Leisure and hospitality newsletter

scruttonbland.co.uk

HOSPITALITY

• How local businesses are thriving • Digitising invoices and expenses

About us

If 2020 was the year that tourism, leisure and hospitality businesses had to respond to sudden and unprecedented change in order to survive, then 2021 was about using those lessons to keep going, amid some stop-start economic and political decisions. And 2022? The post-COVID world has brought new challenges, with labour shortages, rising prices and, most recently, rail strikes which have disrupted travel plans for many. These are undoubtedly serious problems, but it is worth remembering that there are huge numbers of people who are now desperate to get out and about, to immerse themselves in the real world once again. Whether you are a family run hotel business, a large leisure chain or a corporate sized tourist operation, our team of hospitality specialists can help you to make your business more efficient and advise you on mitigating your financial and insurance risks.

Running a leisure and hospitality business can bring its own set of risks, from sorting out public liability insurance in case a member of the public is injured or harmed on your premises, to ensuring that you have your payroll and tax payments set up correctly. Our in-house teams are here to support you, helping you to get your financial obligations under control, advising on ways that may bring operational efficiencies and leaving you free to create a wonderful hospitality experience for your customers.

Our aim with these newsletters is to provide interesting and relevant information to businesses operating in the leisure, tourism and hospitality sectors. We already work with many clients in these industries and have extensive knowledge and experience of the issues they are currently facing across our region.

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How many stars? Using reviews to build your hospitality brand - and why negative comments can be good news

Having a strong reputation for your hospitality or leisure business is one of the most important ways of building and maintaining your brand. But how does that work post- Covid? And what do you do if someone leaves a stinker of a review?

Improve your online communication Having a good website is fundamental to building your brand. However, the previous two years have seen an uplift in digital traffic generally, as more and more people have got used to interacting online rather than in person. As a result, it’s become vital for leisure and hospitality businesses to have an interactive online presence on social media and to utilise the review options on Facebook, Google and Trip Advisor, to actively encourage customers to leave your business a review. These sites are often the first place your customers will look to see if other customers have enjoyed their experience and whether it’s somewhere they’d still be interested in visiting. As well as this, it’s also a way for you to show your business’s personality - it’s important for you respond to any reviews left quickly and to respond to any questions asked. Respond to comments and reviews Speaking to your customers through social media can be challenging. There are a few fundamentals to bear in mind:

I’ve had a negative review – help! Online reviews are a fantastic way to help potential customers get an idea of what you do best, but there will almost always be a dreaded one-star review that pops up. But this doesn’t have to be a disaster. Reviews that include a critical comment on the customer’s experience should be taken seriously. Is it an issue that can be addressed? For example, a meat product which has been bought in that customers are saying is too salty can be easily rectified by talking to the supplier. Or an issue with reserving a table may mean that your online booking system may need improvements. A business that has purely five-star reviews can sometimes look a bit contrived. Having a balance of reviews shows you are authentic, especially when customers can see that you have responded promptly and sensitively to negative as well as positive comments. If it’s a really unpleasant review, then check the history of the reviewer: there are plenty of keyboard warriors out there who want to trash reputations. If they have a history of leaving only poor reviews, you are entitled to be suspicious. Alternatively, and if they had a genuinely poor experience, then why not invite them back and encourage them to leave a better review? Showing you have listened to them and handled the situation professionally will enhance your brand reputation.

Measure the customer experience Just as the numbers of people using social media has spiralled upwards in recent years, so the metrics and analytics have become more sophisticated. A good place to start is Google reviews which encourages people to leave comments and not just stars. Trip Advisor ratings are another obvious metric which can be measured and benchmarked against other similar businesses. Customer surveys is another route, and questions can be tailored to your own requirements – although it’s best to keep your questions brief and direct if you want to encourage feedback. Customers want to be heard What your customers are saying to you can help you to strengthen your business offering and ultimately your success. Talking to an independent business adviser will help you look at the key business metrics – such as sales and retention – and they can use their professional expertise to advise on improving your systems and processes, as well as ensuring you are compliant with financial regulations. Get in touch with a member of our hospitality and leisure team to find out more.

