Knowing how to handle your income is crucial for your business’ condition, and dining establishments get a bad reputation in the industry. One of the major problems a new restaurant doesn’t endure the first few years is that the managers and owners don’t know how to handle their daily finances.
Inventory management, tracking payroll, reading the restaurant’s daily business review, and knowing how to manage your finances are the fundamentals of managing your restaurant’s cash flow. Below is a guide that talks about managing finances.
Making a Daily Business Report
One of the most helpful tools your restaurant can rely on is the ability to track beverage and food sales daily. Making a daily business review will be the foundation for plans. It can help analyze customer counts, payroll costs, and sales trends to predict future sales. For instance, you can look into your previous year’s sales and find trends that will help you plan for the future.
It might help to check your menu specials, staffing, and summer promotions.
Finding Ways to Control Payroll
Like daily sales and cash flow, another aspect you’ll have to worry about is your place’s payroll. Managing a staff is difficult. You’ll have to hire a team that will deliver excellent service — both at the back of the restaurant or in front. But you don’t want to hire more than enough. Overstaffing will only result in problems. Firstly, you pay more, and servers only get fewer tips.
Making a daily business review from previous years will help your staff. Lastly, having a policy about staff asking before switching shifts will reduce the potential for overtime.
Understanding Your Cash Flow
Your cash flow is the money entering your restaurant business — not the money going out daily, weekly, or monthly. You’ll be putting yourself at financial risk if you don’t know how to manage your finances. One of the most crucial aspects of managing your restaurant’s income is setting a budget for upcoming expenses, including food orders, utilities, mortgage, and rent.
Don’t depend too much on your credit for buying food. It’ll stop you from overbuying and spending more than you have to. Besides, paying cash upfront will only lead to a limited discount from food distributors.
Minimizing the Labor Expenses
Your team is also an essential part of your business. But tracking the labor costs is also as important. That doesn’t necessarily mean not paying the staff fair wages. It means you shouldn’t be overstaffing your place. If that happens, you’ll have to pay their salaries out of your pocket. Your staff will also be getting fewer tips and be less productive.
You only get as many people as needed. It’ll allow you to reach the highest productivity level and pay them a fair price. You’ll also have to make sure that you implement a proper shifting system. Or else, you might end up asking your employees to work more, even if it’s not necessary.
It can happen due to poor shift management, even if you don’t have a lot of people. It’ll be an unnecessary expense that you can easily avoid with better management.
Implementing Billing Deadlines
In the early days of your business, it’s best to ensure that your credit bills aren’t that too high. But it’ll be impossible to operate without credit payments. It’ll be helpful to enforce payment deadlines for yourself before the creditor puts them on you. It’ll be an excellent way of settling immediate liabilities, ensuring that you don’t turn into problems down the road. Being ahead of your payments will also improve your credit score.
If you need it, your creditor will not mind stretching the deadlines or rules for you.
Keeping Food Expenses Low
Your food costs are a fixed part of your overall restaurant expenses. You can’t reduce them by much, but you can control them. Food wastage is one of the biggest reasons for high food costs; hence, inventory management and proper storage are essential aspects of controlling the costs. Optimize your menu to ensure that you don’t have items that aren’t selling as much, resulting in more costs.
Budgeting for Known Expenses
In managing a restaurant business, you might encounter recurring expenses, including raw ingredients, electricity, labor, rent, and more. Keep money aside for meeting running expenses at the start. It’ll help you inform how much money you have to survive the month without these working and fixed expenses.
Having extra resources for your working costs will ensure that you maintain a balance that will help your business stay afloat.
Not Settling Your Credit Bills
One of the restaurant owners’ worst mistakes is running a high credit bill. In buying your ingredients on credit, you might get a cheaper deal, but you’ll end up locking your finances and overstocking. Bear in mind that most ingredients expire, and if you’ve overstocked, it means that sales will not match.
In short, your credit bill will only end up costing you more. During your business’ early years, it’s better to avoid running a high credit bill and pay with cash.
Managing restaurant finances isn’t something you can learn in a day, but it’s a job that you’ll have to evolve into. Nonetheless, the tips mentioned above for managing your finances are the most common habit that you’ll have to develop so that your restaurant can break even as soon as possible.