5 Simple Ways to Effectively Manage Restaurant Finances
A majority of restaurant owners would agree if you said that running a restaurant is a challenge, for the simple reason, like most businesses, it certainly is. Unfortunately, many restaurant owners often have trouble managing cash flow, especially during the first three years of operation. If you want to keep your business afloat, it's essential to learn how to manage restaurant finances effectively. Some restaurant owners even apply for restaurant business loans to help them ease their cash flow issues.
Studies show that many restaurants don't make it past five years for the simple reason they have trouble managing day-to-day finances. How about you?
Managing your restaurant financing involves controlling your cash flow, creating a cash flow forecast along with other measures.
Here are five ways to effectively manage your restaurant finances.
Control Your Cash Flow
To effectively manage cash flow, you need to know how much cash goes in and out of your restaurant. One of the biggest mistakes restaurant owners make is not knowing where all the money goes. If you want to make informed business decisions, you need to know the amount of money that goes in and out daily, weekly, and monthly. In this way, you'll have control over financial responsibilities, such as budgeting for overhead expenses (payroll, rent, and utilities) as well as specific investments you may want to make. Using online pay stubs will surely help you manage payroll in a breeze for you and your employees.
For example, if you're anticipating a slower week ahead, you can cut your spending budget based on your weekly cash flow. One way to save money is to cut down on expensive ingredients you put into your specials. Choose less expensive ingredients to make your specials.
Create a Cash Flow Forecast
The easiest way to keep an eye on restaurant finances is to have a cash flow forecast. This will provide you with an overview of how much money comes in and goes out, allowing you to manage your finances better. You'll be able to know when you have some to spare and when you need to be frugal. Business owners often use cash flow forecasts to make wise decisions when it comes to capital expenditures.
Cash flow forecasts can also help improve your restaurant by comparing the actual figures to the forecast. If you see any disparity, you may want to analyze the figures to know what's going on with your restaurant. You can also use this year's figures to make improvements in your cash flow forecast for next year.
Make Seasonal Budgets Based on the Cash Flow Forecast
Creating annual budgets for restaurants may not be feasible given the seasonal nature of the business. However, budgeting every month may be more efficient for your restaurant. Once you've created your cash flow forecast, it will be easier for you to create seasonal budgets that control your cash flow and boost revenue.
Cash flow forecasts also enable you to budget a few months ahead, which in turn properly prepares you from a planning standpoint for seasonal upturns. You'll have an accurate idea of what your business needs and how much you need to allocate for different expenses, such as seasonal employees, marketing, and daily business expenses.
Don't Depend on Credit.
Having credit is not entirely bad. In fact, it's beneficial for business owners looking to get their business off the ground. However, it can be risky if you're going to depend entirely on it. If a huge chunk of your overhead goes into repaying a loan, it can easily lead to a downward spiral.
Instead of accepting credit offers from your suppliers, you can ask them if they offer discounts for immediate payments. Keep in mind that your suppliers are also concerned about their cash flow, so they will most likely take a larger upfront payment than an installment. Plus, it may be cheaper for you to pay a large but discounted amount than to take on credit.
Save More Money
There are different ways restaurants can lower costs and save money. For instance, you can use energy-efficient appliances to lower your energy bills. Other ways to reduce expenses and save money include:
Installing low-flow faucets and energy-efficient bulbs.
Keeping inventory low to avoid spoilage.
Updating your menu or trimming it down.
Doing inventory daily.
Cutting costs is essential. It will help you save money and improve your bottom line. Always be on the lookout for a money-saving strategy that works for you.
Here's How Restaurant Business Loans Can Help Boost Your Cash Flow
If you find yourself short on cash when running your restaurant, you might want to consider applying for restaurant business loans. Entrepreneurs know that operating without sufficient capital can be crippling.Restaurant financing and business bridge loan can help bridge cash flow gaps so you can continue offering delectable dishes to loyal customers.
