3.20.20 | Industry Insights
As the U.S. Government works to pass bills to help businesses manage the financial challenges presented by the crisis, many are asking what they can do now to mitigate the ensuing negative impact.
Berdon has been diligently tracking all industry related tax benefit and relief information of new bills being passed, as well as those currently being worked on, including the recently passed Families First Coronavirus Response Act aimed to combat significant financial hardships for American workers. As details of these bills become available, Berdon will communicate all relevant information to clients, and how the bills may provide short- and long-term relief.
As we work to share industry impacting issues, some common areas of critical concern to our hospitality client include:
Business owners and management teams are faced with very difficult, gut-wrenching decisions with regards to staffing. If your business has not been mandated to close and you are permitted and able to operate, it is essential to determine the minimum amount of personnel needed to operate your hotel/restaurant, while maintaining an appropriate level of social responsibility that most Americans are expecting from businesses during this unprecedented time. Working with unions and local labor attorneys to fully understand your obligations will also help you make some difficult staffing decisions. In order to help ensure the health of your business in the short- and long-term, all issues, including offering severance and extending health benefits, need to be analyzed.
Mortgage or Rent
Communicate your situation with landlords/lenders and ask for appropriate forms of relief (abatements, deferrals, etc). Draw down on available lines of credit if prudent and review your agreements for guarantees and good guy clauses.
In areas where you can currently remain open as a full-service restaurant, consider cost-saving moves such as offering a modified menu with reduced menu options. Determine how many seats need to be removed for proper social distancing.
If mandated to stop operating your restaurant, determine if takeout/delivery is a viable option for your business. Whichever course is taken, it is suggested that you determine the best use of excess perishable inventory. Several local not-for-profit food pantries can benefit from food surplus, especially with schools closed and many scrambling to supply community children with mid-day meals. Restaurants can reduce the costs of unsold inventory at scale by maximizing tax deductions for food donations and minimizing disposal expenses. Some restaurateurs have also started socially-conscious community kitchens where allowable by law, to help the local neighborhoods manage through these difficult times.
During these uncertain times, it is important to also review contracts with all vendors and suppliers, including commitments under equipment leases and management agreements.
Contact your insurance carrier to check if your business interruption policy considers current events as loss of profit under the terms of the plan. As a reminder, business interruption proceeds are fully taxable since they are used to replace lost income.
At some point, you may need to quantify the costs incurred related to this crisis. In anticipation of this, you may want to start including a job code (or some other type of coding depending on your system) when posting disbursements, so that you can efficiently accumulate the hard costs incurred when called upon.
Given the fact that the COVID-19 pandemic is an unprecedented situation, each business needs to determine the best approach for them to survive the crisis. By following these tips and leveraging the resources available, which includes your Berdon Relationship Team, will help to reduce the negative impact that every business is feeling as a result of the COVID-19 pandemic.
Berdon LLP New York Accountants