Cash flow can be a challenge even for seasoned restaurant owners and managers. It can be hard to decide when to hold back what’s being spent on the business and when to invest in new aspects of the restaurant.
Ultimately, a good restaurateur should be able to identify both, all while balancing the finances — but it’s no easy feat. Here are some ways to tighten your cash flow to be the most efficient … and some areas of the business you should be splurging on.
Saving for a Rainy Day
Efficiency with Ingredients
One of the best ways to save money and maintain your cash flow is to not overbuy on ingredients. You need to understand how much of each ingredient you should be buying to prepare for a week of service.
Buying a little extra is generally fine – after all, there are many factors you can’t control in a service – but taking a wild guess at how much to order can cost you greatly. Especially when that ingredient is never used and ultimately gets thrown away.
Ideally, you want to use as much of the ingredients from stem to root (or from nose to tail) as possible so you aren’t wasting the money that went into getting them. Make sure to train your kitchen staff to prep ingredients so the amount of waste is minimal. Leaving a little piece of fish on the carcass during deboning might not seem like a big deal, but those scraps add up to dollars fast.
Take Advantage of Free Resources
Pick your industry resources carefully. Are all four of your monthly food industry magazine subscriptions helping your business grow, or can you cut down on that expense? How much have you been learning in your ongoing business courses and is it worth the cost of the program? Is it the right time for you to make the trip to that restaurant conference, or do you need to save your money this year?
Those resources can be really helpful, but only if you aren’t breaking the bank to use them. And in the digital age, there are more ways than ever to research and brainstorm on a budget, like forums, blogs, and online magazines. In fact, the Rewards Network blog has new posts on how to better run a restaurant every week and a new, free eBook every month!
Spreading Out Your Payments
This isn’t so much about saving money as simply making sure your cash flow is consistent. Set up your bill payment schedule so every week will have you making some sort of outlay to a vendor or a building utility or a lender.
Plan it out if you can that no week is more overloaded with payments than any other, so that you won’t have to worry about an unbalanced cash flow.
Putting Money Away
Ultimately, it’s okay to splurge on things your business needs (which we’ll of course get into), but that should only be happening if you have more money than usual at the end of a month. Every restaurateur needs to maintain a cash reserve, even if it’s just a little at a time, so you can safely spend on the important, sometimes unexpected stuff without worrying about paying the next round of bills.
What to Splurge On
These days, there’s a real chance that your budget for employee pay is going to need to go up. But knowing when to spend more willingly on your employees is a necessary skill as well. Maybe you have to hire on more staff to keep up with service. Maybe you recognize that you need to raise your payscale to keep your best workers.
Either way, putting money towards increasing your payroll can be a great way to invest in your employees and make sure you’re staying up to the pay standards of the industry — and acknowledge the people who work hard for you day in and day out. Remember, retaining satisfied employees for the long run can help you cut back on the exorbitant cost of training new staff.
Legal and Financial Consultation
As your business starts to grow, it’s crucial to have all legal aspects of your business in order, from bookkeeping to contracts, from taxes to trademarks. Using your saved funds to hire professionals (lawyers, bookkeepers, etc.) to take care of this stuff is important, but especially when your business starts to grow and these details become a lot more complicated.
Keeping a PR crisis management consultant on retainer can also be a splurge that pays off in the long run if you ever have to face a public crisis or negative media attention. Some of these things may seem like luxury items, but in reality, they can save you money down the road when you least expect it, and help you maintain a secure cash flow.
Equipment and Maintenance
One of the biggest setbacks a restaurant can have is a key equipment piece breaking down. For one, kitchen equipment can be very expensive to replace. And ordering in that new equipment takes time and could mean slowing or even shutting down your kitchen until it’s in.
Even just getting equipment repaired can slow down your kitchen. Splurging on a solid maintenance program can be one of the best investments for your back-of-house. Better to put the money in now than pay a lot more later after the equipment isn’t cared for properly.
Eventually, every restaurant needs a facelift. If you have the funds and you get the gut feeling that it’s time, putting that money into updating your restaurant, both for esthetics and function, could take your business to the next level.
From the bathrooms to the lighting to the walls to the signage, there are plenty of ways to renovate your restaurant, so think it over carefully, research thoroughly, and pick the parts of your restaurant that need the most improvement.
In the end, saving and splurging don’t have to be mortal enemies of each other. You put money away so you can have funds for splurges. You splurge so you can better your restaurant, increase your incoming cash flow, and ultimately have more funds to put back into savings. If you plan wisely, the save and the splurge work together to grow your business.
Want to figure out your cash flow options before the big renovation? We have a free eBook to help you sort out your needs, titled “What’s Eating into Your Restaurant Profit (and How You Can Improve Your Cash Flow.” Get it today!