The month is over. The month is over.
Make sure you check the account of the restaurant.
The number is not what you would have expected.
For owners of restaurants, this disconnect can be frustrating because the cash flow and profit seem to provide the same information. They don’t. A P&L examines financial performance over a period and the bank account is a reflection of the exact timing of funds being moved into and out of the business.
Knowing the difference can change how a restaurant’s owner views their finances.
Imagine what might happen during the typical week. Customers pay for food. Employees have to be paid. The invoices for food and drinks are issued. Rent is getting closer. The timing of the credit card deposit differs. Sales tax is an obligation.
Already the shopping spree for next week have begun.
Looking just at revenue or the final profit figure leaves out a lot of the work.
The key may lie in the price of the best.
The cost of food, drinks and labour costs are worth taking a closer review when the profitability of a restaurant begins to decrease.
Cost of goods sold combined with labor is a major cost. The Bookkeeping Chefs’ provided advice places the cost of goods sold between 60-65 percent of the revenue for many establishments. They also recommend the importance of weekly monitoring rather than waiting until the end of the month.
It is more important to be able detect changes early than obsessing about an exact percentage.
Imagine that the restaurant’s results are usually close to its goal, but this past week, it was higher. Perhaps overtime has went up. Maybe beverage costs were stable as food costs rose. A higher percentage of food could cause the manager to look at buying, waste, menu mix portions and vendor invoices.
The percentage raises the question. The restaurant’s activity is the answer.
This conversation is possible because everybody can remember what transpired.
The details are more difficult for you to recall after a couple of days.
The Vendor Bills are then delivered.
The restaurant will be able to pay later for the ingredients it buys. That timing helps explain why profits alone won’t be able to answer all cash questions.
Vendor invoices need to be received, recorded as well as tracked until they are paid. Manually completing this task in an organization with a lot of suppliers could become an enormous administrative burden.
Automating the process of paying bills can help organize this by reducing the repetitive handling of payments and bills. The bookkeeping system that is connected to the internet can give the user a better picture of obligations which haven’t yet deposited into the account of the bank.
It’s important because a bank’s balance when seen in isolation can look healthier than the restaurant’s real-time position.
It could be that you’ve got $80,000 in your account as of right now. This amount could mean something different if payroll, rent vendors, or other obligations consume a significant part of it in the next few days.
Forecasting cash flow is a common outcome.
The most appropriate question to ask is “What happens to our cash after we receive the money and have fulfilled the obligations we have made?”
This distinction is crucial when deciding the appropriateness of the right week to make an extra purchase replacement of equipment, or preserve liquidity.
The Money You Received Could Not Be Yours
The sales tax illustrates this point especially well.
A restaurant receives money from customers that eventually has to be managed in accordance with its tax obligations. When these dollars are mentally grouped together with operating cash, it can create a false impression of the cash available for spending.
The consistent records help ensure sales tax compliance as well as giving management a more realistic view of the restaurant’s finances.
Accounting for restaurant operations is more effective when the financial responsibilities of each restaurant do not have to be considered separately.
Prime cost affects margin. COGS and future payments are affected by purchases made by vendors. Payroll and cash availability are affected by payroll. Cash flow is affected by sales tax. The P&L shows financial performance, while forecasting helps management look ahead.
Connect the pieces.
Bookkeeping Chef combines restaurant-specific reports along with system integrations. For operators who don’t want to spend their nights manually reconciling financial data, specialized outsourced bookkeeping services can handle much of the accounting workload without removing the owner from the financial conversation.
The final part is crucial.
Restaurant owners shouldn’t stop going through the manuals just because they are handled by another. Owners should be given information that can help them know what’s going on.
So if the P&L states that the restaurant has made profits, but the account feels extremely insecure, don’t believe that one of the numbers must be wrong.
Find out what transpired between you and your partner.
Answering this question can give you more insight into the restaurant’s location than the number.
