What happens if you don’t properly budget your finances? For restaurant business owners, this may mean poor cash flow, denial of restaurant business loans, or improper credit tracking. This goes to show that proper financial management is a crucial aspect in ensuring business success.
Proper budgeting is a way for restaurant owners to see the future of their business. It outlines your financial limits and how you can properly utilize those limits. Keep in mind that you won’t be able to accurately pinpoint or control every cost, but having a budget gives you a foundation for the financial decisions you have control over.
Finances are a huge part of your daily operations. This means that every penny you spend or save can impact your bottom line. It’s important to keep track of your finances by avoiding these common budgeting mistakes restaurant owners make.
1. Unorganized Accounting Processes
What might seem like an innocently disorganized accounting can actually hurt your finances and eventually drain your profits. For example, if you’re fond of giving out gift certificates, keep in mind that those are liabilities until redeemed and you need to take note of that in your accounting books. It’s important to make sure that the money that should go in the bank should end up in the bank. You can refine your accounting process by making sure that your finances are prepared and recorded accordingly. Organize your purchase orders and vendor balances with their respective invoices.
2. Working with Accountants that Have No Experience in Restaurants
One of the most common mistakes restaurateurs make is hiring an accountant or bookkeeper that doesn’t specialize in dealing with restaurants. Given that a simple financial mistake can make or break your business, it’s important to hire someone with industry experience. Accountants that have specific experience with restaurants can give you effective advice in dealing with various accounting issues your business encounters.
3. Failing to Allocate Capital for Marketing
What’s the use of offering delectable meals if no one’s there to eat them? Marketing is a crucial aspect in every business because without it, you won’t be able to establish brand identity, generate more customers, and grow your business. By setting a marketing budget, you’re investing in the growth of your business.
Thankfully, you don’t have to allocate thousands to kick-start your marketing. In fact, marketing is a controllable cost. This means that as your business grows, so does your marketing efforts. Experts recommend that approximately 3% to 6% of your monthly revenue should be reserved for marketing. But at the end of the day, you still need to evaluate your finances and set a realistic budget.
4. Human Error
When running a business, mistakes are inevitable. While most errors are unintentional, some are not. Theft is a common problem among many business owners, and not just in the hospitality industry. Oftentimes, restaurateurs assign financial matters to one person, either the manager or the bookkeeper. Without check and balance, suspicious activity can occur without your knowledge.
Another common issue restaurateurs deal with is with your profits being eaten away by your employees. Literally. Many restaurant staff sometimes nibble away as they work or give away food to customers, or family and friends. Another human error is messing up order taking or preparing customer orders. This can result in wasted food, which can hurt your bottom line. It helps to conduct a thorough investigation to know which employees are worth keeping or letting go.
5. Not Minding External Factors
External factors such as festivals, holidays, bad weather, street closures, or salary increases can greatly affect costs and sales. Make sure to include these changes in your books. Stay up to date with these changes by keeping up with your local chamber of commerce or tourism department. By doing this, you’ll be able to anticipate external factors that can affect your business.
6. Inefficient Processes
As a business owner, you should regularly evaluate whether you have the right systems in place or not. Assess your restaurant and identify your weak spot. By doing so, you can effectively and efficiently correct them. For example, let’s say you have issues with excess inventory. Your working capital can get tied up in excess inventory, which can affect your cash flow. To avoid this problem, be sure to promote consistent practices when it comes to physical inventory. Perform sport checks, and run waste reports.
7. Not Keeping Up with Technology
Do you still use MS Excel to track everything? If so, then you’re way behind the tech train. It’s important for restaurateurs to keep up with technology. You can start by purchasing a POS (point-of-sale) system that can integrate with the accounting software you use. This ensures you have access to all your data in real-time which can help you make wise business decisions quickly.
Restaurant Business Loans to Finance Your Restaurant
Sticking to a budget can be challenging for many business owners. However, if they want to maintain a stable cash flow, they have to adapt to necessary changes and keep their expenses at a minimum. If you think you need additional working capital to run your restaurant, you can easily apply for restaurant business loans in banks or alternative lenders. An additional injection of cash to your business can expand your spending capabilities and make sure that you have enough funds on hand to invest in different opportunities. But as you go along the way, make sure to enforce these practices and gain better control of your restaurant’s finances.