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Restaurant Cash Flow<\/h2>\nRestaurant Cash Flow<\/h2>\nYou\u2019ve likely heard all the gloomy statistics about restaurant failure rates, such as that 90% fail in the first year (this has, in fact, been debunked). Although new studies show the failure rates aren\u2019t nearly as dismal as originally reported, that\u2019s not to say you, as a restaurant owner, shouldn\u2019t be cautiously aware of the possibility. One of the biggest reasons small businesses fail is a lack of cash. Having a robust understanding of your restaurant cash flow and how to manage it are essential parts to managing your finances and keeping your small business in the green.<\/p>\n
Simply put, cash flow is the amount of money flowing in and out of your business every month (or day, week, or year). Cash comes in from customers, cash goes out to pay for the essentials you need to run your restaurant. That being said, just as you budget in your personal life for home and living expenses, the same should ring true for your business. To manage your restaurant cash flow, it\u2019s critical to budget accordingly for rent, utilities, food orders, payroll, etc.<\/p>\n
Cash flow, in essence, is almost like your business checking account. You\u2019re in a \u201cpositive cash flow\u201d scenario if you\u2019re bringing in more money than you\u2019re taking out; if more cash is going out than coming in, you\u2019re in a \u201cnegative cash flow\u201d and will need help to cover overdrafts. This type of situation isn\u2019t uncommon in the startup world\u2014new businesses will often need working capital to cover cash shortages, which can come in the form of a loan or line of credit (ARF can help you with that).<\/p>\n
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<\/h2>\nThey\u2019re not glamorous, but keeping detailed reports of your sales, payroll, food orders, etc. can help you build a history of your business. This type of information will be helpful year over year as you look to increase staff or bulk up your food orders, as you\u2019ll be able to analyze sales trends, customer counts and predict future sales. You\u2019ll have a real pulse on your business\u2019s ups and downs, which is critical to understanding your cash flow.<\/p>\n
Take your menu for instance: If you\u2019re tracking the sales of your dishes year over year, it\u2019s easy to view what\u2019s selling and what\u2019s not. Remove the items that aren\u2019t as popular and introduce a new dish to test out!<\/p>\n
Another benefit to keeping detailed reports comes into play when we talk about payroll. You\u2019ll need enough staff on-hand to cover the front and back of the house, but unnecessary overstaffing can lead to you spending more on payroll. It also means your servers will see less tips. Reference your historical business reviews to ensure you staff accordingly for that particular time period\u2014you\u2019ll likely save money in the long run.<\/p>\n