By Chris Maloney, partner and hospitality and leisure sector specialist at accountancy firm, Menzies LLP (www.menzies.co.uk)
Over the past year, most owner managers in the hospitality and leisure sector have become used to real-time contingency planning and agile deci- sion making. However, at last, things could be starting to look up, with an opportunity to start trading again in the coming months.
On 22 February, Prime Minister Boris Johnson set out his “roadmap to recovery”, providing much-needed clarity about when pubs and restaurants in England might be able to reopen. The key word is ‘might’ as nothing is set in stone and the dates given for reopening could change.
With outdoor venues planned to open up from April, and more normal operations planned to resume from July, what plans should businesses in the sector put in place to enable them to reopen and stay viable as they do so?
CASH IS STILL KING
Knowing the key areas to consider and conducting effective financial forecasting is essential. Doing so can help pubs, restaurants, hotels, and leisure businesses to weigh up the costs involved in staying operational throughout the economic recovery period and make the right choice about how to proceed.
Most importantly, cash outflows for the repayment of various COVID- related debts and other liabilities must be considered.These could include government-backed loans, deferred tax arrangements, outstanding payments to landlords, or other supplier fees. Investing in three-way cashflow forecasting could also help to protect directors from becoming personally liable for money the business might owe if things don’t go as planned.
As well as allowing businesses to make informed decisions on their recovery plans, cash flow forecasts will help to highlight whether there’s a requirement for further financial support and fiscal incentives.With questions around whether these will be addressed by the Chancellor in his Budget Statement on 3rd March, it is more important than ever for business owners to stay up to date.
PUTTING CUSTOMERS FIRST
While owners will be keen to make the most of any opportunity to drive footfall, consumers are likely to have concerns about their expo- sure to the virus for some time. Prior to reopening, the cost of COVID safeguarding for both employees and customers should therefore be factored in, alongside any promotional incentives and special offers to attract visitors.The two go hand-in-hand: communicating offers to increase footfall, whilst promoting the fact that that all necessary safe- guards have been put in place to make their premises as safe as possible.
To determine which areas to prioritise and invest in, business owners should consider running ‘what if?’ scenario-based planning sessions.With a greater number of people likely to work from home going forward, do opening times need to alter and/or menus adapt to make the most of lunchtime trade? Is the location of the business enabling it to make the most of passing trade or should a move be considered?
Owners need to take stock of what they have learned during 2020 and be prepared to adapt their businesses accordingly. For example, contingency planning will be important in case of further disruption caused by new strains of the virus. Maintaining a strong customer experience is important, and for those that find adhering to social distancing rules challenging, there may be an opportunity to adapt and innovate by considering offering takeaways, meal kits, or hampers to boost sales. Partnering up with a local delivery firm could help to optimise profits achieved by such services.
PROTECTING STAFF AND SUPPLIERS
The furlough scheme has undoubtably provided significant support for the hospitality and leisure sector.While there is hope that the Chancellor will continue the initiative into the summer, the current scheme is due to come to an end on 30 April 2021.
Therefore, thought needs to be given to ensure that the optimum level of staff is in place to maximise profits and to rebuild reserves once the scheme comes to an end. Businesses should be reviewing employment contracts to allow flexible working or support of contractors where necessary.
Another challenge likely to hit hospitality and leisure businesses going forward is how to attract and retain talent.To help them to achieve this, businesses may need to take a fresh look at their training needs for life after COVID, and consider introducing employee incentives, whilst keep- ing a careful eye on cashflow. Modern technology could help to alleviate staffing issues in some areas, create efficiencies, and reducing costs; for example, in areas such as stock control where human interaction isn’t essential.
As many business owners will understand, it is not only their business that needs to be considered to survive the pandemic, it’s their supply chain too. It is good practice to broaden the supply chain to protect supplies of key products and materials. However, there is a fine balance to be taken here, due to the importance of supplier relationships and likely discounts and payment terms.
It is important that lessons are learned from the experience of the pandemic. Plans should be put in place now that allow for further COVID-related disruptions, but also to gear the business back up, so it is ready to reopen.
Despite recent challenges, the hospitality and leisure sector is resilient and many businesses are expected to bounce back when trading reopens. However, some businesses that have watched cash dwindle away during the pandemic, or have run up debts, are going to be tested in recovery. By taking the right steps now, businesses can be prepared to take advantage of all that 2021 has to offer and mitigate the risk of business failure.