The challenges and uncertainty facing the entire Australian hotel industry as we all navigate the fallout from the COVID-19 crisis are immense — and of course they’ll be ongoing. That’s why it’s critical to re-gain control over cash flow in your hotel business, now and into the future. For the sake of both your business and your peace of mind, it’s the only way forward.
First and foremost
Let’s acknowledge that the period since March 2020 has been a tumultuous time for all of us. Of course, you can’t compare the hospitality business to the life and death stakes of being a health or aged care worker in times like these. But nor should you dismiss the burden of responsibility you may feel as the person who is ultimately responsible for the success or failure of your venue and business. Not to mention the wellbeing of your patrons and employees.
It’s not just your own livelihood at stake if you need to stop trading (again) due to a COVID outbreak or changed government restrictions. The flow on effects to your employees are no doubt on your mind.
During those initial shutdowns in March 2020, all normal semblance of your business cash flow most likely stopped in its tracks. The scary part is, it could happen again at any given moment. How would your business cope with further trading restrictions or another shut down? Could you pay your suppliers and meet your tax obligations?
It’s no surprise that many hotel owners are fearful about what might happen next.
We all need to look after each other for the industry to bounce back after this and be healthy into the future.
As leading business advisers to the hotel industry, it’s been fantastic to see that a lot of suppliers have been reasonable about deferring outstanding debts. Many have agreed to payment plans.
Being upfront and keeping the communication lines open has never been more important. This should be your number one consideration as you make decisions aimed at helping you regain control over cash flow.
Keep in mind, it’s in everyone’s interests to keep each other’s businesses afloat. The last thing any supplier wants is for your business to go under because you couldn’t pay a bill. So, be transparent and don’t be afraid to ask for what you need.
The same applies when it comes to dealing with the tax office and the banks. Thus far, both have proved extremely willing to help hotels continue trading by allowing deferred payments and payment plans. Thankfully, we’ve observed the same goodwill from most landlords, at least the ones we approached on clients behalf. In the majority of cases, we found they appreciated the transparency and were prepared to negotiate so that both parties can get through this together.
They realise they’re just as vulnerable without your business, given there’s a big debt cloud ahead of us. Some are calling it the debt cliff. Whatever you want to name it, the period ahead will be a long game for hospitality.
At this point in the pandemic, it’s likely you need to control your cash flow by saving like never before.
JobKeeper has been a genuine lifeline in terms of lifting savings for many hotels. Unfortunately, the second phase of the stimulus isn’t such an effective safety net and most in our industry won’t benefit. It’s just so critical that you are diligent in your savings at this point in time, so you can put money away for future payments.
Get your adviser involved as you make and review those important decisions that enable you to make payments. Be really conscious about your cash flow.
No matter how dark that debt cloud ends up being for your business and our industry, I hope these tips help you breathe that tiny bit easier as we all prepare to ride the resulting wave. If you require any assistance please contact us.
Derrick Eube has been a partner with leading accountants and business advisers DFK Crosbie since 2005 and has more than 25 years expertise as a management accountant and strategic adviser to the hospitality industry.