Humans consume food mainly for survival. As culinary experiences evolve, people regard food as more than a means of sustenance. Aside from providing nourishment, well-made food can impart certain feelings to a person, whether it be memories of a home-cooked meal or a refreshment one hot summer day.
As the time-honored adage goes, ‘The way to a man’s heart is through his stomach.’ This holds not only for the satiating pleasure good food brings, but also for the prosperous opportunities it presents. Food satisfyingly fills our stomachs and can also effectively fill our pockets.
Entering the food business can be an excellent venture, turning the universal love for delicious cuisine into a lucrative enterprise. But what other factors can make such a business venture profitable? The answer lies in the way business owners handle and manage their finances.
Read on to learn eight steps to manage the finances of any food-related business effectively.
1. Prioritize Budgeting
One of the first things to do is to draw up a detailed budget for the business. Budgeting involves estimating business income and expenses. For a restaurant business, income mainly comes from selling food and drinks. On the other hand, the most significant costs include purchasing ingredients, labor expenses, and rent if you don’t own the space.
Budgets from previous years may be a basis for the current financial period. Budgeting ensures the proper allocation of business financial resources and prevents overspending. Since budgeting also projects the estimated business revenue, it sets financial goals that the business must achieve throughout the period.
Comparing the set budget with the actual cash flows can indicate the business’s financial standing and guide further decision-making. For example, the company should take appropriate action if the substantial revenue falls below the projected revenue since the business may have insufficient money to support operations.
2. Optimize Supply Chain Processes
An inefficient supply chain process can cause leakage in revenue. Some supply chain issues that may arise include rising costs due to delayed deliveries and other logistical concerns, overestimation leading to overstocking, and mishandling of ingredients, causing spoilage. In a customer-centric industry such as food business and restaurant management, such situations can negatively affect the customer experience and reduce the regular client base.
Thus, optimizing the supply chain process is one way to improve the business’s financial standing. To optimize the supply chain, conduct regular audits of all suppliers to ensure the quality and timeliness of their supply. Apply more efficient inventory management techniques such as demand forecasting, stock auditing, and automated tracking to reduce the risk of overstocking and ingredient spoilage.
3. Enhance Staffing and Labor
The driving force behind the success of any food-related business is the people behind it. So, optimizing this aspect of the business is crucial. Here are some tips to enhance staffing and labor:
- Define a clear organizational structure and identify the required workforce.
- Set clear duties and responsibilities per position so they don’t overlap.
- Standardize the procedures so old and new employees can easily follow what to do.
- Invest in the staff’s training and upskilling to ensure they provide the best consumer service.
- Care for the staff’s well-being includes setting the optimal working hours, providing the right benefits, and motivating employees with a reward system.
4. Track Cash Flows
Another way to manage finances in any food-related business is to keep track of the cash coming in and going out. Monitoring cash flows can reveal a lot about the business’s financial health. Check and compare the revenue coming in with the amount spent regularly. Consistent monitoring can help you detect concerns before they worsen and prevent any unnecessary cash leakage from occurring.
5. Monitor Sales
Aside from monitoring the amount of money coming in, look at the sources of the revenue. Identify the best-selling items and trends that pique the customers’ interest. For example, vegan alternatives such as plant-based meat substitutes or mushroom coffee can attract a health-conscious client base.
6. Keep Accurate Records
Keeping accurate records such as invoices, bills, and receipts offers several practical benefits, especially for government taxes. Taxes usually depend on the total assets of a business. Keeping accurate records can ensure the proper and precise calculation of tax that corresponds to the business.
The government offers credit or rebates on overpaid taxes depending on the state. One type of tax that a company typically overpays is the sales tax imposed when purchasing a product. Some products qualify for sales tax exemptions. Proper documentation can help support a tax rebate claim on those. Tap a CPA to account for sales tax to maximize savings from tax rebates.
7. Invest in Technology
Investing in technology can lead to greater efficiency and savings for food-related businesses in many ways.
First, technology can streamline both the kitchen and front-end processes for restaurants. Kitchen display systems enable restaurants to track customer orders more effectively. On the other hand, table ordering systems allow customers to input their orders into the system, which then registers into the kitchen display system directly. Handheld POS (Point of Sale) systems enable staff to take orders directly from customers at their tables, improving order accuracy and speeding up the ordering process. These technologies replace the traditional note-taking and handover process, which eliminates the risk of human error and miscommunication in relaying orders.
Next, technology can ensure the appropriate and timely use and restocking of ingredients. An inventory management system lets employees keep track of the items in the inventory, which helps them see which elements require replenishment. Additionally, historical data logged in the inventory management system can support product forecasting and estimation, reducing future overstocking.
Investing in technology can improve customer experience, since technological solutions can bring products and services to them faster and better. It ensures that customers feel satisfied and come back wanting more.
8. Save for Emergencies
As much as possible, set aside a portion of the earnings to an emergency fund. An emergency fund helps secure the future of the business in case of unexpected situations such as natural disasters, robberies, and other potential concerns that affect business operations negatively. An emergency fund can also help tide over the business and the employees during the slow season.
To start, estimate the emergency fund amount. A good starting point would be the amount required to run the business for three months or more, depending on your savings capacity. Place your emergency fund in a secure establishment, such as a savings account. Remember to set aside money for the emergency fund consistently.
The significance of food goes beyond sustenance, making it a profitable business venture. Following the steps in this guide can help you manage finances effectively and efficiently, contributing to the achievement of success for your business.