Restaurant Cafe Financial Control

By June 8, 2020 No Comments
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You are in a restaurant cafe business to make a profit and keeping correct financial records will enable you to measure, control, evaluate and forecast your profitability, your financial needs and your financial viability.

Once you have thought through how you will operate your business it is time to consider the steps below:

Step 1 – Prepare a statement of assets you need

The first step is to calculate how much money you need to buy equipment (fixed capital) and how much you need for trading purposes (working capital).

Assume you decide to buy your equipment and furniture outright.

After listing each item you add up the figure and it comes to say $100,000.

Fixed capital needs $100,000.

The next step is to estimate how much cash you need for trading purposes or working capital.  It is a good idea to be conservative and overestimate your likely needs rather than underestimate.

You could plan to start with enough cash for at least one to two months’ outgoings before taking account of receipts from sales.  This is fairly conservative as you would expect to be taking some cash from the day you open.  However, it should ensure you face no severe liquidity problems in the early days when you may have to pay a quarter’s rent in advance, initial promotional cost, connection fees for telephones, and cash for all supplies.  As you become established you should be able to obtain credit terms from at least some suppliers.

The next step, therefore, is to estimate your cash outgoings for the first one to two months’ operation as follows:

  • rent (say three months in advance)
  • connection fee (telephone)
  • food
  • materials
  • initial promotion costs
  • other expenses
  • living expenses

Assume the above totals $20,000.  You can then put a figure on your immediate cash needs.

Fixed capital – $100,000

Working capital – $ 20,000



Step 2 – Plan your finance supplies

Having established that you need $120,000 capital you must plan where it will come from.  Let’s say you can put up $20,000 and are reasonably satisfied you can obtain a term loan from the trading bank for the remaining $100,000.

Step 3 – Prepare a cash flow budget

The most common cause of business failure is running out of cash.  Even profitable businesses can’t get by when the cash dries up.  Proper planning now will make sure your business is not only profitable but also has the cash it needs to get by from day to day.

The Cash Flow Statement tells you how much cash you have and where it is being spent.  You can calculate your available cash by detailing how much money you have received (receipts) and how much money you have paid out (payments).  The difference is the amount of cash you have.  This is shown below:


Cash Flow Statements should be compiled at least once a year.  The cash flow situation of the business should be calculated at least once a month and if necessary, adjustments should be made to the statement.

Keeping records

You must keep certain basic records so that you can monitor how the business is going and review your business plan  Also they are necessary for your accountant to prepare your annual tax return.  The very minimum is to bank your takings daily.  Don’t be tempted to withhold some takings in order to evade tax.  Remember that the taxation authorities have fairly good ideas about what profit margins are earned in different types of businesses.  Moreover, if you do not disclose your real turnover you will have difficulty convincing a future buyer that your real takings were higher.

Your accountant will also need an accurate record of your payments.  

Another temptation is to pay suppliers or take money for yourself from the till.  This will also confuse your accountant and prevent you from measuring your gross profit trends accurately.

Apart from these basic requirements, you should also keep a record of daily takings  By watching your daily turnover, you can detect early any changes in the pattern of trading.

If the average gross profit falls you need to know why.  Have you ‘absorbed’ a price rise on materials without passing it on at higher prices?  Turnover might be steady but has the ‘product mix’ changed so that you are selling more low-margin goods and less high-margin goods?

Finally, do not confuse cash with profit.  Cash may be accumulating because some large expenditure, such as the insurance policy, is paid annually or because you have not paid one supplier because of a dispute over a delivery.

Restaurant Cafe Financial Control

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How to Cook the Books‘ – money matters.

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