How to manage cash flow in your restaurant ?

How to manage cash flow in your restaurant ?

Understanding your restaurant cash flow is essential to run your restaurant business. Its basically refers to the amount of cash coming to your restaurant minus the amount of cash is flowing from your restaurant on daily weekly or monthly basis.

Managing your cash flow is the must that you should do on ongoing basis whether your restaurant is facing the cash flow problem or not. Many restaurants face the cash flow problem.

WHAT MAINLY CAUSES CASH FLOW ?

  • Low Profiits or losses : Your profit is your major source of cash. It usually coes when you sell something or your customer pays you. If your business is unprofiatbel you wouldn’t be able to earn much and cover every outgoing.
  • Over Investments : Spending money on the things that you don’t really need in your business only leads to drain your funds, that means you’ll not be left with enough cash and will not be  able to spend on the things you really need.
  • Expanding too fast: Expanding the business too soon without having an accurate plan or sufficient money can put you in many problems. Expanding your business too fast may also lead to more cash flow as more capital and more expenses will be involved.
  • High overhead expenses: Overhead expenses are the type of expenses which are not directly related to production and selling of the products. These are the expenses which are ongoing in your business. Like example, rent, internet and other utility bills.
  • Unexpected Expenses: Spending a lot of money on unexpected expenses can put a pressure on cash flow. Few common unexpected expenses are loss of staff, equipment breakdown, and increase in market competition from which it requires your business to invest in these.
  • Overstocking: Bringing the stock in your inventory more than you need is also a unexpected expense. Stock that doesn’t come in use can also be counted in this. Stock kept for too long and doesn’t come in use can also comes in a risk of being spoiled or outdated. Good inventory management is also a key that you can manage your stock in a better way.

HOW TO IMPROVE CASH FLOW IN YOUR RESTAURANT ?

  • Stay on top of book keeping
  • Keep your inventory low
  • Organise changes in payroll
  • Increase restaurant cash flow
  • Work with your creditors to improve cash flow
  • Avoid relying on credit
  • Make frequent and informed labour decisions

I hope after this you will get cleared about the cash flow management in your restaurant

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