The restaurant business is one of the most difficult industries to manage cash flow. One slow week is all it takes to put even the most successful eatery in fear of going under. Fortunately, if you properly manage cash flow, it doesn’t have to be that way.
To help you keep control over every dollar you earn, and each one you spend, here are a few key tips to help you manage your restaurants cash flow
1. Lower your Expenses
It sounds like the most cliché tip on this list, but it’s also the most vital. As a business owner, you already know that keeping spending under control is a necessity, but there are likely some places where you can cut out hidden costs that you may not be considering in your budget. These small things can add up fast, causing issues managing cash flow.
- Underperforming Items: What’s a dish that you have to stock ingredients for that simply doesn’t sell enough to justify remaining on the menu? Cutting it out could help you save on consumables. Replace it with a new dish, or if your menu is more than a page, consider downsizing a bit.
- Underused Ingredients: Speaking of stocking an item that isn’t used enough, are there any specialty ingredients used in just one or two dishes that could be substituted with something more common?
Just remember: Cutting expenses doesn’t mean cutting corners. Lowering your quality is a surefire way to shrink your customer base. If your Restaurant Caters Large Events you may want to opt for a surcharging product to eliminate your credit card processing fees. This way if someone wants to put a $2,000 dollar bill on a credit card you don't eat the 2% - 3.5% fee internally.
2. Check your Pricing
Things are always changing, and your menu needs to change too. How much are you charging for your best-selling dish? Can it be compared to the offerings of another restaurant in your area? Always check your pricing against competitors, and against the cost of ingredients. If you aren’t making good money on a dish, either raise the price or find a way to lower your cost.
When you evaluate your menu (at least once a quarter), you should be checking these aspects: Which dishes are contributing significantly to your cash flow? Which dishes are somewhat contributing to your cash flow? Which dishes aren’t really contributing at all? Determining the answers to these questions will require you to know which dishes sell the best, how much each dish costs to make, and what your profit margin is.
Determine which dishes you should promote more often, which dishes should get a price increase, and even which dishes you might need to consider removing.
Items that Sell Much
- Evaluate menu items that don’t sell that much but are super cost-effective and easy to make. For instance, maybe a child orders a grilled cheese sandwich a few times a month. They may be cheap and easy, but they could hurt your bottom-line if you don’t consider them carefully.
Low Profit Margin Items
- menu items that are very popular but have a low profit margin. They include expensive ingredients and may require a lot of prep time. But, they bring customers in, so think twice before cutting them out.
- are costly to produce and are growing in popularity, but they might not be a permanent menu item because they are expensive to make. These dishes might be seasonal, promotional, or “limited time” offers.
High Profit Margins
- They have a high profit margin, they’re popular, and they’re a staple on your menu. Promote them more often!
3. Cash Flow Constraints
Determine the ratio of payment types for the restaurant. What percentage of payments are cash vs credit card.
Delayed Funding from Credit Cards: Dependent on what payment processor you are working with you may not see the funds in your account for a few days. Many Restaurants realize delayed funding. This is because many merchant processors have an early batch cut off time. The problem is that most restaurants do most of their business during dinner. If they batch the credit cards after the cut off time they will not see those funds, the next day.
Same Day Funding for Merchant Processing: You know what you made today, but it might not arrive in your bank account for another business day or two. That can halt your business’ progress and make managing money quickly. Same day funding for merchant processing might be the right route to take.
4. Get Financing
Sometimes, you just need some extra money to work with. That’s when business financing may be necessary. Here are your options:
- Short-Term Working Capital: By giving your business an extra boost of available cash, you’ll be able to grow your business--even through a slow week when money is tight. Make sure you have the proper solution to fit your cash flow requirements. Short Term Working Capital Programs can be utilized for most types of business expenses. Whether you need to hire additional employees or increase your marketing budget, short term working capital is a solution that can bring value.
- Equipment Financing: If your chefs don’t have the right tools, they aren’t going to be able to cook the best dishes. Getting financing for new equipment could be a big asset. It can cut costs and improve efficiency. When it comes to Cash Flow one of the best ways to conserve capital is Restaurant Equipment Financing, you can opt for a low monthly payment as opposed to large out of pocket expense.
- Software Financing Programs: Could your Restaurant benefit from updated software to run the business more effectively. Just because your Bank will not Finance Software that doesn't mean you cant find an institution that can.
Are you interested in learning more about how business financing could help your restaurant grow? Learn more at bncfin.com/restaurant
Schedule a Call with a Business Advisor
Does your Business have Financing Requirements? Schedule a call with a Business Advisor to see how BNC Finance can be a resource to your business.