Owning a restaurant means navigating two different yet equally challenging roles: small business owner and restaurant manager. But, despite the seemingly endless to-do lists on your plate, it’s important that your restaurant finance management doesn’t take the back burner.
Financial issues can sneak up on you if you’re not consistently checking in and preparing for the unexpected—fire, flooding, or expensive repairs are common setbacks in the restaurant world. To prevent your business from being derailed by such a situation and prepare yourself for long-term financial health, it’s important that you get your finances in order before things get tough. Here’s everything you need to know to successfully manage your restaurant finances.
Essential considerations for restaurant finance management
As a restaurant owner, you are responsible for paying rent on time to keep your doors open, as well as paying employees, vendors, and suppliers in a timely fashion—doing so requires organization, planning, and careful budgeting.
Here are our top five tips, tools, and systems for you to consider incorporating into your restaurant finance management plan to simplify and streamline your efforts in 2023.
1. Establish a budget
The most important thing you can do to build a sustainable restaurant business is establish a realistic budget. There are many ways of doing this, and the one that’s right for your business depends on your goals. What’s important is that you’re identifying what expenses are essential to your business and how much money you need to generate to cover them.
Establishing a budget will help you focus your spending to ensure that your money is going where it’s most impactful. No matter what method you use, your budget will help you define your business’s priorities and goals and ensure you’re best serving them.
2. Invest in accounting software
If you haven’t already, look into buying accounting software. There are many options available at different price points, each of which provides you with a different range of features to support your business structure. Having accounting software will increase your overall financial awareness, giving you a centralized place to track accounts payables and receivables, ensure bills are paid on time, and generate financial reports to help you analyze and improve your spending.
While it is possible to track your finances without accounting software, it’s much harder to do well in a system not specifically designed to handle such information. As such, you’re more likely to encounter accounting errors and financial setbacks along the way. QuickBooks and ZipBooks are two affordable and reputable options to consider in your search for the right accounting software.
3. Maintain a cash flow statement
In a restaurant, money is continuously moving in and out, making it difficult to know for sure how much money you actually have at any given moment. Since deposits sometimes take days to become available in your account and payments made to vendors may not actually be withdrawn immediately, without a cash flow statement, it can be difficult to keep track of your current financial position. That lack of clarity can sometimes lead business owners to make decisions that set them back financially.
Maintaining a cash flow statement means you can easily see how much money you actually have at your disposal, allowing you to conduct day-to-day business without fear of accidentally sending your business into the red.
4. Monitor labor costs and schedule carefully
Having a great staff and paying them well is an essential aspect of running a great restaurant—but leaving labor costs unchecked will tank your revenue. Consider the number of people you need on staff during each phase of the day to keep things running smoothly. While having too few people during a rush can be a detriment to the speed of service and overall customer experience, overstaffing can cause distraction among team members and reduce productivity.
Finding your staffing sweet spot may take some trial and error, but doing so will save you serious money.
5. Reduce food costs and waste
Food costs are a substantial line item on your restaurant’s budget, so it’s important to regularly critique and optimize them. Consider modifying your menu to reduce costs, remove items that consistently underperform, and work with suppliers to ensure you’re getting the best prices you can.
It’s also important to carefully analyze the use and waste data within your operation. Are you purchasing ingredients at sustainable volumes, following effective inventory management and food storage protocols, and training staff to minimize spoilage and waste? Implementing these strategies will not only increase how far your food goes and reduce the environmental impact of your restaurant, but it will also ensure that every item on your menu deserves to be there.
Start moving your restaurant in the right financial direction
With the tips above, you’re well armed with the best strategies and tools to implement a strong restaurant finance management plan. Establish your budget, invest in the tools you need to keep your finances organized and easily accessible, and carefully analyze your business operations to identify areas where you could cut costs, scale back, tighten, or improve your overall function. By thoughtfully considering each element of your restaurant in this way, you’ll not only eliminate unnecessary spending and waste—you’ll also strengthen the food, service, and overall impact of your restaurant on the community.