COVID 19: Cash Flow Strategies for Restaurants


The COVID 19 pandemic may be seen as the greatest economic and businesses disaster of this century. California restaurant owners who received “Stay at Home” orders from the State or local governments are not only struggling with how to keep their businesses afloat, but their personal finances as well.

With the support of the Federal government, there are several low or no interest disaster relief loans available, if you qualify. But be prepared that with the massive influx of applications, that the process may be 6 to 8 weeks before you a see a check. More than ever, it is essential that you be aggressive in managing your cash flow in the interim.

Restaurateurs should be reviewing and updating their revenues, expenditures, and profits on a regular, if not daily basis. Take the time to really know your financial performance information if you are not already doing so. Start by estimating your, cash flow needs by making projections for your reduced guest traffic and sales. The next step would be analyzing your fixed costs and estimated variable costs based on sales projections by each line item with laser focus to determine areas of opportunity for cost reductions and improved cash flow. Here are the top 15 cash flow strategies for restaurants:

15 Cash Flow Strategies for Restaurants

  1. Cancel or reduce regular maintenance services like hood cleaning, window washing, music service, or pest control.

  2. Cancel purchases of large expense items such as new equipment, group trainings, and delay big ticket repairs, unless they would not create a health risk.

  3. Manage your inventory and look for ways to reduce your food and non-ingredient costs. Since California restaurants can only do take out or delivery during the “stay at home orders”, reduce the menu size, have a selective menu that promotes items that are higher profit, and really be on top of waste, portioning, and pricing.

  4. Contact your suppliers and determine which ones will require you to pay immediately and which ones are more lax about collection and do business with the ones that benefit you the most. Don’t be afraid to ask your suppliers to give you better payment terms or ask for discounts on products. It is better for them to take a discount than not get any revenues because you are out of business.

  5. Look for ways to reduce payroll. Cut hours, cross train employees, consider laying off people, or if you have not been managing the restaurant, maybe you will have to comeback and do so during this period.

  6. Contact your landlords. Ask them for rent deferrals or even temporary rent reductions since it will be more cost effective to your landlord to honor this than to evict, find a new tenant, and make tenant improvement concessions.

  7. Contact your lenders or credit card holders. Let them know how you are doing. That you are doing your projections and give them a heads up that you may be asking for some kind of relief in the near future. They may be able to move you to zero interest credit cards or forgive interest and late payments for an extended period. They may have credit lines that could consolidate your higher credit card interest rates.

  8. Negotiate with your partners and stakeholders to reduce their share payment or request their contributions if the business is in the red.

  9. Contact your insurance agent if you qualify for relief from your business interruption policy. Find out if you can take a loan against the cash value of a whole life insurance policy to temporarily fund the business.

  10. Review your bank and credit card statements for subscriptions or other non-essential service like social media schedulers that can be cancelled.

  11. Look for ways to cut overhead such as reducing head office rents and staffing, source online companies that can do a service such as accounting or graphics more cost effectively.

  12. Look for items such as equipment that can be sold or products that can be returned for credit.

  13. Do your own delivery service as this may reduce the hefty costs that 3rd party delivery companies demand and provide another opportunity to retain a few extra staff members.

  14. Talk to financial and business advisors such as your CPA, the Small Business Association, and FEMA for ways to restructure your finances or operations. Many of these services may be free.

  15. Take advantage of payment time and penalty deferments being offered by local, state, and federal agencies.

California and Los Angeles Business Relief - As of 03/30/30

We recommend you contact these agencies as changes in policies are fluid.

Payroll Taxes: Can delay for 60 days. Must file an extension requests within 60 days of the regular filing date. https://www.edd.ca.gov/about_edd/coronavirus-2019.htm

Sales Tax: Can delay for 60 days. https://www.gov.ca.gov/2020/03/12/governor-newsom-issues-new-executive-order-further-enhancing-state-and-local-governments-ability-to-respond-to-covid-19-pandemic/

Internal Revenue Service: Delayed filing and payment until July 15. Quarterly tax payments can be deferred until July 15. https://www.irs.gov/coronavirus

Franchise Tax Board: Delayed filing and payment until July 15. Quarterly tax payments can be deferred until July 15. https://www.ftb.ca.gov/about-ftb/newsroom/covid-19/index.html

Eviction Moratoriums- Residential and Commercial: -City of Los Angeles protects residential and commercial through 04/19. State covers only residential evictions.

https://www.lamayor.org/mayor-garcetti-orders-new-restrictions-evictions-announces-indefinite-moratorium-water-and-power

Utility Moratoriums: Governor blocks turn off of utilities and essential communication devices.

http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M329/K673/329673725.PDF

This is a difficult time for all. If you reach out for support from other restaurant and business owners, government agencies, and have open and transparent communication with your employees and vendors, you may find solutions to some of your current financial problems that could help you weather this economic disaster. If you would like to reach the author for support with your cash flow questions, please contact Celeste at info@restaurantsuccesscenter.com. I would love to hear any other cash flow strategies that you have found. Let's build a big list. #restaurantsuccess #COVID 19 #restaurantclosures #keepmyrestaurantopen #Restaurantdisasterrelief #SBA #CRA #survivecovid #covid #coronavirus

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