Be alert to comments coming in from all online locations. Having a question or comment hanging about on a social media platform like Twitter for several days without a response looks like you don’t care about feedback from your customers. Reply to the comments. If they’ve had a good time, thank them for getting in touch, and pass their comments on to your team. If they didn’t, then empathise and explain what you’re doing to put it right. Try to be personal, and not to look like it’s an automatic response. If it’s a serious issue then take the conversation offline, and don’t get into an argument on social media. It never ends well.

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Two for Joy – how Two Magpies are conquering the bakery world

It’s a hot day in Darsham, where the staff of some of the Two Magpies shops and cafes have been attending a bakery school, to learn more about now the products are created. One of the biggest leisure and hospitality success stories in our region, Two Magpies Bakery was founded by Rebecca Bishop with her then-husband in 2012 and joined by co-owner Steve Magnall (previously CEO of St Peter’s Brewery and deputy MD of Greene King) in 2018. They now have over 150 staff working for them, with 60 in production crafting a range of delicious products including hand- laminated croissants, sausage rolls filled with locally supplied pork and appetising pain au chocolat made with French butter.

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W e spoke to Two Magpies about their business journey, and some of the wisdom they have gained along the way. Firstly: the origins of that memorable name? It is Rebecca’s choice and comes from her love of collecting things and taking ideas from a variety of eclectic sources in order to create a product that’s exactly right. And of course, there’s the old English rhyme in which two magpies are ‘two for joy’.

Customer feedback This ethos of ‘right product, right place’ has given the business a great reputation as well as a cluster of prestigious awards for their bread and bakery products. “We know that people can easily go to a supermarket and buy a packet of six doughnuts for a pound,” says Steve. “Our challenge is always to create something extra special, as well as a place where people keep coming back to. We also really listen to feedback from our customers. We had lots of people coming into our Darsham shop asking when we would be opening in Woodbridge, and when a suitable site became available, we didn’t hesitate.” Economic pressures So how have they dealt with the current economic issues facing the leisure and hospitality industry? “There are undoubtedly major concerns in the market,” comment Steve. There’s the cost of living increase, and inflationary pressures on every aspect of the supply chain. Our objective is to balance the rising costs and trying to keep the high quality of the product without eroding the margin.” There is also the issue of the skills shortage in the sector. “One of our core strategies is to focus on our staff,” Steve continues. “We know how valuable they are, and we try to look after them as well as we can. We pay above the minimum wage, and we’ll happily take on people with no experience and train them up. We try to be flexible and accommodate people’s needs: we have bakers who used to be van drivers, and there are several generations of families working for us. Training is so important, like today’s baking school for our shop staff. We train our front of house staff to teach them about our products, which will inform them about what they’re selling and improve their engagement with our customers. It’s all about creating the best experience: building a positive journey for our customers which will keep them coming back to us.” Two Magpies is clearly succeeding in the upmarket bakery market, so what is next for the expanding business? Steve says they’re looking for more sites. “Ideally Bury St Edmunds, possibly Sudbury, Hadleigh and Dedham. We’ve got very good at kitting out a shop in a matter of weeks, although opening a new bakery and cafe isn’t cheap, and averages about £200,000 per site.”

Location, location, location The original Two Magpies was set up in

Southwold in 2012, after a long search across the country to find the best location for a bakery business. Their search criteria still applies today when looking for new sites for their cafes and shops. “We look at the high street to get a feel for the kinds of businesses that are there, to see if Two Magpies would be a good fit,” says Steve. “If there’s an independent butcher, a florist or a greengrocer then we know that’s a good start in determining the kind of location that will work.” Their analytical approach to the siting of Two Magpies branches has obviously been successful as there are now branches in Southwold, Aldeburgh, Blakeney, Holt, Norwich, Darsham (where their cookery school is located) and most recently, Woodbridge. They’ve also recently moved their bakery production site from Darsham to Walpole where they now have 11,000 square feet, which will – they hope – be large enough to accommodate the needs of up to 20 cafes and shops.

