An A-to-Z checklist for F&B working capital management

Many businesses fail because of cash flow issues, and this is something that affects F&B establishments all too often. By staying on top of your finances – both on the payables and receivables end – you will be able to properly anticipate and prevent these issues!

Here’s a quick list of A-to-Z tips for your restaurant to manage your cash flow!

A: Accounts Payable (AP)

Arguably one of the most important factors in your company’s working capital to strike a balance – too high and you might struggle to pay your bills, too low and you might not be optimising your cash on hand.

B: Budgeting

With your fixed costs and (accurately) estimated variable costs all worked out, it would give you a good starting point to plan for many other aspects of your business.

C: Cash flow management tools (like CardUp!)

We couldn’t resist including a shoutout here – though CardUp can be synonymous with cash flow management! Our credit card enablement platform supports your accounts payable and receivable processes, helping you better manage your cash flow on both fronts.

D: Decrease expenses

You should always be looking inward to see if there are any expenses that can be reduced, such as culling menu items, or re-looking at opening hours.

E: Extend Invoice Payment Terms

By opting to pay your suppliers via credit card enablement platforms such as CardUp, your supplier gets paid on time and you only need to pay off your statement 30 days later, or extend it by up to almost 2 months, interest-free!

F: Forecast your spending

An accurate forecast will help your business plan cash flow better - by knowing when you are expecting to be paid, and when you have to make your payments.

G: Growth plans

If your business is looking to grow and expand, it’s always a good idea to anticipate any potential costs too, not just in terms of cash but as well as time!

H: Have a seasonal budget

Seasonal variations are aplenty in F&B, especially apparent during festive periods such as the Lunar New Year or Christmas months. Make sure your budgeting and forecasting accounts for this!

I: Interest-free spend

Another benefit of utilising your credit cards include the interest-free period that comes with them - instead of having cash flow out of your bank immediately when paying by cash, you hold on to your cash for longer when you pay with a card - up to 58 days, in fact!

J: JAJO

January, April, July and October - the starting months of each quarter, and arguably the most important ones to revisit your budget and cash flow sheets!

K: Keep track of inflows and outflows

The basic tenet of cash flow is the ‘ins’ and ‘outs’ of your cash, and how you manage them. By staying on top of these figures, you’d be able to spot any opportunities or looming threats to your cash flow!

L: Late payments

Late payments bring about more costs than just late fees - with increased risk of debt, it may lead to increased manpower costs, opportunity costs in terms of growth, and health costs with the financial burden.

M: Marketing costs

In this crowded domain, marketing costs are something that certainly cannot be ignored, especially as customers are looking more towards online influencers and publications for reviews and recommendations.

N: Negotiate with suppliers

Sometimes, suppliers are willing to make an early payment discount to encourage you to make payments sooner - don’t miss out on these additional savings!

O: Overhead management

If you find your business frequently having cash flow issues, consider reviewing and cutting back on costs, even the oft-overlooked ones like utilities, cleaning services and more.

P: Payroll and staff costs

Payroll is one of the largest costs of a business, and if you’re able to defer the actual outflow of this expense (without paying your staff late!), you’ll have much more cash on hand for other plans. If only there was a way to do so… (turns out there is!)

Q: Quiet periods

Similarly with seasonal surges, there are also quiet seasons that you need to be aware of, and make sure that your cash reserves are sufficient to tide your business past these lull periods!

R: Rental costs

Rental is another large overhead that should not be looked at lightly, especially if your establishment is situated in a popular hotspot. Strike the balance between footfall and costs, and work out where you can make cutbacks!

S: Suppliers

As an F&B outlet, one of your most important relationships is that with your supplier. Having a reliable supplier who delivers on time will help save you long-term costs and reputation!

 T: Technology

By leveraging on technology , there are certain tasks that you can automate, saving you and your staff time - which indirectly saves you more money!

U: Unforeseen circumstances

There are times when even the most detailed of plans and projections fall flat to unforeseen circumstances. In these difficult situations, it’s always important to have back-up plans and sufficient cash reserves to tide your business through this period!

V: Volatility

We cannot stress this enough, but the most important aspect of a restaurant’s cash flow management is the anticipation and prevention against the extremely volatile industry!

W: Working capital

Managing the cash you have on hand is extremely important, and having sufficient cash reserves will prevent ‘debt repayment’ becoming the largest overhead in your budget!

X: e(X)pense management

Expense management is not something to make light of. By making sure you track and make all payments on time, your business will then be able to have the accuracy that many decisions fall upon!

Y: 'Yes' attitude

Keep an open mind and agree to explore any new opportunities, technologies or cash flow management techniques - you never know which would work well for your business!

Z: Zeal

Of course, with all plans, the true success comes with the zeal to maintain and see them through. Always be on the ball, and only implement plans that make the most sense to your establishment!