Back in February when COVID-19 was starting to gain media coverage, who would have imagined the profound impact it would have on the world and more importantly Australia? Most thought that it would not impact them, or it would just blow over.
From 23 March 2020 when the clubs and hospitality industry was forced to close their doors (thereby literally ceasing all revenue) right through to reopening and adopting social distancing policies, it has been a rollercoaster ride full of uncertainty especially through March and April.
The Government’s JobKeeper Payment Scheme and other assistance packages have enabled most clubs to get through this period as best they can and ensure that employees continue to be paid.
It has been a trying time, and we would like to congratulate all clubs that have been on the front foot in the COVID-19 period in trying to improve their club through renovations, communication and interaction with members and providing take away meals.
Many volunteers have pitched in and made their club a more attractive facility which has been testament to great community spirit.
Working with our large number of clubs and hospitality clients, we have also learnt a lot about preparing for times of uncertainty.
Here we share some of those learnings:
Beverage and Food Inventories
With the impacts on COVID-19, clubs would have had to write off inventories that were either perishables or nearing their expiration date. However, we have found that some of this stock has been held for long periods or was in excess of requirements.
It is an ideal time to revisit purchasing methods and consider holding less stock. Is your club reviewing use by dates of products when performing stocktakes and if stocks are nearing best before dates could these be sold at discounts or promotions?
Stocks can be ordered and delivered on a timely basis so holding large quantities of stock only ties up cashflows and may also increase the risk of fraudulent activity.
Clubs should look at the average dollar value of stock held prior to COVID-19 and set a target (e.g. 25% or greater) to reduce stock values to be held in the future.
Clubs that have significant debt levels or going concern issues will need to monitor and budget cashflows in the near future carefully.
Some clubs will have received relief from payments or commitments during COVID-19 but in some situations this relief only served to delay the payment of current commitments and clubs may have to make additional payments after re-opening to catch back up.
This may also include principle repayments on borrowings rather than interest only.
Wages is the largest expense for clubs and in previous issues of Club Chat, we have suggested numerous ways for clubs to try and reduce wages where applicable.
We do acknowledge that the club industry is a major employment provider, however, if your club is seeing significant reduced revenue especially after the JobKeeper payments are completed, this is an area that needs immediate focus.
Clubs that have a strong balance sheet including strong working capital, cash and minimal debts will have less worries in getting through COVID-19 compared to those clubs that are experiencing going concern issues.
Going forward, risk analysis needs to be undertaken on club finances and board and management should be consistently reviewing the financial position and performance of the club.
Clubs that have covenants in place with borrowings need to be reporting actual results against these measures as well as other KPIs. We strongly recommend that EBITDA as a % of revenue is strongly focused on.
As always, if you would like discuss this article further, our team would be happy to help.