How COVID Changed the Role of the Restaurant CFO

COVID has emphasized the significance of flexibility and creativity in senior executives, especially among CFOs. Moreover, it has changed the role of a restaurant CFO as most restaurants shift to virtual CFOs. In the current climate, finance professionals have become the most crucial cog in the wheel, driving the organization forward while also adopting a defensive/survival mode.

CFO services quickly grappled with trillion-dollar relief packages, disaster programs, and tax relief programs during the COVID pandemic. 

This article will discuss how the COVID pandemic has changed the role of the restaurant CFO. Furthermore, we will discuss how corporate CFOs in the restaurant world today can protect against risk and increase their liquidity during uncertainty. 

Challenges to the Restaurant CFO During a Juncture of COVID Recovery

It is true that many restaurants globally are facing the problem of cash constraints and significant distribution disruptions due to the logistical bottlenecks caused by supply chain issues. However, these matters only challenge the role of restaurant CFOs as they face difficulties in budgeting and cash flow management. 

Restaurants are facing millions of dollars of damages due to supply chain disruptions after the removal of lockdowns. In addition, a restaurant CFO may be forced to unnecessarily risk the financial budgets by overlooking the duration risk caused by supply chain disruption and spending beyond the forecasted budget.

How can Restaurant CFOs Reduce Operating Expenses and Mitigate Risk?

Restaurant CFOs faced many risks in their business dealings, including uncertainty around litigation outcomes, recoveries, and duration risk during COVID. However, they can effectively utilize the capital to finance the expenses to increase budget certainty and risk protection. 

To reduce costs, a restaurant CFO need to streamline processes so that they can cut down on the associated expenses. Therefore, it’s essential to evaluate the process costs involved in managing accounts receivables to analyze operating costs. The role of restaurant CFOs is to identify clerical tasks and procedures that can be digitized and eliminate the need for manual intervention. Furthermore, they can minimize business disruption and focus on high-priority tasks leading to better business performance and cost savings.

How can a Restaurant CFO Manage Liquidity?

COVID has turned restaurant businesses into slim profit margins and high overheads, raising cash flow problems and expense management concerns. However, restaurant CFOs can employ different business models to increase sales and examine the profit margins to inform pricing. Furthermore, CFOs must improve the invoice collection period to have enough finances to pay off short-term debt. These include offering discounts in return for prompt payments, sending reminders on unpaid invoices, and defining weekly cash collection targets.

Businesses can move from short-term to long-term debt where appropriate. It can lower interest rates and have smaller monthly payments giving you more flexibility to meet short-term financial obligations. The role of a restaurant CFO is to efficiently manage accounts payable, which will boost your restaurant’s liquidity. You can benefit from the discounts for early payment and negotiate longer payment terms with regular suppliers. Don’t pay suppliers early when there’s no financial incentive. And if necessary, prioritize payments to key suppliers to keep your business running.

Next Big Challenge for Restaurant CFOs

The primary challenge remains that restaurants may face financial planning and budgeting issues in uncertain times. Furthermore, restaurant CFOs face the issues of inherent uncertainty and collection risk. As a result, companies often refrain from pursuing legal action due to cost, thus leaving money on the table. It is not new, but in a post-COVID world, it may become an even more significant challenge for restaurant CFOs.

Some of the significant challenges for restaurant CFOs are:

• Cost management to drive a competitive edge 
• Managing costs relative to external standards and investor targets
• Acting on cost-related risks and opportunities resulting from the business cycle

The role of restaurant CFOs has traditionally been to bookkeeping and develop cost structures. But cost control has grown more challenging while remaining crucial to long-term strategy. It is not easy to convert a continuous expansion into sustained profitability since rising costs continue to outstrip income. It is especially true while negotiating the post-pandemic economic indicators. 

How can a Restaurant CFO Prepare to Tackle Uncertainty?

Restaurant CFOs can and should seek creative solutions to increase liquidity and reduce expenses, which include using productivity techniques, lowering overheads, and revisiting debt obligations.

Restaurant businesses were dealing with a wide range of social, economic, and technical issues even before the COVID-19 pandemic. Even while change and uncertainty can be difficult, they can also lead to new possibilities if people and organizations are able to use change to their advantage.

To properly understand and reduce the risk for their organization, restaurant CFOs must be ready for both short-term and long-term unpredictability. 

Below are some key areas for restaurant CFOs to explore to guide their businesses in uncertainty:

• Do planning, liquidity management, and risk management to finance agility
• Keep stakeholders informed and aligned with crucial insights
• Understand skills and opportunities for the future of finance
• Collaborate and communicate with all stakeholders to build trust and integrity

Planning, Liquidity Management, and Risk Management

It is challenging to predict particular revenue and spending projections with any level of precision during unpredictable times. Restaurant businesses need organizational agility to be able to model quickly changing environments. The requirement for more dynamic financial planning increased with uncertainty. Organizations may react to changes and change course to better understand the impact on top-line income and bottom-line expenditures by having the flexibility to perform more dynamic financial planning.

Restaurant CFOs should be well-positioned to assist business executives under challenging times by forecasting cash flow and liquidity and identifying hazards more quickly and accurately. Since many organizations have many cash sources, it can be difficult without the correct tools to have a clear insight into their cash position and liquidity.

Keep Stakeholders Informed and Aligned with Crucial Insights

In times of uncertainty, there is an increased need to make insights more available throughout the business. For example, to respond to basic stakeholder queries, restaurants should have access to operational, labor, and financial data from a single source. In addition, restaurant CFOs should seek a deeper understanding of various data sources to aid in their decision-making. It entails the capacity to communicate trustworthy insights with the larger organization and, more crucially, motivate these stakeholders to act based on this information.

In a similar way, the role of the restaurant CFO is to seek advice from the finance department on controlling investor expectations during times of ongoing transformation. It involves financial planning for risk mitigation ahead of the regularly scheduled release of financial reports and communicating thoughtfully and proactively.

Understand Skills and Opportunities for the Future of Finance

We are at a turning point in the evolution of both technology and society. Restaurant CFOs should strive for transformation now that there is a worldwide automation market and the technology is available.

Restaurant CFOs are in an excellent position to overcome problems with new technology and train their current staff in order to take advantage of upcoming technologies. However, the moment to drive this shift may be right now.

Collaborate and Communicate With all Stakeholders to Build Trust and Integrity

For restaurant CFOs, this frequently entails committing to working differently and implementing dramatic internal changes. It involves being open and honest and having the flexibility to change course and adapt to the demands of the clientele. The role of the restaurant CFO is to provide real-time data from many sources and share these insights with the rest of the organization to foster cooperation and improve decision-making. In this way, they can play a role in the organization’s path towards trust and transparency.

Restaurant CFOs must concentrate on the correct areas by giving the organization the knowledge it needs to make better decisions, prioritizing agility, and comprehending how finance will meet the demands of the business. Along with all of these elements, there is a growing demand for brand trust and transparency, which the CFO function will be crucial in fulfilling.

Wrapping Up

COVID has stressed the importance of flexibility and creativity, especially among CFOs, and this is something we understand at OAK Business Consultant. We are here to help restaurants reduce expenses and enhance liquidity for competitive innovation. Our CFO services are professional, top-of-the-line, and affordable.

Contact Us! We will discuss your business, review your financials, show you what to focus on, and make you aware of significant lurking financial risks.