'Cash sales' means all income from your main business activity which is received at the time of sale. You will be handling very large volumes of cash so it's very important to put in place secure cash-handling systems.
To prepare your cash flow, estimate how much income you will receive over the next 12 months, including VAT. To do this you will need to work out how many people are likely to play the machines every month, how much they will spend and what proportion of the money taken by each machine you will keep. Also think about what other facilities you will offer and what your pricing structure will be.
There are a number of things to consider when you make your estimates:
Type of business
Decide first of all on the type of arcade you are planning to operate. This might be:
- an adult gaming centre (AGC) that can offer an unspecified number of Category B3/B4 machines (but which must not exceed 20% of the total number of gaming machines on the premises) and unlimited numbers of Category C and Category D machines. Category B3/B4 and Category C machines are for over 18s only. (Arcades that were in existence before 13 July 2011 can choose to offer a maximum of four Category B3/B4 machines - the previous limit - or 20% of the total gaming machines, whichever is the higher. They are entitled to this choice indefinitely. Arcades that gained their licence on or after 13 July 2011 but before 1 April 2014 could also make this choice, although from 1 April 2014 they're only entitled to 20% of the total number of gaming machines)
- a licensed family entertainment centre (FEC) that offers an unlimited number of Category C and Category D machines. Category C machines can only be played by adults and must be sited in an 'adults only' area. Category D machines can be played by children
- an unlicensed FEC which can offer only an unlimited number of Category D machines and where children can play on any machine. (Although 'unlicensed' arcades don't need a licence from the Gambling Commission, they do require a permit from the local authority)
FECs in particular usually offer a range of other amusement machines that are outside the scope of the licensing/permit regime, such as driving simulators, shooting games and so on.
You will also need to consider:
- the legislation you will have to comply with. Licensed AGCs and FECs need an operating licence from the Gambling Commission and a personal management licence may be required as well. Operating licence holders must also complete annual regulatory returns and observe mandatory codes of practice. Unlicensed FECs are less heavily regulated, although they do need a permit from the local authority. Most gaming machines sited in arcades are subject to Machine Games Duty and kiddie rides need to meet health and safety requirements
- your opening hours
- whether you will have more than one arcade
- whether you will be open all year round
Depending on how your business operates, you may decide to have a mix of machines such as:
- cash/token Category D machines which pay out low cash prizes (a maximum of £8), Category D crane grab machines that have a maximum non-cash prize value of £50, or Category D coin pusher/penny falls machines with a maximum prize value of £20 (of which the maximum permitted cash value is £10)
- higher prize Category B or Category C machines, for adults only
- skills with prizes (SWP) machines, such as quiz machines
- redemption machines. These give out tickets that the player can redeem for prizes and as long as the tickets are given out according to the skill of the player the machines are not classified as gaming machines and so aren't affected by gaming machine legislation
- machines such as juke boxes, videos and kiddie rides
Give some thought as well to how often you will need to replace your machines - regular customers quickly become familiar with a game and want something new but if the majority of your customers are tourists who will visit your arcade only once or twice during their holiday, you may not need to replace your machines as frequently. Think also about how you will stop customers (and staff) working fiddles.
As well as offering your customers a range of gaming and amusement machines to play on, you might also offer other attractions such as:
- dance machines
- pool tables
- air hockey
- table football
- café and snack sales
- food and drink vending machine sales
- sales of novelties
To help with your decisions, click on the checkpoints for guidance. Once you have worked out a Cash sales figure add it to the relevant field in your cash flow forecast.