The month is done. The sales were strong, the P&L is in profit and nothing appears seriously to be wrong.
Make sure you check the account of the restaurant.
You didn’t get the number you had hoped for.
This gap can be a source of frustration for restaurant owners as they believe that profit and cash on hand should tell the same tale. They are not. A P&L measures the financial performance of a company over time in time, whereas the bank account reflects the time frame of money moving in and out of the business.
Understanding the difference will change how a restaurant’s owner thinks about their finances.
Imagine what might happen during the typical week. Customers pay for meals. Employees have to be paid. Food and drinks are issued. Rent is coming. Deposits to credit cards are timed. Sales tax has been collected, but the money is a legal obligation.
Already the shopping spree for next week have begun.
If you just look at the revenue or the final income, then you’ll miss a lot of this process.
The answer could be hidden in the price of the best.
Food, drink and labour costs are worth a closer examine when restaurant profitability begins to fall.
Cost of selling goods with labor is the main cost. The Bookkeeping Chef’s guidance puts primary costs between 60% to 65 percent for a variety of restaurants and emphasizes monitoring on a weekly basis instead of staying until the end of of the month.
It is essential to be able to spot changes early than obsessing about certain percentages.
Imagine that the restaurant normally does well, but this week, there’s more of a percentage. Maybe overtime was boosted. Perhaps the cost of beverages remained steady however food prices soared. The chef may look over menus or waste, portion sizes or vendor invoices, as well as purchasing if the food portion is greater.
The percentage raises a question. The answer lies in the activity of the restaurant.
Weekly reports allow the discussion to continue while everyone is still aware of what has happened.
After a period of two to three weeks, it becomes much more difficult to reconstruct details.
After the vendor bills are paid
The restaurant will pay in the future for the ingredients it buys. This explains the reason why profit alone isn’t enough to answer every cash question.
Vendor invoices have to be received and tracked. This can take an enormous task for an organization that has several suppliers.
Accounts payable automation helps organize this process by reducing repetitive handling of bills and payment information. The user can have better insight into the obligations that haven’t yet landed on their bank account through integrated bookkeeping systems.
It’s important because a bank’s balance when seen as a whole can appear healthier than the restaurant’s real-time position.
It could be that you have $80,000 on your account right now. The figure of $80,000 means little if rent, vendors or payroll take an enormous amount over the coming days.
Forecasting cash flow is a normal outcome.
The most appropriate question to ask yourself is “What will happen to our funds after we receive the money and have met our commitments we’ve identified?”
The distinction could be important when deciding whether this is a suitable week to replace equipment, make an additional purchase, or to preserve the liquidity.
And Some of the Cash Wasn’t Yours at All
The sales tax example is a good one.
The cash a restaurant receives from its customers is eventually going to need to be handled in line with its tax obligations. If these funds are combined with operating cash, they can make a false impression about the cash available for spending.
Regularly maintained records help restaurants to comply with the sales tax laws as well as providing an accurate view of their financial position.
This is a reason why restaurant accounting is better in situations where financial responsibility isn’t seen as separate entities.
Prime cost affects margin. Vendor purchases impact COGS as well as future payments. Payroll affects both labor percentage as well as cash. The availability of cash is influenced by the sales tax. The P&L tracks financial performance, and forecasting assists management to look ahead.
The pieces link.
Bookkeeping Chef assists in bringing these pieces together with restaurant-focused reports as well as system integrations. Bookkeeping outsourcing services with specialization are an ideal alternative for businesses that don’t have time to reconcile their financial data. They are able to handle the bulk of the accounting work while removing the proprietor from discussions about finances.
It’s the last thing that counts.
Restaurant owners should never stop going through the manuals even if they’re managed by someone else. Owners should be given information that can help them know what’s going on.
If the P&L indicates that the restaurant made cash, yet the bank account feels extremely tight, don’t presume that any of the numbers can be incorrect.
Find out what happened between you and your partner.
The answer to that question will reveal far more about your restaurant than any number be on its own.