The hospitality sector, along with the broader food and drink industries, is navigating a particularly challenging period marked by high energy bills, the need for business rates reform, labour shortages post-Brexit and a decline in revenue due to the cost-of-living crisis.
Even with recent legislative efforts to support the industry through proposed VAT reductions and business rate reforms, businesses must still adapt strategically to cope with varying customer demand and high operational costs. Notably, despite strong appeals from the industry, there were no changes to VAT announced in the latest Spring Budget.
Given these circumstances, we have prepared a menu of practical tips to help business owners dish out delightful solutions in the competitive food and beverage market. We recommend trying all of them.
Know your financials: Meticulously manage your cash flow and costs. Ensure you have enough cash on hand for daily operations and unexpected expenses. Renegotiate supplier contracts, reduce waste and adopt energy-efficient practices to curb expenses. Where feasible, automate service elements to cut labour costs and boost operational efficiency.
Use forecasting tools: These tools are invaluable in managing food costs and staffing, especially during peak periods. They help ensure resources are utilised efficiently and effectively.
Keep track with regular stock checks: If you run a pub or bar, it’s vital to perform regular stock checks to keep your finances healthy. These checks help you keep an eye on how much you’re earning from drinks like beers and spirits. If you notice you’re running low more often than expected, it might be due to wastage—which you can cut down with better staff training—or, in some cases, theft. Catching these issues early helps you manage your stock more effectively. Plus, keeping detailed records of what you sell helps you understand which items are making money and which aren’t. If profits on certain drinks dip, it might be time to tweak your prices to stay profitable.
Strategic pricing adjustments: Balance the need to cover increased operational costs by revising menu prices. This should reflect current VAT obligations and market conditions, allowing you to remain competitive without sacrificing profitability.
Debt management: Manage your debt strategically to support growth without endangering financial stability. Consider refinancing high-cost debts and stay informed about government grants available for your industry to fund capital improvements or expansion efforts.
Thorough VAT recovery: Diligently maximise the recovery of VAT on all eligible expenses, such as utilities, equipment and refurbishment. This is crucial for maintaining financial efficiency and adhering to complex VAT regulations. If uncertain, consult your accountant to ensure you’re capturing all possible recoveries.
Diversify revenue streams: Expand into catering, event hosting, or integrate retail elements. Embrace technology like online ordering systems and mobile apps or invest in marketing strategies that enhance the customer buying experience. For instance, make your venue hireable for events and partner with local suppliers to offer add-on services, negotiating fee rebates. By anticipating client needs, you can make their experience effortless and increase the likelihood of repeat business.
Prioritise customer experience: Reinvigorate the dining experience with menu enhancements and unique service offerings. Excellent service and memorable experiences can foster loyalty and help your business stand out in a competitive market. Whether it’s tacos with a side of traditional mariachi music or another unique twist, remain true to your style and don’t compromise on quality. Consider surveying your clients first to better understand their preferences.
Build a resilient workforce: Combat labour shortages by investing in your workforce with competitive wages, training opportunities and a positive work culture. The job market is volatile and loyalty with little reward is no longer enough. Reward employees who consistently go the extra mile.
Expert advice for every step
We’re not reinventing the wheel here but rather emphasising that strategic planning and proactive management are crucial for the survival and growth of businesses in the hospitality sector. The resilience and innovative spirit of this sector will be pivotal in overcoming current adversities. When in need, you can always rely on us as accountants to go beyond the usual number crunching and offer practical industry advice.
Looking for an accounting partner? Cottons have got you covered. Contact us today.
