No one saw COVID-19 coming and can claim to have been fully prepared to deal with its impact on business.  This is especially true in the hospitality industry.  While we deal monthly with flexing budgets due to subtle shifts in occupancy, the deep impact of COVID-19 calls for potentially drastic actions not only to protect ourselves, our staff and our guests from contracting this potentially deadly virus but to protect our company and property portfolio as well.  As we’re now experiencing, yesterday’s bustling convention hotel is today’s ghost town as meetings and groups cancel and business travel is curtailed. Whether your demand generator is an airport, a convention center or a beach occupancy is likely shrinking if not way down. The forecast for the next 30 days while understandably a great unknown, is bleak at best. What steps are you taking to make sure you come out on the other side of this with only a few bruises and ready to flourish when activity levels return to normal?  Here’s one part of my playbook for survival in these challenging times.

You must have a weekly cash forecast.  If prepared in a comprehensive and complete manner, it will provide a visual understanding of where you are and what steps you’re going to have to take to survive.  There are many questions a cash forecast will help you to answer.  For example, do you know if you’re going to be able to generate enough cash to cover your debt service?  While your lender will likely waive ratio covenant violations for a few quarters, they will still expect to be paid.  Once you’ve got debt service covered, can you make payroll or keep the lights on? How do you prioritize vendors that must be paid and those that might accept a slower than usual payment stream?  A weekly cash forecast will help you understand the needs of the business, how decreased activity impacts your cash and cash needs and how to prioritize your use of cash.  Working hand-in-hand with a forecasted P&L, your weekly cash forecast is an essential tool to help you effectively manage through this health and economic crisis.

If you are an owner/manager of a small portfolio and don’t have the resources to build and maintain a weekly cash forecast, please consider whether Task Force CFO can help.  Find out more at www.taskforcecfo.com