How to Increase Your Restaurant’s Cash Flow

May 10, 2021 | Operations

Improving your restaurant’s cash flow is more important than ever, but also simpler than you think. Use these tips to increase profitability for your F&B business in any climate.

Optimize Cash Flow for your F&B Business in Any Climate

Before the pandemic, the Philippine restaurant industry was slated to experience a growth of over 8% in 2020, soaring to a total market value of $16 billion annually. Instead, the pandemic projections showed a dramatic decline to $7 billion in the same year, based on a September 2020 report by the US Department of Agriculture’s Foreign Agricultural Service.

Restaurants all over the country are feeling this hit, and increasing cash flow is going to be more important than ever for your restaurant if you want to continue to grow in the new normal. That means both maximizing your income and minimizing your operating expenses.

While this might not necessarily be a new concept to you as a business owner, some methods of increasing cash flow have more impact than others during these unprecedented times. Let’s look at four of the best techniques you can use to improve cash flow in the current climate.

 

1. Ensure that your accounting is updated

Accounting is an essential part of doing business, even if it’s not the part which restauranteurs are most passionate about. Nevertheless, it’s impossible to manage your expenses and income if you’re not keeping track of them.

Make sure that you input every receipt and invoice into your financial tracking tools at the end of each business day. This will help you create accurate statements and financial reports that you can use when making important decisions in the future to help increase restaurant cash flow.

You can also reduce your accounting work by using a restaurant POS system that integrates directly with other accounting platforms. This way, you eliminate the tedious effort of inputting invoices manually and can see the financial performance of all your locations in a single glance. 

 

2. Trim the fat from your menu

Every menu item that you offer has an inventory cost. If it’s on your menu, you have to keep restocking its associated ingredients. This is true even for the dishes which people don’t order as often. 

Gather data on how often customers are actually ordering each of your dishes and check the profit margins on menu items. If there are menu items that aren’t generating positive cash flow or acceptable profits for your restaurant, you might want to consider putting them on the chopping block.

To help figure out what gets to stay on your menu, plot your menu items into a growth-share matrix.

You want to identify which items belong to the following categories:

  • Dogs: Menu items that don’t cost a lot to prepare, but generate little revenue
  • Cash cows: Items that cost little to prepare, but generate lots of revenue
  • Stars: Items that may cost a lot to prepare, but are top-sellers
  • Question marks: Items that cost a lot to prepare and generate little revenue, but which may be rapidly growing in popularity

Once you’ve found the dogs in your menu, you’ll want to prioritize shelving them for the time being. They might be one of the less visible costs in your books, but having a lot of dogs on your menu can add up.

Mosaic Menu Optimization

Mosaic Analytics Menu Engineering Report

You can also automate identifying these components of your menu with an analytics  platform like Mosaic Solutions. These systems can automatically balance profitability against popularity, determining the margins for each item and allowing you to get a read on how your menu items are doing, even at particular times and days of the week.

 

3. Stay on top of inventory

Once you’ve trimmed the fat from your menu, it’s important to keep a tight rein on your inventory and ensure that you’re avoiding food wastage as much as possible. This means ordering only as much as you need.

Knowing how to optimize your restaurant inventory orders requires you to keep a close watch on your stock levels, as well as your sales. You should be generating sales forecasts so that you know how to adjust your orders in response to changing demand.

With this data, you’ll be able to set par-based inventory targets. With targets like these, you’ll never be below safe operating margins, and you can avoid overstocking and generating unnecessary food waste.

You can make the inventory optimization process even easier and more efficient by automating it with an inventory and purchasing management system. With this, you can manage your restaurant’s stock levels, generate reports, and even automatically place an order when the stock falls below par levels. Restaurant management systems can also automatically optimize your inventory order amounts based on your inventory trends and sales forecasts, and place purchase orders directly with preferred suppliers.

You can also reduce spoilage by labeling and organizing every batch of orders that come in according to when they were delivered, so that you know when food is about to expire. This allows you to prioritize the use of the oldest ingredients in your stock, so that they don’t go to waste. It also has the added benefit of improving food safety, so that you never inadvertently supply customers with spoiled ingredients.

 

4. Reduce overhead costs

Your restaurant likely won’t be operating the same way as it did before the pandemic. For example, fewer customers are willing to dine in, which could motivate a move towards al fresco dining or delivery services. 

This scenario is associated with various impacts on a restaurant’s overhead costs. A dispreference for indoor dining means that you don’t need to keep the air conditioning on as much, which can significantly reduce your monthly electric bill. Fewer customers overall also means that you need fewer employees to run your restaurant, which can translate to less money spent on staff salaries.

Identifying how to reduce your overhead costs can be one of the biggest ways you can improve your restaurant’s cash flow. However, at the same time, you don’t want to resort to drastic measures like lay-offs unless you have no other choice. It may be better to focus on improving the way you already do business, especially through software automation and digital transformation.

Solving a Mosaic of Problems with One Solution

You can solve many of your restaurant’s biggest cash flow concerns with software that helps you gather and crunch the numbers, letting you make data-driven decisions that increase overall profits. 

Digitally transforming the way you do business might seem like a daunting task. But you can make it easier by having a single solutions provider take care of everything, including the installation and training for your staff.

Mosaic is your solution to making this all happen with one software suite. We offer a robust and highly integrated restaurant POS system, data analytics dashboard, and purchasing and inventory management systems that help restaurant owners make data-driven decisions at every step. Our platform reduces expenses and saves time on manual processes, allowing you to focus on growing your restaurant and creating an experience that keeps customers coming back for more.

Ready to take your restaurant to the next level? Contact us, and let’s work together to help your business thrive!

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