Dollars & Sense
Does anyone like dealing with numbers? Most operators got into the foodservice business to feed people. But tracking the loonies and toonies—and knowing just how profitable you are—is very important. And once you get an efficient, workable process, this too can be satisfying. Because you’ll be well on your way to finding out how profitable you can become!
It’s a Plan
No matter how many years you’ve been in business, it’s never too late to create a business plan that helps map out your future. The best are based on general guidelines formed from tracking your expenses—every glass, light bulb, napkin and container of hand sanitizer, as well as rent/building, food and staff costs. Then you can make and substantiate decisions, like purchasing a new ice machine, hiring a second prep cook, even negotiating for less of a rent increase. Or go for a loan. There are several basic plans for restaurants available online, if you’d like something to work from. However you structure it, a business plan should work for you.
Reflecting on successes and failures, adapting to new circumstances and trends, and growing thoughtfully are a big part of staying in business. And carving out time to update your plan every year or two can help. Just create a document file on your computer.
Computerization can make your life easier in other ways. The latest point-of-sale systems can automatically synchronize sales, vendor payments, inventory and payroll data. And they save time by avoiding manually entering all that information. Real-time, accurate numbers can produce reports that help in understanding cash flow, because it’s possible to be “busy” yet experience days when you can’t pay the bills. Those numbers, in turn, help operations streamline systems and invest where it makes the most sense. Let vendors demonstrate their wares for you. Or choose a readily available program like QuickBooks—it does less, but may be enough for your needs.
More on Cash Flow
It’s one of the top reasons foodservice establishments go out of business. Balancing your cash flow means monitoring expenses and covering them in a timely manner. And it can feel like juggling—you don’t want to drop the ball. Maintain constant vigilance to see if numbers are creeping up and anticipate expenses that are on the horizon, both short- and long-term. Does your revenue match?
To be smart, prepare a profit and loss statement each week if possible. A restaurant's P&L summarizes income, expenses and inventory, conveying total profits and losses over a period of time. This makes it easier to track numbers and compare reports from month-to-month and even year-to-year. A P&L statement includes information relevant to your cash flow, including sales and labor expenses. There are plenty of samples online.
Need a financial boost to replace equipment or remodel? Today, banks and credit unions aren’t your only option. For those with excellent credit, and a few years in business, a lender like Prosper or LendingClub could be an option. Be aware, though, that this would be a personal loan, meaning you are liable for the debt, not your business. Crowdfunding sites such as Indiegogo, Kickstarter, RocketHub and FundRazr reward investors in various ways. Look into their rules and regulations, starting here: ncfacanada.org. These may include forfeiting earnings if the funding goal is not met. Friends and family could be another source of funding; put terms in writing to keep things professional and clear to all parties.
Even if you’re comfortable with bookkeeping, etc., there may be times to consult an expert. Note that CMAs (Certified Management Accountants), CAs (Chartered Accountants), and CGAs (Certified General Accountants) are transitioning to one designation: CPA, short for Certified Public Accountant. Having a CPA or other professional review your current system may result in better, faster ways to track numbers and streamline tax reporting. Look for someone who is familiar with the restaurant business. Next on your must-have list: rapport and trust.
Check your documents for when the lease term expires—and what happens next. For example, your contract may switch to month-to-month. Whatever it specifies, you want to be ready. And processes like negotiating less of an increase will be easier if you’re prepared with solid facts on what your location is bringing in, and/or what you have spent on improvements or maintenance.