It can’t have been easy growing the business so quickly over the past decade – how did they manage it? The key, says Steve, is to manage your cash flow. “Cash is king. You must always make sure you can pay your suppliers and meet the wage bills. We underestimated the success of the new sites, but I’m happy with our business journey. We now have Scrutton Bland’s Sarah Healey Pearce assisting us as a business adviser, and she’s quickly become part of the Two Magpies team. It’s crucial to have a trusted financial adviser if you are planning on expanding the business. They can help with things like locating sources of funding, as well as some of the time consuming but necessary work to ensure you are meeting your compliance obligations.” Finally – how does Two Magpies come up with new ideas for their product ranges? “We have a group called ‘The Sixth’ who meet every two months to look at ideas for concepts and flavours. We always try to use the freshest local produce and to make use of what’s in season. The temporary product lines are changed every two months - we had twelve new product lines for the Queen’s Jubilee - and we’re already planning ahead for Christmas.”

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Coping with the invoices – is there a digital solution?

Managing the invoices and expenses side of any business can be a significant burden on its finance team but with some professional advice, modern technology can be used to help streamline this area of a business. Fresh from his presentation at the Digital Accountancy Show on the topic, SB Director Ryan Pearcy looks at the many recent developments in this space and how a tech- focused business can optimise their operations by selecting the right software to use.

The issues Expense management can be a horribly manual and time- consuming task. Traditionally it involves collecting paper invoices and expenses from multiple areas of the business, getting approval from various individuals, manually re-typing the information on these documents into a finance system and then selecting some of these for payment which often means using a separate manual process. If there are queries these tend to be put to one side and not processed until resolved. In some businesses the information does not end up in the finance system until payment has been made, which can significantly impact the time frame for internal reporting. The time all this takes results in finance systems never being up-to-date and a heavy reliance on the finance team to process payables with accuracy and consistency. Multi-site operations make the process even more difficult as where goods are received may differ from where the order is held and paper documents, collected by non- finance individuals, have to make their way to the central finance team before verification and processing can commence. Add multiple entities of a group into the mix and documents will inevitably get misplaced or put on the wrong system. Data collection Invoices and expenses can be paper (via post or hand delivery), email (which tends to now be the most common) or via a portal that you must access and download yourself. These will generally be received by multiple different people in the business, based on

their role and department. After that, if you have a well organised system these may come into a centralised email address or physical tray but for many businesses the finance team are responsible for collecting this information. Once collected they then need to re-type this data into the finance system. In the hospitality sector, this is particularly laborious and is exacerbated by invoices with large numbers of lines that need separating to different nominals or cost centres for reporting purposes. The repetitive and (let’s be honest) manual nature of this work can lead to errors and so a robust review process is also required to check the data inputted. Multi-site and multi-entity Leisure and hospitality is known for having either multiple sites per organisation, or a number of separate entities or buildings on one site within a group structure. Both of these setups usually have a central finance team and their separate structures create unique challenges for the accounts payable process, but it is the central finance structure that creates the initial challenge. A centralised, and usually remote, team means that operational individuals generally receive delivery notes and invoices. To make use of a digital system they will need to engage in a new data capture process, but they will not see any tangible benefit to themselves as the efficiencies are felt most by the finance team. This tends to cause push back by those on the shop floor and it is up to the business owners and managers to stand firm to ensure the new processes are observed.

