If your restaurant business is struggling financially, you aren’t alone. You’ve probably noticed eateries opening, filling their tables, making a good name for themselves and then, mysteriously, closing despite their apparent success. What goes wrong? Our firm of auditors in Dubai has made it their mission to specialize in financial management help for the restaurant industry. They say that for most restaurants, the warning signs are clear long before the business owners notice that the writing’s on the wall.
1. Bookkeeping for Compliance Only
While it’s possible to run a business by gut-feel, it’s never advisable. However, when you’re passionate about great food, those cash slips, purchase orders, and invoices might seem less important to your success than the comfort of your patrons. It’s a mistake.
When you’re only gathering financial information for tax compliance purposes, you miss the urgent signs of a business that’s falling deeper and deeper into financial trouble. You could also miss the opportunity to make a vital correction that would have saved your business before it’s too late.
2. High Costs Compared to Income
Are you pricing your menu correctly? It’s more than just a matter of costing out the dish you’re serving. Some restaurateurs don’t even go that far. Pricing is done as a guesstimate – and that means profits (or losses) are guesswork too.
3. Inventory Shrinkage and Loss is Unacceptable
When food’s your business, some waste is inevitable. After all, you wouldn’t want to serve up anything but the freshest produce and you wouldn’t want to run out of stock midway through Saturday’s lunchtime rush either. And then, there’s the matter of staff meals, and what gets taken home, and what inept chefs end up having to consign to the bin. How much of what you buy is actually going to clients? Do you even know?
4. Cash Flow Isn’t Planned
Let’s not beat around the bush. Running a business means knowing how you’re going to pay your bills. Doing so with overdrafts and other forms of credit has a direct impact on your bottom line. Credit is costly. Do you know how to prepare a cash flow forecast? Do you know how to plan cash flow for a full financial year? Or will you reduce profits (or increase losses) by the same amount as the cost of credit? What is that? Will you survive?
5. Monthly Management Accounts Aren’t Analysed
Do you really know how much it costs to run your business? Are there times of the year when you can expect to do better or worse than usual? How can your sales budgets compensate for that? Is your business in trouble RIGHT NOW? Without accurate management accounts to give you that information, you simply won’t know.
6. You’re Thinking About Making Food, But You’re Not Thinking About Making Profits
If you thought your restaurant business was there to make food, think again. That food is undoubtedly scrumptious, but it’s a means to an end and not an end in itself. Any business, no matter what it does, has a single aim: making a profit. To make profits, you need to understand the recipe, and your accounting and bookkeeping services in Dubai should be able to give it to you. If you’re more interested in food than profits, you’ll get great food, but you won’t make a profit. If your accountants only give you numbers, they’re not giving you value. Remember the most basic reason why your business exists.
7. You Fly From One Crisis to the Next
Although there’ll be an element of unpredictability in any line of business, you should at least know that you can pay wages and suppliers, that you’ll cover your rent, and still have something worth taking home after all your hard work. If you never know what to expect, your restaurant business needs financial management advice. Flying from one crisis to the next isn’t sustainable. Come down to earth and get some sound business advice.
Is It Time You Talked to Xcel Accounting?
You often hear it from small businesses in Dubai: “I can’t afford a financial manager!” When you run a small business like a restaurant, you become the financial manager. You may not have the skill, but you should have the people who can give you professional guidance. Your accountants should be the qualified experts who give you the information and advice you need to make decisions. If they’re just giving you numbers, it’s time you moved on.
If you identified with any of the points we mentioned above, your restaurant business is in danger. Talk to us right away. Book a discussion session with us. We’ll send some of the finest restaurant accountants in Dubai to the rescue.