A smart financial plan protects your business
The role of a restaurant budget is to help you estimate the funds required to run different departments of the business. Today, the process of preparing a budget is even easier thanks to the availability of restaurant budget software. Startup restaurants especially must include a budget in their business plan to avoid finances going haywire. The advantages of budget making include being able to anticipate expenses, set targets for growing the business and stay within financial limits. Once you've designed your operational budget, regularly review it to ensure that your business is on track as planned.
What You Need
- Restaurant budget software
- Projected sales figures
- Projected costs
- Budget methodology
Step 1 A computerized operation helps ease the task of preparing a budget. Shop around before you acquire suitable budget software or you can prepare your own worksheet if you would rather not use software. This will include columns for projected sales, projected expenses on a weekly or monthly basis. Some restaurants use 13 periods of 4 weeks each or a 12-month period to monitor their budget. Each column can be subdivided to show details. Calculate net income by subtracting expenses from income for the period and compare assets and liabilities.
Step 2 Estimate an approximate value for sales expected in a given period on the basis of customer traffic.
Step 3 Calculate your expected costs. These may be fixed costs (insurance, rent or loan repayments), semi-variable costs (salaries, utility bills) and variable costs (supplies and distribution costs, commissions, repairs).
Step 4 Calculate your break-even point (this is the minimum sales required to pay all expenses before you can make a profit). Your restaurant business plan must show the percentage of your budget which should be allocated to each area of the business.
Step 5 Decide between two possible ways of preparing the restaurant budget – either the 'projections' or 'required profits' method. In the projections method, projected profits are calculated on the basis of projected revenue and costs. The other method involves starting with projected expenses, calculating required profit and then estimating what is actually possible.
Tips and Warnings
- For budgeting, use the same software package as is used for accounting. Your accountant should be able to help you figure out ways to structure a budget.
- An established restaurant can easily use the projections approach as it has previous years' data to base projections on.
- Evaluate your restaurant budget regularly. Is the restaurant meeting its targets? If not, how can you modify expenses? Should pricing be looked at again? Variable costs change with sales volumes but fixed costs remain the same up to a certain point.
- Don't use the projections approach to prepare a budget for a new restaurant.
- Don't forget to factor in initial costs when preparing a restaurant business plan for a new restaurant.