In a multi-site operation reporting is done by location and so purchases need to be split by location. This is not always straight forward as the simpler data-capture tools do not extract invoice address and so cannot automate the allocation to the location. This can then become a manual process which removes a major time saver for the team. A multi-entity organisation has a different challenge. When invoices come into central finance they need to enter into a data capture tool but as each entity will need a separate nominal ledger you will need a separate expense capture system to link to it. With suppliers that operate across multiple locations, and therefore multiple entities, invoices end up in the wrong system and moving them across can be painful. Orders and Deliveries To maintain control and save money via ordering in bulk, Purchase Orders can be used to authorise a purchase before it is made and to hold a supplier to account. In the fast-flowing hospitality sector growing businesses tend to avoid these as getting the paperwork to site or approved is time-consuming and can affect operations. When operated effectively, Purchase Orders ensure best prices are agreed upfront and suppliers are held to these before payment is made. When used manually the admin burden of purchase orders can often outweigh the benefits.

Delivery notes are always delivered to site, but without an available order there is no

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How do they work? The most effective expense management systems are either one software or a combination of different software that work effectively together. They are a combination of data capture tools, custom built approval flows, automation engines and integrations that enable documents to be located, processed, allocated, approved and pushed for payment from anywhere. Individuals are given appropriate access to the software, depending on their roles, which can be accessed from anywhere with an internet enabled device, and the software creates reminders via notifications where helpful. Starting with Purchase Orders, these can be created centrally via an app (potentially on a phone) using item lists pulled from the finance software. These are then sent via pre-built approval flows digitally and instantly to the relevant internal individuals, which once approved can be sent digitally to the supplier. When goods are received these can be matched against orders, both for volume and price, and allocated to a location. When an invoice is created this can be captured via a designated email address, photographed via a phone, or scanned or extracted from an invoice portal. At this point the invoice is scanned with all relevant information extracted automatically and pushed through for approval via the designated approval process. This can be a combination of automatic and manual approvals based on the nature and value of the expense, as well as the department. They can be digitally matched to Purchase Orders and

way to validate if what was ordered is correct. Generally volume can be estimated by an experienced team, but price is harder and trust is put on the supplier. This tends to allow for errors and over-pricing which hits the margin of the business. Payments Payment processes can be simple by idea but complex by operation. The focus here is in relation to payment in arrears, normally based on the due dates of invoices. Payments are run based on due dates of invoices, generally from the finance system. Information is manually re-keyed into the bank’s batch payment system from selected invoices or statements. A good system will have suppliers pre-stored with bank details restricted and authorisation only possible by designated individuals. A bad system will put full reliance on the finance team, with most somewhere between the two. Either way, the re-keying of information creates additional risks of fraud or error and adds time to the process. Is there a solution? Modern cloud-based expense management systems create the greatest efficiency savings whilst also improving data accuracy, speed of input and reducing risk of fraud. The best setups enable costs to appear in the system in less than 5 minutes from when they were dispatched by the supplier, including an approval process. The costs of the systems are far outweighed by the time savings they generate and can also enable a significant reduction in paper stored.

Delivery Notes to verify their accuracy, all the while being visible inside the same system and automatically pushed into the finance system ready for payment. Modern payment systems can extract invoice and bank information directly from the finance system (segregated by user level), enable easy selection for payment and approval and sync with traditional banks to enable payment directly, without the need to re-type anything. Reducing your administration burden Selecting a digital expense management system that works for the size and intricacies of the business can quickly deliver a significant reduction in the administrative burden on your team. Selecting the right system is key, with various ones designed to work with operations of different size and structures. With any system conversion comes the challenge of change management and the impact on the team. Processes will need to be adapted, training tailored, and support secured. Getting this right can transform how you and your team work for the better. Get in touch with one of our digital accounting team for a chat about taking the first steps towards cloud-based financial management.

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Leisure and Hospitality – where are we now?

Sarah Healey Pearce, Business Advisory Director looks at the current state of the leisure and hospitality sector.

After the issues caused by Covid since March 2020, you would have thought that the hospitality and leisure industry would have been able to finally put the worst behind them and looked forward to a brighter future, but as we are all to aware, the last few months have seen further challenges to our sector.

