COPING WITH THE ECONOMIC RECESSION (continued)
- Intensify communications with your clients to make sure that long- term and short-term business on your books will actually materialize. Be vigilant in reviewing sales forecasts for sudden large changes.
- If previously booked business appears to be in danger, work with the client to see that everything possible is done to save business. Find new ways to reduce client expense by changing the scope or moving the business to a lower rated time period. This is where imagination counts.
- Find ways to attract future business by identifying new needed services and finding opportunities to tap new markets. This is the first recession in our careers where the luxury segment has been hit harder than the economy sector of the business. For instance, a first class hotel should reach out to luxury clients who are looking to step down to cut expenses.
- In such climates, short term bookings will increase because clients will respond to immediate needs. The internet provides an excellent opportunity to attract short term business.
- Expenses are always more controllable than revenue. Expenses consist of two types, variable or directly related expenses and non-variable also described as overhead.
- Review your variable expenses such as product cost, direct labor and supplies. Challenge department heads to come up with ideas to reduce cost without reducing the quality of service perceived by your customer.
- Reduce inventory levels for both supplies and cost of goods without creating inefficiencies in operations.
- Review internal control enforcement so that unauthorized or devious activities are not decreasing profits. An unstable economy could lead to more incentive for employees, guests, etc. to take advantage of weak systems and controls.
- Reduce current overhead expenses by deferring renovation or maintenance projects that can possibly wait for better times. If overhead departments need to cut staff, review plans carefully. Determine productivity versus cost of these positions to justify the elimination of the job position. For instance don’t eliminate sales positions if they are needed for the action steps mentioned above or accounting positions if it will materially impact accounts receivable collections or enforcement of internal control.
- Items such as property insurance, real estate taxes, and employee benefits should be reviewed to find ways to reduce these expenses by finding alternative sources.
- Look towards outsourcing services that in the long run will reduce cost and increase efficency.
In short no stone should not be unturned in the challenge to continually improve profit and cash flow to guide your business through this current economic crisis.
TM STEINBERG & ASSOCIATES CAN HELP YOU IN THIS ENDEAVOR
With over thirty years of industry experience as a Controller, Corporate Controller, Vice President of Finance and Chief Operating Officer in the hospitality industry, I have many years of experience managing finance and accounting both at the property level and in multi-property situations. I have managed all the disciplines mentioned above and have worked with operational and marketing executives for many years by:
- Managing and analyzing cash flow, including finding innovative ways to gather information from management such as designing schedules to better analyze cash flow and communicating the results to management - resulting in greatly improved cash flow
- Designing systems to control cash balances which include improving the collection process, reducing spending by better inventory control, as well as analyzing cost and labor to in relationship to related revenue.
- Being directly involved in obtaining property and casualty insurance as well as employee benefits. Action includes sending out RFP’s and meeting with potential providers to determine the best alternatives.
- Reviewing and writing numerous internal control procedures and auditing many operations.
- Providing consultants who specialize in reducing property and real estate taxes. The current real estate market provides an excellent opportunity in the current real estate market to reduce the assessed value of your real property.
Do not hesitate to send me an email or give me a call to discuss your specific problems. It would be my pleasure to send you a proposal to solve your immediate problems as well as meeting your long term objectives.
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