As your restaurant business begins to recover from restrictions put on it due to COVID-19, it is crucial to assess your financials and strategize your costs. You might have been able to get by without having to evaluate your costs pre-pandemic but doing so now can be the difference between thriving and merely surviving in the new reality.
By generating a budget for your controllable costs, you can create a clearer path for your cash to move. Assessing this movement by ensuring that the budget is maintained and that invoices are entered daily will help you better manage your cash flow each month. Running financial reports daily will also provide insights into your finances, allowing you to determine if you need additional financial guidance. Regardless of what state your books are currently in, it is never too late to take control of your costs.
Create a restaurant budget
While eyeballing costs might have been sufficient before, the impact of the pandemic requires that you take a closer look at how you spend your money. Every dollar matters to the survival of your restaurant, so identifying both your fixed and variable costs can help determine what costs are in line with your goals and what costs should be adjusted to give you more control over your finances.
Fixed costs, such as rent, are out of your control, but variable costs provide an opportunity to minimize spending and, in return, increase your cash flow. One of these costs is labor. Setting your labor budget to a percentage of sales can drive down labor costs while also providing a scalable comparison so that as your sales increase, your labor can increase to meet the demand. Many restaurants lose money because of inefficient labor estimates. Tightening this up with a budget can cut labor costs and add to your bottom line.
Now, more than ever, it’s also imperative to optimize food costs. Simple ways to do so is by limiting your menu options to those that are most popular and profitable, creating contract prices with your vendors and using a system that can track purchased item costs to help you identify and correct contract violations, and tightening your inventory management to improve processes and reduce variances caused by waste, errors, over-portioning and theft.
Reevaluating your current financials and determining areas that you can make more cost effective can provide a better roadmap to a profitable outcome. At week’s end, reassess your controllable costs to help determine the best way for your restaurant to gain positive cash flow.
Manage your cash flow
Understanding your cash flow can do more than help make sure you have the funds to pay your rent and your vendors each month. It provides the key to thriving in the current economic situation. Review the sources of money coming into your restaurant, such as your sales and funding, and compare that to your money outflow sources, such as rent, vendors, payroll, food and beverages, equipment maintenance, and more, to determine your anticipated cash flow.
In understanding your cash flow and recording invoices on a daily basis, you can better manage it. Your budget provides a baseline for the movement of your money but entering invoices daily gives you a clearer picture of your actual cash flow without relying on theoretical costs.
If you have multiple restaurants, update and compare your books side by side on a consistent basis. In the event that one restaurant is more successful than the other, you may need to lean financially on thriving locations in order to keep all of your locations in business. Maintaining solid bookkeeping for all locations can be the difference between closing and staying open long term.
Run financial reports
For an even healthier cash flow, reviewing your financial statements, specifically your profit and loss statement daily, can help you make necessary adjustments on the fly as you navigate new challenges each day.
Make it a daily task to run your financial reports and determine if your current budget is maximizing your cash flow. These reports, especially your profit and loss statement, provide a look into the revenue that is coming in, your variable costs, and your fixed costs for the month. The information gathered by running this report daily gives you a clear understanding of where your money is going and how you can better manage your cash flow.
Seek financial guidance
Sometimes it’s better to reach out for advice and funding due to irregularity in business operations. If you feel overwhelmed with being behind on your books or think that you do not have the time or resources to put into enhancing your financials, consider outsourcing your accounting and/or applying for small business loans to benefit both your restaurant and your employees.
Get Access to Capital
With the drastic impact the pandemic has had on our economy, restaurants are struggling to pay their bills and their employees. To ease this financial burden, several federal loans have been granted to help small businesses.
The Paycheck Protection Program (PPP) enables small businesses to apply for a loan that can help keep employees on payroll and pay current bills, such as rent, mortgage interest, and utilities. This loan can be forgiven if the money is spent on these payroll, rent, mortgage interest and utilities. A new law, the PPP Flexlibility Act, enacted on June 5 makes this loan more attractive to restaurant businesses because the time frame for spending the funds has been extended from eight weeks to 24 weeks. In addition, the forgiveness rule of stipulating that 75% of the loan must be spent on payroll and only 25% could be spent on other costs, has been changed to 60% for payroll and 40% on other costs.
To initiate the process of getting your restaurant back on track with the funding you need, Restaurant365 is offering R365 Capital, a free service that can help match your restaurant with the appropriate lenders.
Consider Outsourcing Your Accounting
While it may seem counterintuitive, finding a partner to help maintain your books can benefit your restaurant drastically. It is crucial to have someone dedicated to assessing your cash flow during this unstable time and employing an accounting firm can do just that. A CPA can provide insight into your cash flow and give you guidance on ways to sharpen your operations and cut costs. The money spent on an accountant can pay for itself in the financial efficiencies you can gain.
Learn how Restaurant365 can help match you with an accountant that best fits your restaurant’s needs.
The easing of current restrictions will undoubtedly bring your restaurant more revenue, but without managing your financials, you may struggle with sustaining a healthy cash flow each month. Creating a budget, identifying your cash flow, maintaining good bookkeeping, and receiving financial guidance if needed are the tools that will give you more control over your restaurant’s financial future and help your restaurant thrive.
If you would like to easily track data and gain insight into your operations, consider a comprehensive, restaurant-specific management solution. Restaurant365 incorporates restaurant accounting software and restaurant operations software into an all-in-one, cloud-based platform. It includes tools for inventory control, scheduling, fixed asset management and more. For more information, schedule a free demo.