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The Cash Beginning Balance represents the total balance of all readily available cash accounts from the previous weeks’ balance sheet. While the P&L and Balance Sheet are critical to understanding your financial health, they in themselves do not show the true impacts of cash. The P&L begins with all revenue from your sales within the restaurant. Not all sales provide cash to the bank on the same day of the sale – for example, A/R and Third-Party Delivery Services. How can Restaurant Operators use the Cash Flow Statement?

So let’s say payroll is due on Friday and it’s 10k, but you only have 5k in the bank. To survive, you’ve got to know what your cash requirements are, knowing that your shortages are going to hit. Think about the profit and loss statement and how restaurant managers and owners know the profit and loss really, really, really well. Profitable restaurants do, too because they may not predict shortfalls in cash. So, that’s what I’m here to teach you about today, the third financial statement. Since the balance sheet tells you what your business is worth, you always want to guard that and make sure that it’s worth what you put into it and that it’s growing.

Understand Your Numbers (Cash In and Cash Out)

Knowing your total cash flow means you know your cash inflows and your cash outflows. Growth, especially unexpected growth, night to night, week over week, or month over month; look at the trend. It could be a great problem to have, but make sure it doesn’t throw you into the 90% failure rate of having poor cash flow management.

You see that level of operational activity on a profit and loss statement. The profit and loss statement talks about all the money coming in. Then, if you deduct from that your expenses, your food costs, and expenses that you are paying for, that equals for profit and restaurant cash flow management loss. At its most basic level, a P&L reflects costs that are subtracted from sales. The result is a number that gives you a rough idea of a restaurant’s financial health. It is also one of the most important statements when understanding restaurant financials overall.

Restaurant Startup Costs

That’s one big reason why cash flow problems exist; it’s that the proper funding does not exist. This graph helps you make those decisions on covering the gap, so there are no surprises. What’s worse than a cash shortfall is a surprise cash shortfall. When you have to pay back those debts, it can take a massive chunk out of your restaurant’s cash flow. Instead of relying on credit, you might want to talk to vendors about getting a discount when paying in full.

Use the order of your master list to determine the order of your count. So, now that we know the first section is the operating section, and the second one is investing, the third one is the financing. Most of you know a lot about the P&L and the balance statement.

Why Are Restaurant Financial Statements Important?

Want to try Eat App’s reporting feature for your restaurant? It also represents how the Balance Sheet and P & L work together to impact your cash and operating accounts. Always ask for deposits when catering or hosting a large event. Set this money aside until the date of the event, as you will be required to return at least a portion if it is canceled. The variance columns should also show the rate (or percentage) change between this month over last month. Remember not to get tripped up by large percentage variances versus large budget differences.

• Financial statements are key documents that a business uses to keep on track and keep investors informed.
• Creating a monthly cash flow statement helps you track the money going in and out of your business and helps prevent surprises.
• You should have less than a weeks’ worth of inventory on hand to minimize waste.
• You will also prepare an annual version of the same reports after your first year.
• There is a related decrease in cash flow when there are increases in assets.

Consider launching a cash discounting program to cut credit card processing fees. Cash discounting provides a discount to customers when they pay in cash. Customers pay less and your business avoids the expense overhead of credit card processing fees. See if Lavu’s Cash Discount Program might be right for your restaurant. Unless you were an accountant in a past life, generating and understanding your restaurant financials & data may not be the most fun part of owning a restaurant – but it’s definitely the most important.