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Cash Flow

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Cash flow is the other measure that restaurants live and die by. Most restaurants fail in their first year of operation because they simply run out of cash to keep the business going. The funds from the loan run out, credit cards and lines of credit have been tapped, and the money faucet has dried up.

Cash Management on Premises

  1. If you accept cash only, robbers make you number one on their hit lists. Accept credit cards. Shop around for the cheapest processing rate and settle your transactions on a daily basis after closing.

  2. Keep a drop safe in the office and make cash deposits at least once a day, varying the times and people you send to the bank.

Top Cash Burners

  1. Payroll - Staff must be paid on time. Morale will plummet and service will take a nosedive if staff is not paid, aside from it being unethical.

  2. Food Inventory - There’s no way to know exactly how many people will order food in your restaurant on any given day, but you still must have enough fresh food on hand to make all the items on your menu. While good chefs know how to minimize waste, there is no way to avoid spoilage when business is down 50% on a Friday night because there’s a major thunderstorm with torrential rain right outside your door. Fish, for example, is only at peak freshness for a relatively short period of time.

  3. Loan Payments - Loans and mortgages must be paid on time. If they’re not, the bank or mortgage company may foreclose.

  4. Vendor Bills - The monthly phone, utility and other bills must be paid on time, regardless of how business is.

  5. Miscellaneous Expenses - Even though you may budget for repairs and other unforeseen expenses, things always seem to crop up which require immediate cash. It's easy to underestimate the costs of re-printing the menu, paying the plumber for fixing the leak in the restroom and all the rest.

Maximizing Cash Flow

  • Delay payments as long as possible to those vendors that don't give you a discount for paying early.

  • Negotiate with staff to pay as many workers as possible every other week. Pay top managers monthly, if possible.

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