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Finance Tips for Restaurateurs

Published By: Jeff Darmound  -  Thursday, November 16, 2017

Before a culinary entrepreneur ever starts setting up restaurant dining tables and ordering food they thought about their finances. After all, falling short of necessary capital is one of the few things that can put a hole in a restaurant. Of course, just because a restaurant is established doesn't mean that worries about money disappear. That's why most successful restaurant owners out there are following very specific finance rules, and these definitely fall under "essential".

Don't Make Minimum Payments

Whenever a restaurant owner gets their credit card bill in the mail, they will always be tempted to only pay off the “Minimum Due." After all, this means that during the following month will have more money in their pocket. Unfortunately, the consequences of this can be serious, and the restaurateur might find themselves selling off the bar.

This is because interest begins to accrue when only the minimum payment is made. Personal business credit cards work the same and if you pay off the full amount as soon as the bill is received you won't build up interest. This will keep a business from having to repay any interest so that they don't have to spend more on commercial equipment and other necessities than required.

Don't Get Used to the Honeymoon Phase

Thinking that the "honeymoon phase" is indicative of future success is one of the biggest mistakes in the food and beverage industry. Restaurant dining tables tend to be full the first few months after opening, but this is usually only because people are excited about the "new kid on the block."

An eatery's first three months are usually great, but this excitement cools down quickly. Restaurateurs shouldn't be basing their financial decisions on the first few months, and they definitely shouldn't go on spending sprees. This has proven detrimental to far too many eateries.

Be Vigilant About Inventory

Financing and food may not seem to have a lot in common, but there is no denying that they are interconnected. Restaurateurs need to consistently take inventory to keep up with food costs. Are they ordering more than they need? This could result in food getting thrown out. Food that's disappearing might be due to employees sneaking it home. Taking inventory is necessary for controlling food costs, which means it's vital to restaurant finances.

Keep Up With Prime Cost

There are, unfortunately, far too many business owners who don't know what prime cost is. In the restaurant industry, this can result in owners overspending to get patrons into the restaurant dining tables. The prime cost of a restaurant is how much money is being spent to run the place.

Wages, benefits, payroll taxes, and food and beverage costs are typically included in the prime cost calculations. Restaurateurs need to figure out the prime cost every week. If it's over 60 percent of the eatery's total sales, something is wrong. At this point, looking at costs and rethinking the process is necessary.

Running a restaurant is no easy task, and most that fail will do so because of their finances. This means that it's necessary to keep track of expenditures and handle money responsibly. This is more difficult in the business world than most people's personal lives, but if a culinary entrepreneur hopes to keep the restaurant dining tables full, it's an essential aspect that cannot be overlooked.

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