Tips to Manage your Cash Flow
You’ve probably heard the saying “Fail to prepare, prepare to fail,” and this certainly rings true when it comes to running a business. Don’t leave your restaurants’ success to chance or luck — put a business plan together and prepare for success!
There are three major areas on your profit and loss statement (P&L) to manage your cash flow. If any of these areas aren’t where you want them, we suggest you create a plan to improve these to have the biggest financial impact.
- Grow sales
- Manage food
- Manage labor
Set monthly, weekly, daily, and hourly targets for sales, food and labor and communicate those expectations with your team. Then, track and communicate results with your management team on whatever interval is most impactful for your organization.
Reward great performance — performance that exceeds minimum expectations and achieves your desired results. And equally as important, don’t wait until month-end to address underperformance — address and correct it immediately.
This is very important for newly built or newly acquired restaurants, especially those that have tight margins for cash flow coverage and heavy debt service. Make sure your key leadership knows early on what cash flow is needed to cover lender obligations.
Managing and growing sales targets
- Review sales drivers – Evaluate where your increases are coming from and implement strategies to further boost those drivers. Likewise, identify unleveraged sales opportunities and plan to go after them.
- Utilize menu pricing tools and studies – With inflationary cost pressures on nearly every line item of your restaurants’ P&L, you cannot ignore those menu boards.
- Consider hours of operations – Does it makes sense to expand your hours? If so, which hours will bring more guests into your restaurant most profitably?
- Incentivize speed of drive-thru – With significant drive-thru business, incentivize speed and accuracy and reward managers for getting more cars through the drive-thru. Consider technology and equipment investments to help your team with these efforts.
- It’s not just a cash business – With considerable cashless, mobile, and delivery business, evaluate your restaurant controls and internal back-office procedures to be sure they sufficiently reduce opportunities for theft, verify that your restaurants’ deposits are clearing your bank account in an accurate and timely manner, and identify any sales deposits that are not.
Until next time, build that sales plan, communicate your targets, and reward your team’s top line successes. When we meet again, we will dive into opportunities for managing the two biggest restaurant operating costs — food and labor.
And don’t go at this alone — give your CLA McDonald’s team a call — and we’ll get you there.
Angel is a principal with CLA with more than 25 years of accounting experience advising owners of McDonald’s franchises around the country in all phases of the business, from start-ups including registered applicants and next generation candidates through transitioning first generation operators into retirement or exiting the business.
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