I ssues such as labour shortages, the rising cost of key ingredients and other costs and travel chaos have continued to plague the industry, with recent worries for consumers over the rising cost of living becoming more real and potentially impacting demand in what should be the busiest season of the year.

However, I think there are a number of reasons for UK hospitality businesses to feel hopeful.

Travel issues aside, Visit Britain is predicting that international tourism to the UK will increase to 59% of pre Covid levels and this trajectory will continue into next year. Whilst consumer spending in the tourism, leisure and hospitality industries is discretionary and will come under pressure with rising cost of living, some businesses may well see turnover increase - particularly cafes, pubs and restaurants which are seen as “treats” and a relatively cheap way to relax.

Whilst there was an initial flurry of activity as people headed to foreign shores as countries started to open up, the news last week was full of flights being cancelled due to staff shortages. It is likely that this will mean that some families choose to stay in the UK again this year rather than risk being stranded at an airport. Whilst this piece of news is by no means something to be optimistic about, especially for tour operators and other related businesses, it is hopefully only a short-term issue. It also means that the staycation may once again be popular, boosting our local economy as East Anglia remains one of the most popular tourist destination in the UK.

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There are reasons to feel cautiously optimistic but there are still significant pressures on businesses in these industries, with rising costs and resource shortages showing no signs of abating. So what can you do to try and ease these?

Don’t overlook what you can do to ensure you are a good employer. This means not only presenting your business in a positive way in order to attract staff, but doing what you can to retain your existing staff. This need not simply be paying more but ensuring they are appreciated, offering training and a supportive positive work environment. There may be employee benefits you can offer such as gym membership or private health insurance. It’s important to regularly review your marketing strategy to ensure you are in touch with your consumers’ needs and desires, and ensure you are doing as much as you can to reach and attract potential new customers.

Despite endless discussion in the media, it is obvious that there is no silver bullet to solve the issues we currently face, but hopefully the summer of 2022 will see a continued improvement in the region’s leisure, tourism and hospitality sector.

Consider bulk buying products or ingredients whenever possible, to take advantage of discounts and longer-term credit facilities. Look at contacting suppliers to fix future costs where possible, such as utilities, phone etc. Examine the costings of your key products and whether you can increase prices to the consumer. If this is difficult then consider other ways of maintaining your margin. These could include using different suppliers, designing menus around alternative ingredients or considering portion size, to cut down on waste.

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It’s all systems go at Yeo Yeo Group is a longstanding Felixstowe hospitality business comprising The Alex Café Bar, The Alex Brasserie, Café Bencotto and the View Point Cafe, who strive to provide good quality, well cooked food, served in comfortable and stylish environments at a fair price point.

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W e spoke to Julie Yeo, who runs the Yeo Group business with her husband Tim, to find out how they have coped over the past two tumultuous years. “When Covid happened in Spring 2020 we were doing very nicely. We were planning to bring our managers into the business more, so that Tim and I could step back a bit. Covid was a huge shock and quickly became a terrifying prospect. We had over 100 people on the payroll, and it was a horrific thought that, having been forced to stop trading (we closed before the government mandated it) we might have to start letting some people go to save the business. When the furlough scheme was announced within days, we popped the champagne. It was a huge relief to know that our colleagues would receive an income whilst we were unable to trade. We have a number of European staff and they stayed on through Covid, however as staff could receive furlough and legitimately take on other work during lock downs, it was natural that some of our people would take on additional jobs. It was therefore inevitable that when the lockdowns ended some people decided to stay in their new jobs, feeling more secure as key workers. This however was not predicted by the hospitality sector (we had all been under the blissful illusion that if we were one of the survivors of lockdown, there would be plenty of skilled people looking for work) or the government.

