CASH FLOW REFLECTS THE MUSCLES OF YOUR BUSINESS

You have a dilemma, your business has made stellar PROFITS! But you wonder how to pay your income taxes — since there is no cash in your bank account.

How is this possible: be prOfitable buT have no money?

This scenario is more common than you think. Many restaurant owners confuse the terms “cAsh flow” and “profit.“ Those two terms  are not interchangeable. They represent two very different financial measures of spectrum of success. Unclear about it? Many folks out there are in the same boat.

The distinction between the two is of the utmost importance. Cash flow is a cornerstone concept behind a sane and efficient restaurant.

GeTTing the understanding of CAsh fLow is the key to success in the Hospitality InDustRy

Let’s get the hang of it: WHaT IS CASH FlOW?

What about the saying “Cash is King”, we all know it’s important, but what does is the real meaning of it? To get the best scope of the situation, thInk of sales as the muscles of your Restaursnt, and cASh flow as its lifeblood.

An on going business gets its cash flowing in from the sales produced by visiting customers or with food to go. Everything is nice and dandy, there is enough income coming in to cover the cash flowing out to pay salaries, buy food, wines, beers, liquors and pay rent and taxes.

Timing is important, even more than important––it is: KEY — The science of cash flow Management is to get the hang on the timing of when you get paid by your guests = cash in, and when to pay your bills at the end of the month: cash out.

This is why a Business Plan is an absolute MUST. If more money is coming in than is going out at the end of the month, you have “positive cash Flow” and you can laugh to the bank!

If on the other hand more money is going out to pay bills than is coming in from sales, you have a “negative cash flOw.” Then the problem: Where will you find money to cover overdrafts? 

This scenario is not unusual, but very common for start-ups. It quickly becomes crucial to put a quick remedy to the situation if you want to stay in the game!

WhY DOeS CASH FLOW MAttER?

Many restaurants struggle with their day-to-day operations, and can’t grow because they run out of cash.

Negative cash flow is the major reasons why startups fail — According to the Bureau of Labor Statistics about 24% of small businesses fail in their first year, and about 50% fail by their third year.

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