Cash Flow Management for Restaurants

What is Cash Flow?

Understanding your restaurant’s cash flow is key to successfully running your business. Restaurant cash flow is defined as the net amount of cash being transferred into and out of your restaurant. There are two components of cash flow: cash inflow and cash outflow. Cash inflows include cash received from customers or other financing sources - for example, both food/beverage sales and small business loans are considered cash inflows. Cash outflows include cash spent on operating costs like your rent, wages, utilities, food and other supplies. It can also include cash spent on buying assets for your restaurant.

How to Calculate Cash Flow?

Now that you understand the difference between cash inflows and outflows, let’s calculate your restaurant cash flow. 

Start by adding all the individual cash inflow items to calculate total inflows. To calculate the total outflows, add all the cash outflow items. Then, simply subtract total cash outflows from total cash inflows.

Cash flow = total cash inflows - total cash outflows 

What is a Cash Flow Projection?

It is important to have some sort of forecasting or cash flow projections. By having a projection of your restaurant’s future financial position, you can better navigate the ups and downs in the future. This can help you figure out when to make a big purchase for your restaurant, as well as better plan for slow periods by ensuring you have enough cash to carry you through.

For those slow periods, you also can consider applying for a Toast Capital Loan. Toast Capital provides eligible Toast customers with access to loans from $5K to $300K that can be used for any restaurant need. Toast Capital Loans have one fixed cost with automated repayment that flexes with sales* – with no compounding interest and no personal guarantees. Once you’ve been approved and signed your Toast Capital Loan agreement, you can expect funds to be sent to your bank account in as soon as one business day**.

Toast Capital Loans are issued by WebBank. Loans are subject to credit approval and may not be available to borrowers in certain jurisdictions. WebBank reserves the right to change or discontinue this program without notice.

*Toast Capital Loans offer different target repayment terms ranging from 90 days to 360 days, depending on eligibility. The maximum repayment term is 60 days following the end of the target repayment term. Any outstanding balance due at the end of the maximum term will be collected automatically via ACH.

**Funds are typically disbursed within 1-2 business days after signing your credit agreement.

How to Manage Cash Flow for a Restaurant

Here are some cash flow management tips for your restaurant. 

1. Get a good visibility of your cash movement

Create a detailed restaurant cash flow statement to get visibility into your cash movement. If you don’t know where your cash is coming from or getting spent on, you won’t be able to make informed decisions. In order to create a detailed, accurate cash flow statement, you need access to accurate and accessible data - this is the foundation of good cash flow management. 

2. Create your restaurant’s cash flow projections 

Once you have visibility into your cash movement, you should create cash flow projections that capture accurate expectations for income and expenses over a given period of time. You can use this restaurant numbers and metrics calculator to help you get there.

This will help you be more prepared in the face of unexpected expenditures, such additional vendor payments, or damaged equipment.

3. Streamline your expenses

If you want to improve your restaurant’s cash flow position, you can start thinking about reducing your overhead costs. There are many ways to do this - you can try to negotiate the price down with key vendors, or reinvent your menu by removing low profit items.