How to Ensure Your Restaurant Gets Positive Cash Flow

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Positive cash flow is important for most types of businesses but especially so for restaurants. If you’re coming across hard times and need to improve your liquidity, take a few preventative and corrective actions to ensure you stay afloat and thrive.

How to Ensure Your Restaurant Gets Positive Cash Flow

Avoid Reliance on Credit

It’s normal to rely on credit when starting a business. As your restaurant matures, weening your business from the need for credit is a smart course of action. Whether you rely on credit from your suppliers or from a bank that funds your short-term liabilities, it’s best to operate within your means.

Even if you’re able to make payments with ease, reliance on credit can be a disaster waiting to happen. A black swan event in the economy can cause revenue to drop drastically. If this occurs, it’s only a matter of weeks or months before you run into trouble.

Create Cash Flow Forecast

Cash flow is an essential financial metric for restaurants. Due to the way they operate, restaurants need to be liquid enough to service their liabilities.

Whether you’re experiencing tightness in cash flow or are operating on all cylinders, a cash flow forecast can enhance the way you operate. Rather than having to scramble to meet your responsibilities and stock up on supplies, you can cut out the anxiety with a detailed cash flow forecast. It’s always better to know how thin you can spread your cash reserves in a time of need than trying to find last-minute solutions.

Make Your Inventory Work for You

Keeping with the previous tip, maintaining low inventory will help keep you out of cash flow trouble. Stocking up on supplies can seem advantageous, especially in the face of rising prices. However, the more inventory you keep, the less cash you have on hand with which to maneuver in tough times.

A sales forecast can assist you in finding the ideal amount of each item to keep in stock. Are there items on your menu that aren’t flying off the kitchen counters? Try and keep fewer supplies regarding that menu item in stock.

Furthermore, you can remove dishes from your menu and add others that have a higher turnover. Occupying storage space with supplies that tend to remain in stock will result in inefficiencies.

Stay On Top of Your Payroll

Changes in the economy will affect your payroll. Whether you have to hire staff, let some people go or pay higher wages, you need to reduce uncertainty.

Restaurants can see high turnover as people take jobs in the field as a temporary occupation. Have a look at your turnover for the past six months as well as a year back. Spot any trends that can help you make informed decisions about your staffing and payroll.

Monitor Vendor Pricing

It’s prudent to build lasting relationships with your suppliers. After all, owning a restaurant is about offering your patrons quality food and beverages. However, you have to make sure that suppliers don’t take advantage of you.

If you have contracts with your suppliers, tracking your invoices can alert you to any pricing violations. Oftentimes, vendors will change prices and restaurant owners will simply not notice the discrepancy.

Furthermore, don’t be discouraged from price shopping. If you can find the same quality or better from a different supplier, it may be in your best interest to diversify your providers.

Increase the Average Check

The previous tips focus on a defensive approach. Monitoring your current operation and optimizing pain points relies on your current level of business. If you want to achieve growth and increase your revenue, you’ll have to work on selling more.

You need to start by calculating the average amount paid per customer. Take your sales for a given period, a month, for example, and divide it by the number of customers for that period. Consider all the necessary actions you need to take to maximize your restaurant’s average check.

Get creative, exercise some good marketing sense and leverage your menu offerings in the most productive way possible while automating your restaurant operations with professional assistance from companies like GRUBBRR.

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