A New Restaurant

The restaurant graveyard is littered with the bones of businesses that have died because they didn’t have adequate cash flow.  The pieces for success were in place, but the restaurant died because it didn’t have enough cash to keep going until it could become profitable.  Steps that would have guaranteed success were not made because there wasn’t enough cash on hand to implement them.

Your restaurants survival is dependent on controlling your cash flow.  These 5 suggestions will help.

1. Know your balance

It is amazing the number of business people that don’t have an accurate grasp on how much money they have available.  They can tell you how much butter is in thewalk-in, or who is scheduled to cover tonight’s shift, but when you ask them about their restaurants cash flow, their eyes glaze over and they begin to mumble incoherently.  If you want to guarantee that your restaurant will not succeed, then don’t pay attention to your cash flow.

I success is something that you are striving for, make sure you have a plan to keep track of where your money is going and how much you have available.  This is something that should be in place from the very beginning when you are starting a restaurant.

To survive in this, or any other industry, you must be able to make wise business decisions regarding your finances.  The only way to do that is know your financial position.  Overestimate the cash available and you will make decisions that will leave you short of funds.  Underestimate and you will not make decisions that could improve your profitability.

2. Keep up with your accounting

One way to keep on top of your cash position is to make sure you keep up with your financial paperwork.  I once worked for a man who felt like God didn’t put him on earth to do paperwork.  He kept that attitude right up until the bill piled up so high that he had to declare bankruptcy.

The sad part is that it happens far too often, and it is so avoidable.  While doing paperwork may not be the most fun part of your day, if you keep up with it the time it takes is pretty short, especially in light of how much is at stake.

If you don’t feel like you can do an adequate job with it, hire someone to do it for you.  The main thing is to make sure it is done, and that it is accurate.  If you stay on top of it, you will always have an accurate figure to work with.

3. Manage from your books, not your bank statement

It is confusing to me that people will do things that they know aren’t right, but they do them anyway because it is more convenient.  Managing your finances from your bank statement is one of those areas.

Here’s a tidbit of information that should be common knowledge, but far too many people choose to ignore: bank statements are not relevant to your financial position.  Bank statements are a snapshot of the transactions that have occurred with your account at some given point in the past.  There is a lag between the time the check is written and the time it clears the bank.  Even though you have already spent the money, it does not show up on your bankstatement right away.  It is not an accurate reflection of where things are right now.

Remember the previous tip about keeping up with your paperwork?  If you are doing that you will have an accurate picture of your cash position.  You will know who you have paid, what money has come in, and how much is available.  That is handy information to have.

4. Project your needs

It is very easy to get caught up in the here and now.  After all, that is what you are dealing with on a daily basis.  That doesn’t give you an excuse for ignoring the future of your business.  To be successful you always have to be looking ahead and planning for the future.

This isn’t a crystal ball look into the future kind of thing.  This is about making projections based on factors that affect your business.  Your restaurant may be affected by the seasons, or there may be events or conventions that will affect your sales.  You should be able to look out at least 6-months to project what your needs are going to be.  You may needcash to survive a slow spell, or you may need to spend cash on marketing for a big event.

By knowing what your needs are going to be, you can make decision that will still give you the cash on hand that you may need.  It may mean the difference between making a wise investment in the future, and leaving yourself so cash poor that you can’t survive a slowdown in business.

5. Keep the Flow Coming In

I written quite a bit in the past about the importance of keeping the customer happy.  Well, here it comes again.

Customers provide you with the cash you need to stay in business.  Without the customer there is no cash.  Without cash, there is no business.  If you want to keep the cash flowing, you have to keep customers coming into your restaurant.  That could mean needing to spend some on strategic marketing.  Without a doubt it means taking care of the customers you do have.

It is a fact that it takes more money to attract new customers than it does to keep your current customers.  You’ve already spent the time and money getting them in, now do what it takes to keep them.

Cash Flow = Survival

It does your restaurant no good to be asset rich, but cash poor.  Your suppliers don’t really care about how much you invested in new equipment.  What they care about is getting paid.  Ask your employees to choose between a new fryer and their weekly paycheck.  What do you think they will choose?

Your business needs money to survive; it is the restaurants life-blood.  Keep track of it at all times, and you will significantly improve the odds of your success.