We did not have enough trained people to reopen all our venues. The situation wasn’t helped by the fact that everyone else in the hospitality sector was in the same boat as us, and we were all frantically recruiting simultaneously and competitively. It is a dreadful scenario for everyone – added to which is the general long-standing issue of skills shortages. Many colleges have closed their catering courses, (it takes a lot of expensive kit and space to teach chefs) so there aren’t the same numbers of qualified new staff coming into the sector as there used to be. Our response to the staffing crisis was to broaden our search. We have always had a good relationship with a recruitment agency in Poland and returned to them to help address our staff shortages. Our HR manager, Mel, jumped through numerous paperwork hoops, and we paid the various fees to get a Sponsor’s licence from the Home Office, enabling us to recruit from outside the UK. We were only allowed to recruit higher paid staff to work at a specific venue. Tim and our Group Head Chef, Preston, travelled to Poland and conducted multiple interviews. We purchased and furnished two delightful static caravans to provide accommodation. We now finally have two Indian and two Sri Lankan chefs in our kitchens, although getting them here has been another challenge as the appalling situation in Ukraine meant long visa delays. From a financial perspective, we are thankful that when lockdowns happened, we were in a strong position. As a well-established business our years of debt are behind us, and we now own the freeholds of two of our venues. We have been in catering – a cash positive industry - long enough to know that although we may have a healthy balance on our bank statement, a large chunk of that money is in fact owed to our creditors. When we stopped trading, we immediately paid all outstanding amounts to our suppliers. This has further cemented our good relationships with our suppliers, and we nurture and treat those relationships with great respect. We took advantage of the lockdowns to do some extensive refurbishments and maintenance in our venues: bars were pulled out and refloored and refitted, equipment replaced, areas redecorated, new leather banquet te furniture built, and toilets upgraded. We also revamped our main office, installing air conditioning, recarpeting and redecorating etc, as like most public venues the back of house areas are the last to receive attention. That’s one of the reasons all our venues have open kitchens, so that our customers can see for themselves that we run a clean and professional food business.

We also overhauled a plethora of our IT systems, with the help of Scrutton Bland’s consultancy. We moved to Xero for accounting, to ensure our card payment machines could be fully integrated with our tills, and our accounting processes are fully streamlined and compliant with Making Tax Digital. We installed new HR and Payroll systems, a new phone system, re-wrote our website, upgraded our credit card machines, changed our card merchant, and became a cashless business. Boy has that saved us time and money. Running the two parallel systems of card payments and handling cash is hugely expensive and time consuming. Going cashless has meant it’s much faster and easier to reconcile tills. It means we don’t have to keep large amounts of cash floats in our tills and change safes, and our insurance premium has gone down. As the volume of card payments has doubled, we’ve also been able to renegotiate a lower rate with our card merchants. Yes, it has disgruntled a very few customers, but curiously those who have complained, complain on behalf of other people, saying it’s not an issue for them. In mitigation, we have made it possible to buy our digital gift cards online. So how are things this summer? Well, the good weather has helped get people out and about, and we are finally in a position to be able to reopen The Alex Brasserie, initially at weekends only. There are still problems – the escalating cost of living means that people are thinking more carefully about going out for a meal and at the same time all our costs are rising dramatically. But we have built a reputation on delivering high quality service and good value food in some of the most attractive venues in town – and that’s what we and our excellent colleagues intend to keep doing.”

www.yeogroup.co.uk

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Get in touch If you need any more information or advice on any of these issues, please don’t hesitate to contact us for a friendly no- obligation chat. Our professional business advisory teams have many years of experience and offer a wide range of services to help your leisure and hospitality business develop, at the same time as ensuring that your financial regulatory obligations have all been met. We provide a number of advisory services to businesses in the leisure and hospitality sector, and can also call on our other teams within the business to provide you with advice in other areas you may need such as insurance, audit or corporate finance.

Contact us at hello@scruttonbland.co.uk or call us on 0330 058 6559 .

0330 058 6559 scruttonbland.co.uk

@scruttonbland

0742/06/2022/MKTG

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