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September 6, 2022

How Restaurants Can Make the Most of Pandemic Relief Funding

As COVID relief programs were incredibly influential within the food and beverage industry, many bars and restaurants are finding themselves in the situation of having larger amounts of cash than what they are used to. While this is not a bad problem to have, it’s important to explore your business’s options and determine the best use for that excess cash. Below we dive into ways restaurants can make this excess funding work for them.

Diversify Your Savings

If your business wants to continue to hold excess cash for various reasons, we highly recommend a diversified savings plan. This includes allocating the money between an emergency fund, general savings and savings for other specified reasons. If you have been wanting to upgrade your POS system or replace the fabric on your booth seats, allocate a portion of your excess cash specifically for those improvements.

Series I Bonds

One option for a low-risk savings mechanism is the Series I Bond. These bonds have a minimum holding period of one year and are subject to a penalty of three months of interest if redeemed prior to 5 years. They continue to earn interest for up to 30 years and earn a combined fixed interest rate and variable inflation rate that is adjusted semi-annually. During a period of rising interest rates, this bond has promising forecasted returns; even with the $10,000 limit on the amount of I-Bonds one can purchase.

Invest in Your Restaurant’s Future

Like individuals, businesses can hold investment accounts with brokers. This is always a credible use of excess cash and can be a great way for restaurants to build a cushion for future downturns. Each portfolio is different regarding how aggressive their investment strategy is, but often will produce a greater rate of return than interest earned in a traditional savings account. We recommend speaking with your financial and investment advisors to build an investment strategy that fits your timeline and business goals.

Consider Restructuring Debt

It may be true that 2022 will not produce the same refinancing opportunities of 2020 and 2021, but that does not mean that businesses have missed out on the time to restructure their debt entirely. Many are still experiencing benefits from refinancing their debt even while interest rates are rebounding from their previous dip. Discussions with your current lender and potential new lenders may still provide benefits for some businesses.

Debt is an emotional topic for many business owners. If you have noticed that your business’ outstanding debt is influencing key decisions regarding strategic growth or possibly expanding into new locations or product lines, a good use for your excess cash may be to pay off a portion or all your outstanding debt obligation so long as doing so doesn’t adversely impact your decision making in the future.

Recruit and Retain Staff

As in most industries, the service industry has suffered from lack of employees. Considering ramping up your advertising and recruitment budgets? If you have an abundance of cash and are currently noticing a reduced supply of employees, it may be time to increase your budget for recruitment. There are various job posting websites and advertisement services to help you inform the public that you are looking for well-qualified employees.

Wondering how to retain the employees you currently have? While hiring new employees is crucial to keeping your restaurant running smoothly, so is keeping your existing employees. Spending some of your excess cash on your employees is one way to lower turnover at your restaurant. Some examples include bonuses or raises, increasing the food comp plan and hosting events for your staff. While disbursing excess cash to employees may be hard for some employers to justify, consider implementing a 401(k) savings plan for full-time employees. Often, these employees do not have an adequate retirement savings plan in place, and this could give you a leg up over your competition.

Our team of CPAs and advisors works with businesses in the lodging, food and beverage industries to add value through tax strategies and financial advice. Our affiliate company, Claris Advisors, can take the worry out of investing. Learn more about how we can work together to help you by contacting an Anders advisor below.

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