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3 key cash flow strategies for restaurant owners

3 Key Cash Flow Strategies for Restaurant Owners

How are you managing your restaurant’s cash flow? Having excess cash from your peak season is nice to have but how you manage it is even more important.

Below are 3 considerations to think about when looking at your yearly cash flow projections.

3 Restaurant Cash Flow Strategies

Budget Cash Flow Monthly

Many restaurants look at their cash flow planning for a year at a time but it’s important to review this plan every month to ensure it is still on track and to see if any changes need to be made.

Seasonality is a factor for virtually every restaurant and must be considered when budgeting your cash flow. There will obviously be more cash flow during peak season and less cash flow during offseason months. How you manage your excess cash during peak season can help your business survive during slower months.

Here are a few suggestions on how to handle your excess cash flow:

  • What do you need to cover your taxes for the year? Set aside excess cash from your peak times to be used for year-end tax payments. Better to get a start on this when cash is available than try to set money aside when times are slow.
  • Deposit some of your excess cash into a reserve account. Only keep the cash needed for current operations in checking and then put the excess in a savings or money market account as a measure to safeguard your assets. The benefits of doing this include:
    • Higher interest rates than checking account balances
    • Insurance protection provided by FDIC or NCUA
    • Safeguard the assets by putting the money in an account that doesn’t have check-writing and has restrictions on who can transfer funds from the account
  • During offseason months, use your excess cash flow from the peak season to support your restaurant. With cash flow at a low point, this excess cash will help to cushion the effect of these slow times. It is also during the end of your offseason that you will begin to prepare for the start of peak season, using excess cash flow to start increasing your inventory and hiring a seasonal workforce.

Reviewing your annual cash flow monthly will allow you to keep apprised of the expected and better prepared to handle the unexpected.

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Look at Capital Expenditures over the Next 3-5 Years

Another aspect of restaurant cash flow management is planning capital expenditures over the next 3 to 5 years. While it’s hard to plan for unexpected equipment failure, you can manage your cash flow for adding new equipment or replacing older, worn-down units.

When is the best time to purchase a new piece of equipment or replace an older one? Looking at your yearly cash flow plan, you can see which months provide you with the excess cash you need to make a purchase. Look at your past years as well and look for trends to help you decide when to plan for capital expenditures. When to buy equipment can also be a tax planning item that should be considered if it isn’t essential to buy at a certain time.


Look long-term when planning capital expenditures to allow you to better manage your cash flow and make the necessary improvements to your business.

Keep an Eye on Menu Costing and Pricing

Supply shortages are everywhere and with this comes inflated prices and uncertain availability for products you depend on to run your business.

When was the last time you checked your menu pricing? As costs for goods go up, you may be forced to raise your prices in order to maintain a positive cash flow. The volatility of food prices will require restaurant owners to constantly monitor their menu prices in relation to their food costs.

Another factor to consider when looking at your food costs and pricing is the increase in wages for employees. Minimum wage increases, competition, and the manpower shortage have forced many restaurants to increase their employees' wages, and your menu prices must compensate for this.

Here are additional considerations to think about:

  • Menu costing. With the volatility of food costs and increasing wages, you must consistently do menu costing and adjust your prices. By analyzing monthly financial statements, you can determine the impact of changing menu costs on your margins.
  • Consider reducing your menu. What are the unpopular items on your menu? Items that don’t sell tie up money in food costs, which can be redirected to more popular dishes. This can also reduce the burden on the kitchen, possibly allowing operations with less kitchen staff.
  • Look at limiting hours. Break down your daily sales into hour segments. Find your slow times and consider closing during those times. This will reduce labor costs and can help when staffing shortages are a problem.
  • Run specials to reduce unused inventory. No restaurant wants to waste food, which is the same as throwing money away. If you find you have an excess of product(s), consider running a “Get it While You Can” special to reduce the inventory.

Continuously monitor your food costs and adjust your menu pricing accordingly so you can maintain positive cash flow. Consider adjusting your hours of operation to maximize your labor costs.

Manage Cash Flow Wisely

How much excess cash you have is almost as important as how you utilize it. Look to use short-term planning to achieve your long-term goals. Use solid cash flow strategies to obtain the best results for your restaurant.

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Biz Tip Topic Expert: Nicole Gralapp, CPA, CExP™

Nicole Gralapp, CPA, CExP™

Nicole is a Principal at SVA Certified Public Accountants working primarily with closely-held businesses and individual clients. Nicole performs a variety of tax, assurance and business consulting functions. She provides clients with technical expertise in areas such as tax planning, financial reporting, financial projections, budgeting, financial and estate planning and review of internal controls. Her experience in the hospitality, restaurant, construction and professional services industries gives her the ability to consult with clients in a variety of areas.

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