9 Ways How To Improve Cash Flow For Your Restaurant

• Reading Time: 4 Minutes
• Published: February 3, 2021
• Last Updated: February 11, 2025

Having a positive cash flow make a world of difference for business owner and restauranteurs alike. It is useful whether you want the cash for operational use or to grow the business. Being efficient in cash flow management will set you apart from your competitor and help you prepare for future opportunities and uncertainties. How do you make sure you have a positive cash flow or improve your cash flow if it is already positive. Here is how –

Increase in Sales

The simplest solution to this will be increasing your sales, but this not an easy process. We have earlier talked about how you can increase profit margins for your restaurant business, and in the same article, we have talked in detail about a few ways you can increase your sales. It will give you some idea of how you can increase your sale and increase profit margin, which will also help improve cash flow.

Consistent Bookkeeping and Accounting

Regularly updated accounts will help you manage your cash flow efficiently. Not only the reports will help you understand your financial health, but it will also help in tracking any discrepancies, which could be the reason for any cash leak. Just make sure your bookkeeper or your outsourced bookkeeping services provider is on it and doing so accurately.

Perform Cash Flow Forecasting

With the help of your accurate figures from your financial books, you can prepare a cash flow forecast that will help manage your cash efficiently. Cash flow forecasting lets you know when you may run out of cash and help plan your activities accordingly. Not only this, it will help you understand whether it is feasible to make high investment expenses like capital expenditure during a particular period.

Create Seasonal Budgets

The restaurant industry is highly dependent on the availability of leisure time and disposable income of customers, hence there are seasons when your business will soar, and sometimes it will drop. With the help of the cash flow forecast, you can prepare seasonal budgets. This budget will help you comprehend your need for a particular season and thus enable you to allocate resources accordingly.

Keep a check on your costs

Cost of goods sold, Labour Cost, and Overhead Cost are three major expenses for a restaurant business. You must cut down your expenses as much as possible without compromising the restaurant’s operation’s quality and efficiency. Few ways of doing so are –

• Cut food cost – Analyse your existing vendor, if needed, search for an alternative if you find an issue with raw material or price. Modify your portion sizing and make sure to reduce food waste.
• Revise Menu Item – Scrap items from your menu, which have a low sale and low-profit margin. Adjust high sale but low-profit menu items. This process will also help manage your inventory inefficient manner.
• Employee Management – While schedule your employee consider that few days of the week or certain seasons, you have lesser footfall and hence you require lesser staff. You should understand the trends and forecasting footfall for the particular days or seasons with the help of historical data and reports from your POS system. Additionally try to reduce staff turnover, with higher staff turnover you have to incur higher costs thus negatively impacting your cash flow.
• Reduce Utility Bill: Review your energy bills, purchase energy-efficient appliances, frequently check on refrigerator temperature, and minimise appliances that are not needed at a particular period.

Optimum & Efficient Inventory Management

Manage your inventory accurately, check every week whether if you are over-buying food and beverages. Make sure your order is accurate that it is neither less or more than what is required.

• Stop Relying on Credit

If you rely more than often on credit, it is time that you should stop doing so. While credit is a useful tool but exploiting this benefit will only become a reason for your restaurant’s downfall. Try to clear all your vendor payments on time, try to negotiate for discounts on upfront payments and if you are availing credit facility make your payment way before the credit period ends.

• Analyse and diversify your vendor frequently

Don’t keep all your eggs in one basket, and this idiom is applicable for your vendors as well. Your final product is dependent on the raw material your vendors provide. So it is important to diversify and have multiple vendors, so if one fails for any reason, you always have a backup to rely on. It is also important to check your vendor contract regularly and see whether your vendors are abiding by the contract terms.

• Emergency Funds

Like how personal finance works, businesses also need to have emergency funds that could be utilised for any contingency. Whenever you have a cash surplus, save a part of it in an emergency fund, it will act as a safety net for you.

An appropriate cash flow management will help you go a long way.  If you are also struggling with a negative cash flow of your restaurant. In that case, our restaurant accounting experts can help you with cash flow forecasting and also help you with overall financial planning. Contact us today to talk to our experts.

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