The month is finished. The month has ended.
Make sure to check the restaurant’s account.
The number you received wasn’t what you were hoping for.
Restaurant owners, this disconnection can be a source of frustration because profit and available cash seem like they should be the same. However, they aren’t. A P&L evaluates the the financial performance of a company over time and the bank account represents the timing of money actually flowing into and out of the company.
Knowing the differences could help restaurant owners shift their views on the restaurant’s finances.
Imagine what happens on a typical workday. The customers pay for food. The payment of employees is essential. You will receive invoices for drinks and food deliveries. Rent is coming. The credit card deposit is also timed. Sales tax is collected, but the money is a legal obligation.
On the other hand, the next week’s shopping has already begun.
Concentrating on revenue or the number of profits at the end misses much of that activity.
The Clue May Be Hiding in the Prime Cost
If restaurant profitability begins to decline, the cost of food, drinks and labor costs should be taken into consideration.
Prime cost is made up of the price of goods and labor. The bookkeeping chef’s guideline places prices for the prime cost at around 60% to 65% for many restaurant and stresses weekly monitoring as opposed to staying until the end of the month.
It is more important to be able to detect any changes in the early stages rather than worrying about a specific percentage.
Imagine that the restaurant’s performance is generally within its target, but this past week, it went up. Maybe overtime was boosted. Perhaps the cost of beverages was stable while food costs grew. A higher proportion of food may prompt the owner to examine the menu, purchases, waste, mix, portions, or vendor invoices.
The percent raises the issue. The answer lies in the restaurant’s activity.
Weekly reports allow for this conversation to take place while everyone is still aware of what has happened.
The details are harder to remember two or three days later.
The Vendor’s Bills Are Received
Restaurants can purchase ingredients during a week and pay for them next week. It’s because of this timing that understanding profits alone does not solve all cash problems.
Invoices from vendors have to be received, tracked and paid. In the course of manual processing, an office with many suppliers could become an enormous administrative burden.
Automating the process of paying bills can help organize this by reducing the repetitive handling of bills and payments. Systems for bookkeeping that are linked allow owners to have a better view of their obligations, even though they haven’t yet been paid.
It’s advantageous because, considered as a whole the balance of a restaurant’s bank account might appear to be better than its actual financial situation.
Today, there may be $80,000 on the account. The amount could have a different meaning if it is impacted by other factors such as rent, payroll, vendors and other obligations for the next few days.
That leads naturally to cash flow forecasting.
The best question to ask is “What will happen to our funds after we receive it and have fulfilled the obligations that we know?”
It is essential to be aware of the difference between them when deciding whether this week is the ideal time to replace equipment or buy more items or to conserve liquidity.
You might not have been eligible for all the money you thought.
The sales tax example is a good one.
The cash a restaurant gets from its customers will eventually need to be handled in accordance with its tax obligations. If these funds are mixed with cash flow, the balance of the bank account could provide an inaccurate picture of how much money is available.
The consistent recording system allows restaurants to comply with the sales tax laws while also providing an accurate image of their financial condition.
Accounting for restaurants is more efficient when the financial obligations of each restaurant are not handled separately.
Prime cost affects margin. COGS (cost of goods sold) and future payments are affected through purchases made by vendors. Payroll and cash availability are affected by payroll. Sales tax influences cash availability. P&Ls track financial performance, while forecasting allows management to examine the future.
The pieces join.
Bookkeeping Chef employs restaurant-specific reporting and system integrations that help connect the pieces. Outsourced bookkeeping can help owners who do not wish to work all night reconciling their financial records.
It’s the very last one that counts.
It’s not the intention of restaurant owners to stop checking their accounts because someone else does. It’s essential that owners get information so they are aware of the situation.
Don’t think that the P&L is correct if your bank account seems tight but the P&L shows the restaurant has made money.
Find out what transpired between you and your partner.
The answer to this question will provide more information about the restaurant’s location than an identifying number.