Financial data is imperative for every business, but it is especially critical for the restaurant industry given the current environment. Many locations were operating on a take-out only basis, or physically shutdown for an extended period, resulting in cash positions being tighter than ever. Timely financial data can help restaurant owners make strategic decisions.
Where can you find this information?
Restaurant owners can obtain and compile their financial data through different systems and applications, such as:
- Point of sale system
- Bank accounts
- Supplier portals
- Payroll registers
- Bookkeeping program
Knowing where to find this data, and putting it together into an accessible, readable format allows the restaurant owner/operator to understand their current financial status.
Cash is king
With the reduction in revenues due to lower foot traffic and increased physical distance required in establishments, along with increasing delivery fees, PPE costs and cleaning protocols, cash is more important than ever. Regular cash flow forecasts should be prepared, addressing questions such as:
- What will the restaurant look like with reduced occupancy?
- What are the 3, 6, or 12 month forecasts?
- What payments have been deferred, and which will be coming due when, such as taxes, rent, and loan payments?
- Where will financing come from for any shortfalls?
Boosting restaurant profitability
- With changes in capacity, staffing requirements will need to be reassessed.
- Analyzing changes to customer traffic and behaviours can allow you to adjust staffing accordingly.
- Consider reviewing hours of operation to compare revenue to cost of labour and other relevant expenses to ensure that variable costs are being covered off. Especially as restaurants have seen a change in the sales mix with online ordering and delivery, being physically open the same hours as before may not make sense.
- Projecting anticipated sales with period-over-period financial data can help in planning inventory purchases during specific periods. As your restaurant ramps up operations, it’s important to review spoilage and high cost items on a regular basis to ensure they are being effectively managed.
- Spoilage = too much inventory
- High cost items = low turnover & theft
- Consider payment terms and lead-time in supplier selection when possible to reduce carrying costs. Suppliers offering longer payment terms provide the opportunity to deploy cash in other ways, effectively providing interest free financing to your operations.
- Consider reducing menu options as operations ramp up to decrease the requirement for different types of inventory. By streamlining options that use the same ingredients, the physical number of products needing to be on hand will be lower, and the spoilage risk will reduce as well due to higher turnover of each item.
BDO can help
Owners should be able to focus on operating their business instead of chasing bookkeeping errors or financial data. We provide the bookkeeping, payroll, and year-end accounting to help restaurant owners rebuild and manage through change. Check out https://insights.bdo.ca/restaurants to discover how we can help you.
Lyn Little, CPA, CA
National Franchise Industry Leader
BDO Canada LLP