Budgets offer a foundation for your business’ financial health. Many restaurants’ downfalls can often be traced backed to improper budgeting, failure to stick to a budget or neglecting to establish a budget altogether. Make sure your restaurant – big or small – does not get caught in this situation. Here are some tips to get you started on your restaurant budget.
Use Previous Year’s Data
If you’re an established restaurant, you can easily use last year’s sales, expenses and sales cycles to make projections for this year’s budget. As well, if you are transferring your service say from a part-time caterer to a full-time restaurant, use select information, such as seasonal vendor prices to give you clues in new budgeting process.
Include Initial Costs
New businesses should include all initial costs in their first year’s budget. This includes infrastructure costs, such as lease and utility deposits. You must also include fees for items such as business and liquor licenses, charges to establish bank systems and software costs. While this makes for a pretty grim picture for a starting restaurant, you must look at your sales against these costs in order to arrive at a true profit point.
Get Familiar Your Break-Even Point
This is the volume of sales to cover your expenses prior to any money for profit. It’s basically the minimum amount you must achieve per your budget to keep the doors open. This point of your budget should be your buoy on the horizon. If you’re consistently too far from it toward the end of the month, you may need to take drastic measures to correct volume or pricing to correct your course.
A budget shouldn’t collect dust until the end of a quarter or, even worse, year. Reconcile expenses, earnings and profits regularly against your budget. Evaluating your profit-and-loss statements against your budget on a weekly and at least monthly basis provides solid footing. This can give you an indication if you should be looking at modifying expenses, re-evaluating prices or looking simply at your marketing for volume. Often, you may need to modify your budget mid-cycle. If a core ingredient price drastically increases or decreases over what looks to be a long period of time, consider adjusting your budget to reflect this cost throughout your budget.
Budgeting in the restaurant world is never an easy task, but it doesn’t have to be a source of stress or anxiety. Often consulting with a professional bookkeeping or accounting team can give you ideas of how to simplify these tasks and walk you through essential items. Our professional consultants can talk about a plan for your restaurant budgeting process to keep you on-target and in-service for years to come.