The Australian hospitality sector is amid a brutal storm. Data from the Australian Securities and Investments Commission (ASIC) reveals that insolvencies in the accommodation and food services industry spiked by 70.2% year-on-year in the 2023-24 financial year, with 1,312 businesses collapsing compared to 771 the year prior.
That’s on top of a 42% jump in hospitality insolvencies from 2022-23 to 2023-24, totalling 1,576 closures.
Key factors driving this economic storm include rising costs for business owners, shrinking consumer spending, and relentless pressure from the cost-of-living crisis. Here are 5 accounting strategies to boost your profitability and stay ahead of the curve.
1. Nail Your Prime Costs
Prime costs (labour and cost of goods sold) typically chew up 60-70% of your expenses in hospitality. The winners in this area keep a tight leash on these numbers. Here’s how:
- Track Weekly: Don’t wait for monthly reports. Use tools like Xero, MYOB, or industry platforms like Deputy to monitor labour and food/drink costs in real-time. Catching a blowout early can save you a fortune.
- Optimise Rosters: Match staffing to demand forecasts. Overstaffing during quiet weeks is a profit drain.
- Haggle with Suppliers: Review contracts quarterly. Lock in better pricing or bulk deals without compromising quality.
Pro Tip: Want a prime cost dashboard custom-built for your business ? Get in touch and we’ll set one up for you.
2. Make Tech Your Mate
If you’re still juggling spreadsheets or month-end reports, you’re falling behind. Smart tech can transform your bottom line:
- Real-Time Numbers: Cloud-based software gives you a daily pulse on cash flow, revenue, and expenses.
- Automate the Grunt Work: Streamline invoicing, payroll, and stock tracking to cut errors and free up your time.
- Find the Gold: Dig into sales data to spot high-margin menu items or services—then push them hard.
Pro Tip: Not on a cloud accounting system yet? We can recommend the best fit for your setup and handle the switch seamlessly.
3. Plan for the Rollercoaster
Seasonality is the lifeblood of hospitality, but it can sink your cash flow if you’re not ready. Get prepped for success with better cash flow management .
- A 12-Month Forecast: Use the prior year’s data to map out peak and quiet times. Then align staffing, stock, and marketing to match.
- Build a Cash Stash: Aim to squirrel away 10-15% of revenue during busy months to cover the lean ones.
- Price Smart: Nudge prices up a bit during high-demand periods to cash in on the rush.
Pro Tip: Get better at forecasting. Book a forecasting session and we’ll craft a cash flow plan to keep you rock-solid all year.
4. Grow Revenue Without Breaking a Sweat
You don’t need a full overhaul to lift your income. Small, clever tweaks can go a long way:
- Upsell Like a Champ: Train your crew to pitch premium cocktails, room upgrades, or event add-ons naturally.
- Mix It Up: Roll out loyalty programs, gift cards, or partnerships with local businesses to pull in repeat trade and fresh cash.
- Focus on What Works: Regularly check what’s driving profit, then make those things a core part of your operation.
Pro Tip: Find out where your profit’s hiding. We can run an analysis to uncover your untapped wins.
5. Keep the ATO Happy
Tax planning is about understanding your options to ensure you’re making the most of what’s available to manage your tax obligations effectively.
- Grab Every Deduction: Don’t miss hospitality-specific write-offs such as equipment depreciation, staff meals and marketing costs.
- Stay on Top of GST: Double-check compliance, especially if you’ve added delivery or online ordering.
- Think Ahead: Begin reviewing your tax situation well before June 30 to keep your business on track.
Pro Tip: Book a tax review with us before Q2. We’ll lock in savings and keep the stress off your plate.
Let the Hospitality Accounting Experts Serve You
The hospitality insolvency stats are concerning, but with these 5 strategies, you can dodge the pitfalls and grow sustainably.
We work with hundreds of hospitality clients including cafés, pubs, restaurants, and hotels. Many of our Directors, myself included, have been in the trenches running hospitality businesses of our own. We know the industry is hard work and that survival isn’t enough.
Ready to kick things off? Get in touch via the form below, or give us a bell on 03 8682 1111 for a no-strings chat.
Disclaimer: This blog is for informational purposes only and isn’t financial advice. Chat to a qualified advisor for tailored guidance.
