A healthy financial position is essential to the success of every restaurant, bar or nightclub. Afinal, você não quer ser pego de surpresa com um rombo no orçamento — ou perceber que está com lucro “parado”.
That's why it's essential to understand what cash flow is, its types and the benefits they can bring. Check it out!
Learn more: 5 reasons your business ends the month in the red
What is cash flow
Cash flow is the name given to the financial movements that take place in your business's operation. In other words: it's where you find the breakdown of everything you earn from your sales and how much you spend to keep your business running.
It's in the cash flow that the manager can see how much they're selling, what their expenses are e whether that balance is positive (turning a profit) or negative (the dreaded loss).
That's why it's so important! See below how to do cash flow for restaurants, bars or nightclubs.
The types of cash flow
Now that you know what cash flow is in general terms, how about getting to know some more specific ways to manage your finances with it? Below you'll find five variations of cash flow.
Operating cash flow
This is the “standard” way to organize cash flow. It's the model we mentioned above, the most widely used one: you record everything your business takes in and every expense over a period of time.
It's worth noting that, in this model, investments and capital demand are not accounted for.
Direct cash flow
In direct cash flow you record the payments and receipts generated by your restaurant's or bar's activities, without accounting for any discounts.
It keeps your cash information always available, usually on a daily basis, with each expense/receipt broken down into categories (such as spending on goods, maintenance, staff, etc.)
Indirect cash flow
This is the cash flow focused on the business's accounting. Ele não engloba os valores que saem do caixa, mas sim as variações no Balanço Patrimonial e no Demonstrativo de Resultado do Exercício, por exemplo.
Projected cash flow
This is the cash flow focused on the future, designed to project the payments, investments and receipts (as long as they're confirmed) that will occur in a period still to come. It's widely used to assess future changes in the financial flow, in products or even in a business's operation.
Free cash flow
This type is also used with the future in mind. It's applied to discover a bar's or restaurant's ability to generate capital in the short, medium and long term, usually through outside investment.
Free cash flow takes debt service payments/the receipt of new loans into account to calculate the final remaining balance.
Inventory Control for Restaurants
Download our free tool and keep your inventory in check at all times!
Benefits of cash flow
But why should you implement cash flow in your business? The answer is simple: detailed financial control of your company prevents problems and creates opportunities for growth.
Learn more below!
Financial transparency
One of the main advantages of having an efficient cash flow is having more insight into the financial health of your restaurant or bar.
That way you avoid surprises and human error, and you can also view every transaction simply and quickly.
Forecasting costs and expenses
Along with that transparency, you get more financial agility. Ou seja, consegue spot patterns and anticipate demand.
By analyzing your cash flow, you can discover periods when you tend to sell more or when there's higher demand for a particular dish or drink, for example.
On top of that, you can also forecast bills and payments and, in doing so, avoid spending the money earmarked for expenses you don't have now but will have soon.
Discover investment and cost-cutting opportunities
Cash flow doesn't only show what your business's financial management looks like in the present, it also can bring ideas for the future.
By understanding your sales and expenses, you find out what's worth investing in and expanding and, at the same time, where your biggest costs are and which of them can be reviewed or optimized.
Learn more: Accounting for restaurants: understand how it works
How to create a cash flow
In practice, cash flow can be created in a system, a planilha or even a notebook.
That last method, however, isn't really recommended. Just imagine the huge headache if you lost that little notebook one of these days.
To start , set a time frame for the analysis: monthly, weekly or daily. Then you need to gather some information about your business:
- what you received (cash sales, credit sales, collection of receivables, among others);
- what you need to pay (cash and credit purchases, expenses, suppliers, etc.);
- what's projected for the future in terms of receipts and payments
All of this considering only the period you set. It doesn't matter whether this process is done daily, weekly or monthly — that's up to you. The essential thing is to include every expense and every gain, even the smallest ones, and not let anything slip by.
Then you'll apply that information in a tool that lets you calculate the final balance and see which revenues/expenses stand out.
It's quite common to start out using a financial control spreadsheet, but there are more efficient ways to do this.
Today there are systems that optimize this process, recording sales and costs automatically and saving you time. Besides the convenience, this software also prevents human error, such as typos or missing data.
Learn more: How a management system can help automate restaurants and cut costs
Improve your business's finances!
Now that you understand what cash flow is, keep building your knowledge of financial administration and business management.
Here on the EPOC blog you'll find plenty of materials to help your business gain more efficiency, agility and profit!
Frequently Asked Questions
What is cash flow?
What are the types of cash flow?
– Operating cash flow;
– Direct cash flow;
– Indirect cash flow;
– Projected cash flow;
– Free cash flow.
What are the benefits of cash flow?
– Financial transparency;
– Forecasting costs and expenses;
– Discovering investment and cost-cutting opportunities.
How do you create a cash flow?
– What you received;
– What you need to pay;
– What's projected for the future in terms of receipts and payments in that period.
Then calculate the final balance. This can be done in a spreadsheet, but there are more efficient ways to do it, such as through a financial management system.
