2. The club may benefit by discussing their charging structure with their current bank. If agreed funds are left in accounts banks will sometimes agree lower rates of bank charges.
3. Beware of sweep account which transfers surplus funds from a current account to an instant access deposit account. With low interest rates such accounts are paying a fraction of a percent. We have encountered cases where the bank charges for operating these accounts exceed the interest earned. Many clubs would be better served by transferring money into a higher earning deposit account.
4. A number of clubs have invested funds into insurance company or banks ‘investment bonds’. These types of investment are usually unsuitable for clubs for a number of reasons:

• They are not low risk investments
• They are not tax efficient for clubs. Individuals will receive ‘taper relief’ on such investments; this is not available to clubs. Clubs would normally expect to receive ‘indexation’ and other relief when they achieve a capital gains; such relief are not available on investment bonds.
• We have discovered that the investment is made in the name of individual members of trustees of the club. This can cause problems on maturity or on the death of the member.
• Clubs who have invested in these products in recent times have seen enormous losses of capital as stock markets fall.

5. Where investments are held with the potential of a large capital gain. Staged part disposals of the investments should be considered each year. The reason for this is that the first £10,000 of profits generated by a club is tax free. Planned disposal of investments could result in the saving of up to £1,900 of corporation tax each year.

Finally remember that as a rule the higher the return on an investment the greater the risk, if an investment return is too good to be true it usually is. If any client of R H Jeffs & Rowe is in doubt please contact us and we can advice you on the investment advice you have received.