Chad Morris
By: chadmorris
Read in 8 minutes

Cash Flow Tips for Restaurants

According to CNBC, the majority of new restaurants fail in less than one year. The reason? In many cases, poor management and lack of cash flow are what lead restaurants to close their doors. You don’t want yours to fall into those statistics!

As a restaurant owner, you know already that in your industry, cash flow is king. Restaurants have unique cash flow challenges that other industries don’t have. Income can be unpredictable to some degree. Also, a restaurant’s inventory can have a much shorter lifespan than stock for other small businesses. To sump up, restaurants tend to have more ups and downs in the business cycle, and short-term changes in cash flow can hard-hit small restaurants in particular.

To succeed, you must develop strategies to help you cope with the ups and downs of cash flow that are typical in the restaurant industry. The following tips and strategies will help you increase cash flow in your restaurant and sail through any financial difficulties.

10 Tips to Improve Cash Flow in Your Restaurant 

To improve the cash flow of your restaurant, consider adopting these ten suggestions:

1. Require Deposits for Catering

Catering is oftentimes a big expense and requires a lot of planning and work. You should require a deposit from every catering customer. The deposit shouldn’t be more than half of the projected bill. This policy results in an immediate inflow of cash.

Receiving deposits from your restaurant’s catering division means guaranteed money. The money can be set aside or used for other expenses in the business.

2. Discuss Terms with Suppliers

Sometimes vendors will offer discounts to restaurants that purchase in volume. Alternatively, you could set up a pay plan that delays payment for a period of time. Comparison shopping may also reveal bigger discounts with other suppliers. By reducing expenses in these ways, cash flow is improved.


3. Rethink Menu Prices

Prices on your menu determine your gross revenue. They need to connect with the prices that you’re paying for the raw materials. If ingredients have gone up in price, it may be time to raise prices on the menu. Other items might need to be removed completely. For example, dishes that don’t sell very frequently. By removing these items, you don’t have to worry about inventory spoiling.

But be careful not to make drastic changes that upset your customers. Start with small changes and receive customer feedback. Little changes in items that are big sellers can lead to big changes in cash flow.

4. Write a Restaurant Business Plan

A business plan for your restaurant can help you have a clearer picture of the issues that affect your small business. It can also help you create goals for your restaurant. Developing a business plan will help you to evaluate financing needs and what the restaurant can do to bring in more customers.

5. Take out a Restaurant Business Loan

There are times when your restaurant will need to have an extra inflow of cash. Maybe you want to expand by opening a second location. Or perhaps your business is slow because it’s the low season and you need help paying your restaurant bills. In these situations, you should consider getting a restaurant loan.

The quick arrival of money is definitely a benefit to the restaurant.

6. Decrease Overhead Expenses

Using cash flow analysis, find areas of your restaurant that are consuming too much money. But there are ways to reduce those fixed expenses. For example, consider combining all of your insurance policies with a single carrier could reduce premiums. Also, reducing office space could save on rent. Or, instead of making large purchases of equipment, consider leasing.

7. Develop Budgets on a Seasonal Basis

Because the restaurant business is very seasonal, it’s important to create budgets that reflect cycles of sales. Realize that in some months you may need to hire additional employees. In other months you’ll spend less on ingredients. When you think seasonally, you’ll be prepared for whatever the future brings.

8. Create Strategies to Bring in More Customers

A low-cost marketing campaign can be a good way to increase your sales. Try to create it not only to bring in new customers but also to remind old customers of your restaurant. Look for value in both Internet, social media and old-school campaigning. The right strategies don’t have to require a large budget and cat set your restaurant apart from your competitors.

9. Integrate Multiple Operations

Try combining different parts of your small business into one. For a restaurant, you might get your wait staff involved in some management roles. Maybe benefits and payroll could be combined into one division. By combining smaller areas into a larger department, expenses can be trimmed.

10. Make Weekly Cash Flow Estimates

Restaurant sales can vary within a single month. For example, sales may reach a peak in the first half of May, which includes Mother’s Day. This, of course, is a big day in the restaurant industry. But the second half of May could see a major drop. By developing weekly cash flow forecasts, you’ll be better able to see what’s driving revenue and what’s not.

Besides a cash flow forecast, you should learn how to perform a cash flow analysis, This will allow you to study where the money is coming from and where it’s going, pinpointing problematic areas so you can adopt solutions.

Camino Financial: Solutions for Your Cash Flow Needs 

If your restaurant needs a quick inflow of cash, consider some help from Camino Financial. Our business loans provide funds for many small businesses just like yours. In fact, most of our clients are restaurant owners. We know the ins and outs of your industry and can match you with the financing solution that adapts to your unique needs and goals.

Our clients receive funds in just a few days after being approved. A quick online application is all it takes to get started. We are loyal to our motto: No Business Left Behind, and your restaurant is no exception. With one of our business loans and our free guidance, you can succeed and take your restaurant to the next level.

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