All About Restaurant Finances
The Basics of Restaurant Finances
The success of a new restaurant depends heavily on how well the finances are managed. Often times people who want to open a new restaurant like eating, cooking or socializing and forget about the business aspect. The money part of owning a business may not be their strong point. To help you understand your restaurant finances, I’ve broken them down into basic categories, from just getting started to maintaining a thriving business.
Your Initial Business Loan
The first issue with restaurant finances is how to get that initial business loan. Banks don’t normally jump at the chance to finance a new restaurant, seeing them as risky ventures. To increase your chances of financing, first start with a sound business plan. A restaurant business plan essentially is a road map of how you plan to be successful. It outlines the start-up costs of opening a new restaurant, estimated sales, and how you plan to deal with financial problems. Read more about how to write a restaurant business plan and get ready for your bank interview.
Understand Your Restaurant Cash Flow
Once the cushion of money from your initial loan is gone, it is important to have a steady income coming in. Keeping an eagle eye on your cash flow is vital for healthy restaurant finances. A typical restaurant has many bills, from food to payroll to taxes and if it runs short on cash, trouble is soon to follow (see below for details).
Track Your Daily Reports
You can also keep a better eye on your cash flow through your restaurants daily reports. Typically generated by a POS system, these reports help you track everything from sales to time cards. At a glance, you can see the previous days total meals and beverages sold, which menu items were the most popular and how long the wait staff worked.
Keeping a log of daily reports over time can help you identify patterns of slow and busy weeks, and help your staff accordingly.
Trouble Shooting Finance Problems
If you find your restaurant short on money on a regular basis, it’s time to reevaluate how you are running your business. Now is the time to start looking for ways to trim costs, from labor to inventory. You may also want to consider a short-term loan from a reputable banking institution- not a shady credit card advance company. Read more about how to handle common restaurant problems.
Ways Your Restaurant Can Save Money
There are many ways your restaurant can save money. Investing in energy efficient equipment will save money over the long term. For faster savings that won’t cost you a mint, try easy, inexpensive saving steps like low flow faucets and halogen light bulbs. Also work on reducing waste in your kitchen by cross utilizing menu ingredients. And take advantage of free services and goods offered through your vendors. Read more about 10 things restaurants should never pay for.
Have a Rainy Day Fund for Your Restaurant
No matter how much you are making, always stash some cash for a rainy day fund. You never know when a piece of equipment might break or some other unseen expense pops up.
You’ll be glad to have a cushion to fall back on.
A successful restaurant depends on how well its finances are managed. Starting with a strong business plan will guide you through the hectic days of getting started. Minding your cash flow and tracking expenses through daily reports will help keep you on track. If you do run into trouble, taking proactive steps to trimming costs and improving profits will help overcome many obstacles.