Cash Flow Management Essentials for Savvy Restaurateurs
The restaurant business can be notoriously difficult to break into and, once established, stay profitable. That’s why having proper cash flow management procedures in place is critical to your success. Without sufficient cash flow, your business may miss opportunities in hiring, promotional efforts, inventory acquisition, technology upgrades, and more.
To keep sound cash flow management procedures in place at your restaurant, consider the following:
When margins matter, it's important to analyze the broader picture to determine which aspects of your business have a significant impact on your cash flow. Labor costs and payroll management are often primary contributors.
With the recent tax overhaul that impacts the credits available to many small businesses, a shrinking labor pool that creates a more competitive hiring landscape, and increased minimum wages in many states in the U.S., restaurants are facing significant challenges that have the potential to jeopardize their ability to stay profitable.
Fortunately, identifying these issues and facing them head-on can help savvy restaurateurs remain competitive in this changing environment. To impact your cash flow management quickly, you may want to focus your efforts on reducing costs associated with labor and other HR-related issues.
Proper forecasting is essential to being prepared for the unexpected. By staying proactive with predicting your cash needs for food, labor, and other operational necessities, you can better prioritize those needs and develop a plan for handling emergency situations when they arise.
Similarly, identifying business ebbs and flows can help you predict the most efficient times to invest in promotional efforts, helping to smooth out the down times when cash is tighter. Analyzing your business patterns can also help identify any business processes that could be draining funds from your company. Restaurant payroll procedures can be complicated, and mishandled payroll can prove extremely costly to a fledgling restaurant. By identifying these issues early, you can take steps to correct them.
Restaurants rely on various processes to stay organized and maintain their ability to process and serve food quickly. But even though there may be many moving parts in your business, that doesn't mean they need to remain separate. Identifying ways to integrate various systems (e.g., your payroll and benefits management) is a great first step toward improving your operational efficiency and managing your cash flow effectively.
This can also allow you to produce integrated reports, which can help you better predict your restaurant needs, and in turn help you manage your cash flow more effectively. Having a single integrated system also tends to be more accurate, since it can keep all your business records up to date and requires less effort to maintain.
Once these procedures are integrated, you may be better able to accurately predict business needs and take action on potential cash flow issues before they happen.