Editor’s note: This column was written by Josh Weissenstein and Cody Sauer, both founders of LLA Hospitality, a campground and experiential hospitality management company.
We highly recommend adding a new expense line item to your Profit and Loss (PL) statement for COVID-19. Why? Because your business is incurring unusual expenses this year as a result of the coronavirus. Many of these expenses will be one-time in nature and are not expected to recur. By adding this line item, it will be much easier for you to track the impact of the virus on your bottom line.
Being able to clearly point to any expense impact, as a result, will help in your discussions with insurance agents, your lenders, and the government if additional support is offered.
What should I include in the COVID-19 expense line?
Payroll: Have you had to increase your housekeeping hours to ensure that all of your public spaces are sanitized? If so, add the additional hours spent on payroll into this line item.
Cleaning supplies: Keep track of all the additional and higher power cleaning supplies that you have purchased. You likely would not have needed these if these events had not occurred.
Guest handouts: At our properties that are open, we have purchased personal size hand sanitizer that we can give out to guests when they arrive. Not surprisingly we have paid more than average for these products but believe it is important to help keep our guests and team safe.
Personal safety supplies: Have you purchased masks? Add that to the COVID-19 expense line. One region that we operate in has required that all team members have their temperature taken before starting their shifts. We chose to purchase a digital non-contact thermometer (https://amzn.to/2vGnxA0). We would not have purchased this otherwise.
Freight: Have you paid additional freight to expedite orders? If so, count this as a part of these one-time expenses.
Interest expense: Have you borrowed money to boost your cash balances during this crisis? If so, move the interest expense associated with that specific borrowing to the COVID-19 line.
Remember to be honest about what expenses you are allocating to these events: only track expenses that are truly related to the Coronavirus.
What about lost revenue?
That is a great question. Some property management software programs offer COVID-19 related cancellation tracking. If yours does not, consider adding coronavirus as a reason for the cancellation in each reservation’s notes section. This will make it much easier to track lost income as a result.
We know that this is only part of the revenue impact as you have also likely lost reservations that would have been made that are not, but it is at least a solid starting point.
To learn more about LLA Hospitality, click here.