Managing Restaurant Cashflow

29th December 2020

Cash is king and that's the key concept that restaurant operators should pay attention to. A profit-making company can still have cash flow problems and can even become bankrupt.  It's key the operators understand the cash cycle and look out for any red flags.

There are various forms of cash that a restaurant operation needs;

  1. Operational expenditure - salaries, F&B suppliers, overheads etc.
  2. Capital expenditure - coffee machines, cooking units, furniture as so on
  3. Loan and interest payments
  4. Dividends to the owners
  5. Tax payments
  6. business acquisitions

The cash is generated from various sources (Revenues, borrowing and asset sales). The key concept here is that profit does not equal cash and this could be due to various factors including excessive spending on Capex, delay in getting the outstanding receivables from the corporate bookings/events or generous supplier terms. All of these factors can disturb the cash cycle. 

Following are some of the ways you can stay on top of your cashflow;

  1. Maintain a weekly cash flow forecast, we recommend looking 3 months ahead or 1 year if possible
  2. Negotiate supplier payment terms based on industry standards ideally between 30 to 60 days
  3. Plan Capex investments during the peak season of trading to ensure there is enough liquidity
  4. Look at lease financing options as they can be more cost-effective depending upon the nature of your business and can provide fuel for growth.

We provide comprehensive tools that help you manage your cash flows effectively which include daily/weekly cash flow forecasting keeping you well aware of what's ahead/

Get in touch if you need support on managing the cashflow for your small business.