The month is finished. Sales were excellent, and the P&L indicates a profit and there is nothing suspiciously incorrect.

After that, you can check the restaurant’s bank account.

The number isn’t what you expected.

Restaurant owners might find it difficult to reconcile this issue since they believe cash flow and profits ought to be the same. The two don’t line up. A P&L examines the performance of the business’s finances over a certain time period, whereas an account in a bank shows the exact time of money moving into and out of the business.

Understanding the difference can alter the way that a proprietor looks at restaurant finances.

Check out the typical week. Customers pay for meals. It is important to pay employees. Food and beverages are delivered with invoices attached. Rent is getting closer. Credit card payments have their own specific timing. The tax on sales is an obligation.

The purchasing for the coming week has already started.

Looking only at revenue or the ending profit number misses much of that activity.

The clue may be hidden in the price of the best.

If restaurant profits begin to move in the negative direction, food, drink and labor expenses require the attention of restaurant owners.

Cost of selling goods with labor is the primary cost. Bookkeeping Chef’s guidelines place the prime cost at between 60%-65 percent of revenues for a variety of establishments, and emphasizes the importance of monitoring weekly rather than waiting until the end of each month.

Effective prime cost management is less about obsessing over a single percentage and more about noticing movement early.

Let’s say that a restaurant typically performs within its targets however, this week’s rate rises. Maybe overtime went up. Maybe beverage costs were stable however food costs increased. A higher food percentage might make the supervisor think about reviewing buying, waste, menu mix portions and vendor invoices.

The percentage is crucial. The answer is found in the activity of the restaurant.

Weekly reports allow for this conversation to be held in the midst of everyone being aware of the events that have occurred.

The details will be harder to recall two or three days later.

The Vendor’s Bills Are Received

The restaurant will be able to pay an additional time for the items it buys. This timing helps to explain why profit alone is not enough to answer every cash question.

Vendor invoices must be accounted for, tracked and paid. This can be an enormous task for an operation that has numerous suppliers.

Automating the process of paying bills helps manage the process by cutting down on repetitive handling of bills and payment details. The owner can get better insight into the payments that haven’t been deposited into their bank accounts by utilizing integrated bookkeeping systems.

This is important since a bank’s balance when seen in isolation can look healthier than the restaurant’s real-time position.

The current balance could be $80,000 on the account. The figure of $80,000 is small if the cost of rent, vendors or payroll are to take the majority of the coming days.

Cash flow forecasting is a normal outcome.

What happens to our cash once we’ve received the cash we’ve been expecting and fulfilled all our obligations?

This is a crucial distinction in determining whether or not this is the appropriate time to buy an additional purchase to replace equipment or preserve the liquidity.

The money you receive may Not Be Yours

Sales tax illustrates the point particularly well.

Restaurants collect money from their clients, which they follow in accordance with the tax requirements. When these dollars are mentally put together with operating cash, it could provide a false perception of the cash available for spending.

Regularly updated records ensure sales tax compliance as well as giving the manager a better view of the restaurant’s finances.

This is one reason why restaurant accounting works better when financial obligations aren’t viewed as separate islands.

Prime cost affects margin. COGS (cost of products sold) and future payments are affected by the purchases from vendors. Payroll and cash availability are affected by payroll. The availability of cash is influenced by the sales tax. P&Ls are used to record financial performance. Forecasting can be helpful to management.

Connect the pieces.

Bookkeeping Chef makes use of restaurant-specific reports and system integrations to bring those pieces together. Specialized outsourced bookkeeping services are an ideal alternative for businesses that do not have time to manually reconcile financial information. They can take care of much of the accounting tasks without taking the owner away from discussions about finances.

The last point is important.

The goal isn’t for restaurant owners to stop looking at the books because somebody else handles them. The goal is for owners to get details in a manner that will help them understand the situation.

If the P&L shows that the restaurant is profitable but the bank balance seems too tight, don’t think the P&L could be wrong.

Find out what transpired between you and your spouse.

The answer to this question will reveal more about the restaurant’s location than the name.