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Hospitality industry financial management will not cope with VAT increase.

The Bowden Group’s David Hunter believes that the hospitality industry as a whole, and independent companies in particular will suffer due to poor management of the VAT rise in January.  In an effort to help a simple VAT calculator has been added to his blog –

Hospitality Business Mentor, David Hunter: “Pubs, restaurants and hotels regularly fail to increase prices in line with imposed changes.  This includes the annual rises following each budget as well as higher supplier costs and, as we will see in January, VAT.  Instead they maintain prices, cutting into their own profits.”

Hunter believes businesses owners don’t want to pass on the costs:  “As I go about my business I regularly meet people who feel that increasing their prices by a penny or two appears mean in the eyes of customers so they simply do not do it.  That might work one year, but if they adopt the same attitude year on year it will chip away at the profits and make their business unsustainable.”

Coupled with this lack of desire, Hunter believes there is also a lack of understanding:  “This is going to sound harsh but I regularly meet proprietors who have difficulties with figures.  It goes without saying therefore that the figures and percentages involved in tax, particularly VAT increases may be challenging for them.  To ease matters we have added a simple calculator to our blog that does the maths for them.”

Hunter added ‘’ There is obviously more to maintaining your margin than increasing prices.  This calculator just shows you what needs to be done to the selling price to maintain your current

margins.  You could equally source the same product elsewhere for less, or change to another product that has a different cost base – maintaining your existing selling prices.’’

Hunter defends his comments:  “I know some people will say that this calculator is patronising and they are all capable of dividing by one figure and multiplying by another.  But that doesn’t take into account every individual – such as those people who maintain their success by being great hosts rather than financial managers.  For them, such a simple formula is ideal.”


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