The Ins And Outs of Financial Health Check-Ups
These check-ups provide a wealth of information on whether or not your business is on the right road, and warn when it’s time to change course. At the core of financial health is a constant and up-to-date awareness of where the money’s coming from and where it is going, and whether the two flows are balancing out. And the best way to find out, and take the required action to preserve or change trends, is by paying attention to what the figures show regarding the following areas.
1. Are You Breaking Even?
Determining the break-even point, where costs and revenue balance exactly, and checking regularly how current performance relates to it, will give a good picture of your restaurant’s financial health. On the positive side, up-to-date figures will reveal if you are still on track towards reaching your targeted annual profit by staying ahead of the break-even point. But they will also highlight shortfalls. Action can then be taken timeously to change this before the situation gets too bad and the costs climb too high.
2. Are You Paying Too Much?
The restaurant business is unlike many other industries where supplies and labour account for only a small portion of the revenue earned. Instead owners can look at the prime costs – incurred by food, beverage and staff – draining the coffers by around 60 percent. Fortunately these costs are, however, easier to change and reduce than the more inflexible ones such as rent and taxes. This can be done by striking better deals with suppliers, or cutting back on order quantities to avoid having too much cash tied up in idle stock.
3. What’s Working and What Isn’t?
Inventory items which no longer earn their space on the shelf, in the cold-room or in the restaurant, can be cut from the list, and sold or disposed of. This applies to fancy devices aimed at producing no-longer popular items; as well as overly large back-up supplies for high cost\low profit or slow-selling menu items. And it also applies to menu choices and superfluous staff. All these result in pushing up expenses unnecessarily.
4. Can You Weather a Storm?
In the hospitality industry it’s a given there will be seasonal slumps without a comparable reduction in running costs; and that renovations or upgrades will be needed to keep attracting clientele. These are easily dealt with by cutting back on the menu and scheduling vacation time for staff or cutting back on temps. But trend changes that take diners elsewhere, disasters or breakdowns, and are not as predictable.
It is therefore important for business owners to have a clear and up-to-date knowledge of the financial health of their business, to find a way to weather these crises. When it comes to evaluating your finances, leave it to the experts. Let us do the diagnosis and help you understand your account books better. Book a session with us!