What kind of cash flow management strategy should be used in a restaurant?

I am looking to gather information about cash flow management strategies to implement them in a restaurant business.

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4

Dear Victor

Restaurant business is usually cash positive. Most restaurants get credit from their suppliers (30-60 days) but get paid when they sell their product. Even if you accept credit cards, you will get paid within a day (at least in Europe you do), except for Amex. Amex can take up to 45 days to pay you, and that is why many establishments in Europe do not accept it (as well as their outrageous charges!).

Even if your supplier will not give you credit, you can use your business credit card (assuming you have one) to purchase supply giving yourself average of 20 days credit whilst your money in is virtually the same day or next day.

So my advice would be:

- Try to get credit from your suppliers
- Avoid Amex like a plague
- Build on the strength of your positive cash flow as there are not that many businesses that have this luxury!

Good luck

3

I suggest that your answer lies within your budget, and business plan.
If your prime cost are within the industry acceptable range, and you have proper controls in place, cash flow should never be an issue.
Profitable volume , and the increase in that volume is normally your next goal.
Extended terms with your supplier depends upon your credit score, and payment history. You may benefit from a "prime supplier" agreement to reduce your food cost, and deepen your relationship.

Good Luck,

John

1

Apart from the above-mentioned suggestions, I'd like to add that one of the most necessary strategies is to track cash flow every week (or at least every month) will help you gauge the costs, plan ahead and monitor the budget.

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