When bills for monthly expenses and payroll are tallied up, even busy restaurants may lack the working capital needed to grow. Here are four ways you can improve restaurant cash flow and access the money you need to grow your business faster.
How to Calculate Restaurant Cash Flow and Finance Restaurant Growth
Your restaurant might be incredibly busy, but that does not necessarily mean that you have the cash flow you need to not only meet expenses but finance restaurant expansion. Find out how to calculate restaurant cash flow, figure out what you need to grow, and discover some ways that you can free up more working capital to make those dreams come true.
Closing out 2018, the restaurant industry just had it’s best year in 3 years, posting its highest sales since 2015. Spurred by increased demand, this might be the perfect time for you to consider ways that your restaurant can generate more revenue, be expanded or be replicated by adding new locations.
Do You Know How to Calculate Restaurant Cash Flow?
At its most basic level, restaurant cash flow equals cash inflows minus cash outflows. When calculating restaurant cash flow, include inflows such as:
- money (cash, credit or debit card payments) received from customers
- money received from selling assets
- money obtained from financing sources (such as a restaurant line of credit or restaurant cash advance)
And outflows, such as:
- outgoing payments for supplies, payroll, services and other costs of doing business
- money used to buy assets, make repairs, replace equipment or furnishings, etc.
- costs of food and beverage ingredients
- rent, lease or mortgage payments
- utilities – and so on
As you begin to add up all of the ways that money goes out, it’s easy to understand why even a busy and successful restaurant could have a problem coming up with ‘extra’ working capital needed to fund growth after expenses have been met each month. In a perfect world, a restaurant would have more money coming in from customer sales than needs to go out each month to meet expenses and obligations. These net profits could be invested in capital expenditures, set aside for a rainy day, or placed into a savings or investment fund for use in the future, when growth opportunities arise.
But the world isn’t always perfect! So here are four ways a restaurant can improve cash flow in order to identify working capital needed for growth initiatives – or even just to make ends meet.
4 Ways to Improve Restaurant Cash Flow and Grow More Quickly
Consolidate Buying for Negotiated Discounts
Many suppliers and vendors offer discounts based on volume. If you are able to consolidate purchases so that you can buy in bulk, or buy a variety of items from one or a couple of suppliers, you may have the opportunity to take advantage of discounts, or negotiate with them for a special discount just for your restaurant.
Source Multiple Vendors
Whether it’s the cleaning service that comes when your restaurant is closed or the supplier that brings food and beverage ingredients to your restaurant, it’s wise to source multiple vendors and plan to review contracts on a periodic basis. Low pricing is important, but you should also consider the added value of suppliers that exceed expectations or provide great service, because sometimes these considerations outweigh discounts offered by other companies.
Establish a Restaurant Line of Credit
Thanks to our partnership with Sharp Capital, we do offer restaurant cash advances. The working capital you unlock can provide you with additional purchasing power, the ability to cover unexpected expenses, or give you the ability to take advantage of emerging growth opportunities without having to wait while you are trying to line up financing.
Many restaurant chains use time-limited offers and loyalty rewards as part of their marketing strategy. These types of marketing tactics can make it easier for you to influence (and predict) customer demand. In turn, you can also improve accuracy for predictions for staffing, inventory, food and drink ingredients, supplies, etc., that will be needed to meet demand at certain times.
Thinking about a Restaurant Cash Advance or Equipment Financing?
We offer restaurant financing programs that can give you access to working capital that you can use to grow your restaurant or resolve short term restaurant cash flow challenges. There is no cost to apply, no obligation to accept, and we would be happy to work with you to help you determine which financing option would be best for your restaurant.