Financial data is imperative for every business. In fact, regularly reviewing and using quality financial information when making decisions can often be a key driver to business success. For restaurants, having financial data in a timely manner can help franchise, independent chain and standalone restaurant owners alike in making key decisions to support operations when business is slow.
Decision making is much easier when your business has accurate and timely financial data. Not only does it give you insights as to whether or not you are making a profit, data can also allow you to understand if you're on track to meet your financial goals and if you will have the necessary cash available to make investments into your restaurant(s) and sustain operations during slow periods.
The data you need can come from a number of different systems and applications. These can include your point of sale system, your bank account, and payroll filings. If your bookkeeping is up to date—either prepared by yourself in a bookkeeping program or a by a bookkeeper—your financial information will generally be more understandable and usable.
That's why restaurant owners should ensure they are getting detailed and accurate financial statements shortly after the month ends. The sooner this information is available, the better positioned you will be to adjust and maintain the profitability of your operations. Having good financial data allows you to make comparisons with prior periods, previous projections, the best-run franchises in your system, or other stores you own if you're a multi-location operator.
Having accurate financial data is key to figuring out ways to reduce costs.
- If you know or expect business is going to be slow, you may consider staffing your store differently. By analyzing customer traffic, you can look for times when there are fewer people coming in and adjust accordingly by having fewer staff on hand. Based on this data, you can also give lower-paid employees additional or longer shifts, which will reduce average wages per week without affecting customer service.
- Data can also help inform your hours of operation. Many owners will want to stay open as long as possible to maximize revenue, but it might not make sense because of the additional labour and other costs. While increasing revenue is important, there is the risk that overall profitability might decline as a result of staying open longer.
- Projecting future expenses—such as those from suppliers—can also help restaurants when business slows down. Payment terms should be a consideration in supplier selection wherever possible. Having suppliers that offer longer payment terms will give you the opportunity to deploy cash in other ways.
- Having an understanding of how much inventory you need by projecting anticipated sales can help you plan inventory levels during a particular period. Inventory can tie up cash until it's ultimately sold. But with perishable items, the risk around too much inventory increases due to spoilage. With non-perishable items, there is also an increased risk of theft for higher-value items. By knowing what products are selling better than others, you can project how much you need to order and keep more cash when sales are slower.
- Once the balance sheet is analyzed, franchisees, independent and chain restaurant owners should do a cash-flow forecast—an essential step in running a successful business. One of the top reasons why businesses fail is because they run out of cash and cannot pay suppliers or employees.
Without data, you are likely making decisions without a full picture of your operations. Having timely and valid financial data can give you the ability to make accurate projections in both the short and long term.
Get a free checklist here to help you maximize profitability during down times.
BDO can help
Owners should be focusing on running and growing their business instead of handling bookkeeping errors or chasing financial data. We work with restaurant owners to provide the bookkeeping, payroll, and year-end accounting they need to run a successful business. Contact our restaurant team to find out how we can help you.