Without a cash flow management strategy, you can find yourself in very tight situations. It can stress the business, not forgetting yourself too. Add the unpredictable nature of income flows of a restaurant business, it can do serious harm to its viability. Here, we share tips to help you implement an effective cash flow strategy for your small restaurant.
1. Organise your books
After a day in the kitchen or front of house, the last thing you’ll want to do is the books. It’s a usual sight to see invoices and receipts posted everywhere, from the kitchen to the dashboard of your car. Some go missing or unattended to. Stop it! You’ve got to make time or find the resources to organise them. The latter is worthwhile investing in. Good knowledge of your income and expenses is the most fundamental component of an effective cash flow strategy.
2. Forecast your cash flow
Maintaining a cash reserve is liberating. You’ll never know when it is needed. To this end, having a cash flow forecast is good accounting practice. You’re less likely to be caught by surprised of expenses due. In addition, with a cash flow forecast, you’re in a good position to break up or manage expenses due, especially for big-ticket items.
3. Avoid over-reliance on credit
A favourable credit term can be deceivingly attractive. But they are temporary reliefs more than anything else. Over-reliance on them can be damaging in the long term. It can spiral out of control. Instead of accepting credit terms, seeking out discounts for quick payments or regular payment plans may work better for both parties.
4. Keep your overheads lean and mean
No, it doesn’t necessarily always mean cutting expenses. Never be penny wise, pound foolish. Let cutting expenses be a final resort where possible. Instead, focus on increasing productivity of your team and equipment. It might call on some upfront investments in new apps or machinery. But if the long term benefits outweigh the initial investment, it’s probably a prudent capital expense.
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