Here Are Things to Do Immediately to Reduce Your Fixed Costs
Lou Armitage, owner of Armitage Accounting offers some ways restaurateurs can reduce their fixed costs and hopefully make it through this pandemic to serve another day.
When restaurateurs were mandated to close their in-restaurant dining operations from March 17 to March 27 due to the quickly spreading coronavirus, Lou Armitage’s average client was looking at $15,000 to $20,000 a month in fixed costs (i.e., rent, insurance, electricity). That’s without paying employees, marketing or buying food.
So the owner of the St. Paul accounting firm that handles only restaurant clients started looking at ways to help clients stay afloat in these tumultuous times.
A big boon for the short term, according to Armitage, is the governor’s recent announcement that the deadline to remit sales tax from March 20 to April 20. “We don’t know what they’re going to do about March sales tax,” he said. It’s day to day right now.
Here are a few things small business owners can do to whittle down the fixed costs of running a restaurant that’s not serving customers:
- Start with your landlord. Ask for one month forgiveness in rent. Armitage said he was surprised how willing landlords have been to work with their tenants. “I don’t know if I’ve ever seen a landlord skip a month’s rent,” he said, adding this is clearly a unique situation that requires everyone stepping up.
- Reach out to your banks to ask if you can pay interest-only on your loans. “Almost all our clients are on SBA,” not conventional loans, he said. “How soon the feds announce a stimulus package will determine how lenient banks and landlords will be,” he said. Just be cognizant the banks may tack “all this forgiveness” on the end of the loan, he cautioned. When banks start seeing some help from the government as well, they may take a different position.
- Go to the company you’re leasing or renting your equipment from and ask them to let you forgo a month or so of payments. Again this may be tacked onto the end of your contract, but it will allow you some cashflow relief.
- POS systems, especially cloud-based ones, can be suspended without cancelling the service. Be sure to reach out to your provider.
- Start pulling individual daily sales reports from your POS and saving them as PDFs. If possible save them to the cloud and an external flash drive. If time allows, save a daily sales report for every day from January 1, 2019, through the current date. That’s approximately 440 individual days, so plan on spending a couple of hours on this project. In the event that a stimulus package is released or you need to prove the effect the pandemic has had on your business, you will need to provide evidence of year-over-year losses and they will likely request specific date ranges. POS systems will often archive this data up to 18 months, but it's better to pull the information now than risk it becoming obsolete by the time you need to provide it as evidence.
- Encourage staff to apply for unemployment. Half of his clients, Armitage said, are going to retain some staff to do takeout or delivery.
- Third-party delivery services had announced they are cutting their fees, he said, but check your contracts. Some are still charging the restaurant the fee, just eliminating the customer’s delivery charge.
While restaurants are a critical part of the U.S. economy, as well as American life, be prepared for the shut down and social distancing to last longer than the end of March. In additional blogs, we will be reporting on what the government is doing to help as well as some bright spots in this dark situation from individual restaurants projects and people helping people.