The month is done. The sales were decent, the P&L reported a profit and there was nothing that appeared to be seriously incorrect.

Check the bank account of the restaurant.

It wasn’t the number you had hoped for.

This disconnect can be frustrating for restaurant owners because they think that profit and cash on hand should speak the same truth. They are not. A P&L examines the financial performance of a firm over a specified time period, whereas it is a bank account that shows the actual timing of money going into and out of he business.

Understanding the difference can help owners change their perception of restaurant financials.

Have a look at the typical week. Food is paid for by customers. Employees must be paid. Deliveries of food and beverages arrive with invoices. Rent is coming. Deposits made with credit cards come with their own schedules. Sales tax has been collected, however that money is a legal obligation.

Already the purchases for the week ahead have begun.

If you are only looking at revenues or the final profit, then you will miss a lot of the activity.

The key to the answer may lie in the price of the best.

If restaurant profits begin to fall, food, beverage and labor costs should be taken into consideration.

The prime cost is comprised of both products and labor. The Bookkeeping Chefs’ instructions place the main cost between 60% and 65 percent of the revenue for many establishments. They also suggest regular monitoring of the week instead of waiting until the end of the month.

Effective primary cost management is less about obsessing over one particular percentage, and more about recognizing changes earlier.

Imagine that the restaurant’s performance is usually within the range of its goals, but this past week, it was higher. Perhaps the overtime rate was increased. The beverage cost may be the same as food costs increased. The higher proportion of food might prompt the operator to examine purchasing, waste management, portions and menus, or even vendor invoices.

The percentage raised the question. The activities that underlie the restaurant provide the answer.

Weekly reports make an opportunity for conversation while everyone still remembers what happened.

The details will be harder to remember the next day or two.

Once the vendor invoices are received

A restaurant could purchase the ingredients this week but have to pay for the ingredients in the future. Because of this, it is the case that understanding profits alone can not address all cash issues.

Vendor invoices must be tracked, accepted and paid. In a business that has many suppliers, doing this manually could become an administrative task.

Automating accounts payable speeds up this process, reducing the time spent on tasks that are repetitive, such as managing payments and bills. These bookkeeping systems are also able to give the owner a clearer picture of debts that haven’t yet hit the account of the bank.

This is useful, because the bank’s balance may seem healthier than a restaurant’s current situation.

The current balance could be $80,000 on the account. The $80,000 amount is small if the cost of rent, vendors or payroll take up a significant portion of the account in the next few days.

That leads naturally to cash flow forecasting.

What happens to our cash once we’ve received the amount we’ve hoped for and fulfilled all our obligations?

This is an important distinction to make when deciding whether this is the appropriate week to buy an additional purchase or replace equipment, or to maintain liquidity.

The Cash Wasn’t Really Yours

The example of sales tax is a good example.

Restaurants get money from clients, which they deal with in accordance with the tax requirements. If the money is mentally added to cash flow, the balance in a bank can be misleading about the amount of money available.

A consistent record helps restaurants stay in compliance with sales tax requirements while providing the managers a clear picture of their finances.

Accounting for restaurant operations is more effective when the financial responsibilities of each restaurant do not have to be separated.

Prime cost affects margin. COGS and future payment are impacted by purchases from vendors. Payroll and cash availability are affected by payroll. Cash availability is affected by sales tax. The P&L tracks financial performance, forecasting can help management look ahead.

The pieces are connected.

Bookkeeping Chef makes use of restaurant-specific reports and system integrations to help bring those pieces together. Bookkeeping outsourcing can be beneficial to users who don’t want to work all night reconciling their financial data.

It’s the last part that counts.

Restaurant owners shouldn’t be able to stop studying the literature regardless of whether they’re being handled by another. Owners should be provided with the information they need in a format that will help them understand what’s happening.

Don’t believe that the P&L is incorrect if the balance of the bank seems to be tight, however the P&L indicates that the restaurant has earned money.

Find out what transpired between you and your partner.

The answer to this question will provide more information about the restaurant’s location than an identifying number.