The month is finished. The sales were great and the P&L had a profit, and there was nothing to be seriously in error.
Make sure to check the restaurant’s account.
The number you received isn’t what you expected.
This gap can be a source of frustration for owners of restaurants because they believe that profit and cash availability should have the same story to tell. But they don’t. It’s not true. P&L is a measure of financial performance. On the other hand, the bank account is a reflection of when money moves in and out.
Knowing the differences will help restaurant owners adjust their views on the restaurant’s finances.
Imagine what happens on a typical week. The customers pay for food. Employees have to be paid. Food and beverages are delivered with invoices attached. Rent is coming up. Deposits to credit cards are timed. Taxes on sales are collected but it is the responsibility.
The purchase for next week has already begun.
Focusing on revenue only or the number of profits at the end leaves out a lot of the work.
The answer could be hidden in the prime cost
Food, drink and labour costs merit a closer look when restaurant profitability starts to fall.
Cost of selling goods with labor is a major cost. The Bookkeeping Chefs’ provided instructions place the main cost between 60% and 65 percent of revenue for many restaurants. They also recommend the importance of weekly monitoring rather than waiting until the month ends.
Effective primary cost management is less about obsessing over a single percentage and more about being able to spot changes early.
Let’s say that typically, the restaurant is performing at a high level, but this week, there’s an increase in percent. Perhaps overtime was has increased. The beverage cost may be the same as food prices increased. The operator may review menus as well as waste, portions sizes or vendor invoices, as well as buying if the percentage of food is greater.
The percentage raised the question. The answer lies in the activity of the restaurant.
A weekly report can make that conversation possible while everyone will be able to recall what occurred.
After a period of two to three weeks, it is much harder to reconstruct the specifics.
The Vendor Bills are then delivered.
The restaurant pays in the future for the ingredients it purchases. This is due to the fact that understanding profits alone can not solve all cash problems.
Vendor invoices must be received and logged. In a busy business with numerous suppliers, doing that manually can become the company’s own administrative task.
Accounts payable automation helps organize this process by reducing repetitive handling of bills and payment information. Systems for bookkeeping that connect allow owners to have a better picture of obligations, even though they haven’t yet been paid.
That’s useful because an account balance seen as a whole can appear healthier than the restaurant’s real-time position.
There might be $80,000 in the account as of today. The amount could have a different meaning depending on other factors such as rent or other expenses, such as payroll, vendors or other obligations over the next few days.
This naturally leads to cash flow forecasting.
What happens to the money we have received after we’ve received the cash we’ve been expecting and fulfilled all our obligations?
This is an important distinction to make when deciding the appropriateness of the best time to buy an additional purchase or replace equipment, or preserve liquidity.
You may not be eligible for all the money you thought.
Sales tax illustrates this in particular.
Restaurants collect money from customers that eventually has to be managed according to its tax obligations. If those funds are associated with operating cash, the balance in the bank can create a misleading sense of the amount there to be spent.
The consistency of the records helps restaurants comply with sales tax requirements while providing management a complete picture of their financial situation.
This is one reason restaurant accounting works better when financial obligations aren’t viewed as distinct islands.
Prime cost affects margin. Vendor purchases impact COGS and future payments. Payroll can affect both the labor and cash percentage. The availability of cash is influenced by the sales tax. P&Ls keep track of financial performance and forecasting lets management examine the future.
The pieces are connected.
Bookkeeping Chef utilizes restaurant-specific reporting as well as system integrations to bring those pieces together. Specialized outsourced bookkeeping services are an excellent option for operators who do not have time to manually reconcile financial data. They are able to handle the bulk of the accounting work without taking the owner away from the financial discussion.
The last part is important.
It’s not our goal for restaurant owners to stop examining their books because somebody does. It’s to provide owners with information in a form that will help them understand what’s happening.
Don’t assume that the P&L is not correct if the bank account seems tight but the P&L shows the restaurant has generated money.
Ask about the events that occurred between them.
This question can tell you more about your business than any other number.
