Money is the major concern for all restaurateurs. If you are opening a restaurant you need to think about certain things. After your restaurant is opened it is important to know how to manage the finances, which include low cash flow and dealing with slow season. Another important aspect to manage restaurant finances is to know which pitfalls to avoid that will cost a lot of money in the long run. Keeping your Restaurant Finance on the top is very important to make sure the restaurant stays open. A restaurant’s success depends on how the finances are maintained. When people think to open a new restaurant they often forget about the business aspect. May be handling money is not their strong point.
Knowing how to manage expenses, track all types of costs, daily business review, keeping payroll under control, understand cash flow are some the essential parts to manage day to day finances of a restaurant. Marketing your restaurant is very important. Traditional methods of advertising like newspaper ads, radio commercials, and TV can be expensive. If you have shortage of money in your restaurant on a regular basis then it’s time to have a look on how you are running your restaurant.
The key to be a successful restaurant is to know how to handle problems. If your restaurant is running short on money you can take some proactive steps like trimming food ordering or payroll. One mistake that small businesses make is not paying tax or running up credit cards can ruin your business. However, the best solution is to prevent them together.
For a successful restaurant, being proactive is the best strategy. If you handle all problems when they arise then you will be in a good position to deal with the creditors if you have a shortage of money. Here are 7 tips you need to focus on when managing the Restaurant Finance.
- Track all types of costs
Maintain a spreadsheet which captures the total revenue, gross revenue and line item costs. You should have an idea of all types of costs even before opening a restaurant. You need to also monitor that how close the actual expenditures are to the estimates. In this way, excavate the hidden costs which are cropped while you manage the restaurant. So, accordingly, that adjusts the monthly budget so that you are can always have a track of what money is coming and going out into your restaurant.
- Understand Restaurant cash flow
Restaurant cash flow is the amount that is coming and going out from your restaurant on a monthly, weekly and daily basis. If you can’t understand the basic things of Restaurant finance then you are at financial risk. To manage the restaurant’s cash flow, the most important aspect is to make a budget for the upcoming expenses like food orders, utilities, mortgage, and rent.
- Managing expenses
You need to keep it going once you have opened your restaurant by staying on the top of finances. Tracking inventory and sales and managing the day to day expenses with POS system is the important components to run a restaurant. Some simple mistakes in purchasing and bookkeeping can cost thousands in the long run.
- Understand sales and net income
You may increase the sales by adjusting the menu or something like that. But if you are increasing the costs, more revenue just means nothing. So it is important to understand how net income and sales work with together. Make sure that when you are increasing sales, you are not significantly increasing the costs. Many people think that sales are equal to net income. But net income is the sales minus costs. If you are increasing sales and also increasing the costs, you are not making any money. If you are investing in something and not getting anything in return instantly, it’s okay but you need to realize that as well.
- Don’t underestimate required working capital
Often restaurant owners make a common mistake by not accounting for the working capital that is required to run a restaurant. After knowing the monthly costs, save at least 2-3 months of working capital if there is a downturn. Obviously, you don’t want to run your restaurant paycheck to paycheck. However, it can be like you didn’t earn enough money to pay the utility bill, which means you can’t also pay your other bills on time.
- Keep Payroll under control
Another important thing that you need to keep an eye on is the restaurant payroll. It is tricky to manage staff time. You need sufficient staff to provide a great customer service but don’t over staff. Remember overstaffing can create many problems. You pay more and the servers make less tips. Have a look on daily business reviews from previous years; it can help to staff according to it. Ask your staff before switching shifts; it can also reduce the potential of overtime.
- Daily business review
The most effective tool is to have the ability to track beverage and food sales on a regular basis. Daily business review allows making a history of the business. It can help to analyze payroll costs, predict future sales, customer counts and sales trends. For instance, when you want to do summer promotions, menu and staffing specials, you can have a look at the review from the previous years. It will help to plan accordingly for this year.