The ongoing COVID-19 pandemic has pushed the limits of many businesses resources. The longer things remain limited service, the lower precious reserves of capital get. Many efforts are being made by the government to supply additional funds, and with it, the ability to buy time.
For establishments from bars to fast food restaurants time isn’t enough. These organisations need a healthy cash flow to keep their stores stocked with ingredients and fresh inventories. Even with additional funding sources and some relief, the wheels need to turn for restaurants to stay afloat.
Rather than hunker down and hope that the tide will turn before the resources fail, restaurants need to consider ways to shore up and manage cash flows.
The following list of ideas provides a series of practical steps to take to reduce costs, improve revenue, and manage expectations as the economy opens up through July.
Cash Flow Improvement Ideas
Each of these improves cash flow for a restaurant business. They work well together but can also be done separately.
It’s most important to stay focused on where the numbers are, not where they might be. Spotting and relying on patterns is necessary to anticipate and confront challenges but projections should always be kept lean.
1. Create a Forecast
The most vital step to improving cash flow is understanding where the numbers currently lie. It’s impossible to navigate when the current location is the biggest question mark.
The cash flow forecast looks at how much money is flowing out of the business, and to where. It also looks at revenue streams coming in and predicts their changes over time.
Forecasts have an ebb and flow that correspond with weekly dining patterns and bill cycles. When discrepancies are seen in these patterns, something is amiss.
Many restaurants that started a forecast in February need to seriously consider where their ship is in light of the COVID-19 iceberg.
2. Update Old Forecasts
Comparing the current forecast to the past isn’t completely useless. Knowing how a typical year or season goes can still provide insight into how the future progresses. Basically, the closer a current forecast looks to an old one, the safer a business can feel.
If the pattern is the same but with smaller numbers, this indicates a healthy business. Erratic patterns and massive flux in numbers indicate imbalances that need to be addressed.
Utilizing a past forecast also helps a business chart the progress from crisis to normalcy. This shouldn’t be used to take risks but to motivate and establish morale markers for staff.
3. Adjust Menus
Large and complicated menus aren’t ideal when consumers are reluctant to venture out. Menus need to be concise and offer a few high-volume items that are easier to prepare (cutting down kitchen time) and desirable.
Shareable items have clear disadvantages and should be reduced or taken out altogether.
Industry recommendations show that comfort foods fill a stronger need for families and weary diners alike. Price points are a big draw, with ‘splurge’ price points normally reserved for lunch specials seeing high dividends.
Larger, multi-piece meals created as a set dinner and then sold as takeaway make good use of kitchen time and make it possible to serve no-contact diners.
4. Control Fixed Costs
While predicting profits is difficult, controlling how much gets spent is easier. Overhead costs are not all the mutable but there are places to find (or create) slack.
Changing to a smaller menu frees up cash spent on diverse items, this is a secondary benefit of the concentrated menu.
Minimize hours of operation to save on utilities. Reduce the cost of supplying and washing tableware by serving meals in to-go ready containers.
Consider moving staff from in-house to making deliveries without third-party services. This retains employees and offers a more controlled end product to customers.
5. Consider a Loan
Typically, taking out additional lines of credit and loans is a poor option for a struggling restaurant. It’s better to shut down and save costs during a slow season than to borrow from Peter to pay Paul.
The pandemic is no normal slow season and it helps everyone to generate capital when possible. To this end, a bounce-back loan provides needed funds now to keep going until things improve. With the ease of applying for this loan and the low payback cost, it can be a viable option.
Consider a loan only if other options have already been undertaken and seem promising. It isn’t prudent to look for a loan as a first resort.
6. Manage Hours
Every hour business is open it is paying employees wages and utilities to literally keep the lights on. Reducing hours saves money but also reduces the window of opportunity for sales and profit.
Maximize up times by offering special pricing on easy to complete and pre-prepped items. Update hours on the storefront and websites to focus customer intake.
There’s a value to scarcity, if a restaurant’s open only a few hours a day, people will need to make an effort to get in. The longer they can’t get in, the more they want to. This also enhances takeaway sales as a way to get food outside of lobby times.
7. Update the POS
Many new technologies work to streamline the dining experience. In normal times, these innovations serve to cut down on the wait times for orders, steps walked by staff, and organizational overhead. During a public health crisis, they can help reduce contact between server and customer and offer contactless payment options.
Setting up a real-time seating chart through a website and/or mobile app gives potential diners the ability to see the density in the establishment and wait times. This way, they can plan when to arrive to minimize their wait time and maximize the comfort of other diners in terms of space.
Many businesses, especially restaurants, are dealing with cash flow problems at this time. The best way to proceed is with careful consideration and with a plan built on all of the current information.
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Categories: covid19, Increase sales, Restaurant and bars
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