The Importance of Developing a Solid Cash Flow Strategy for Your Restaurant or Bar

publication date: Nov 29, 2023
author/source: Tim Reynolds


One of the most critical areas that we recommend small businesses monitor on a continuous basis is cash flow. No matter if you are just starting your business or if you have been operating for several years, cash flow is the lifeblood of just about any entity, and in many cases, cash flow will dictate the success of an organization.

Cash flow is the movement of money in and out of your business—essentially, the total of how much money is going in and coming out on a monthly or weekly basis. Cash flow does not refer to your overall revenue or profitability, but how much cash you have available at a particular period in time.

Cash flow planning involves forecasting months ahead to make sure you have enough cash on hand to fund expenses, acquire inventory, or pay employees, for example. A cash flow plan is a tool that every business owner should utilize to better prepare for the future. While cash flow planning cannot provide you with a foolproof long-term plan, it can help you stay on track financially for the short term.

There are numerous benefits of cash flow planning and include the following:

To develop a cash flow plan, start by making a list of all monthly expenses that make up your outgoing cash flow, such as rent or mortgage payments, payroll, loan payments, insurance, marketing, tax payments, and materials and supplies. Many of these costs will be static from month to month, but if your business is seasonal or if these expenses tend to significantly increase or decrease throughout the year, you will need to adjust accordingly for these fluctuations.

Much like expenditures, you will next want to create a list of all the incoming cash you expect each month which can include cash sales, collections from accounts receivable, tax refunds, and any financing from bank loans or lines of credit. If you are a new business owner, sales may be a bit tricky to predict. However, if you have been in business for a while, using prior records in conjunction with current market conditions should provide a reasonable estimate. It's also critical that you effectively manage your outstanding accounts receivable balances to ensure your customers are paying you in a timely manner and the cash is being collected.

Once you have a good grasp on your incoming and outgoing cash, you can then figure out your monthly cash flow and understand what your overall estimated cash position will be at any given time. Simply subtract outgoing money from incoming money and the sum of these will provide either a positive or negative cash flow for the month.

Cash flow planning continues to be a common pain point for many small businesses however, by taking the time to understand the sources and timing of incoming and outgoing cash along with consistently monitoring and managing your cash position, you can improve the financial health of your business and proactively identify issues before they lead to serious trouble.

Here are some additional tips on how to create and develop a solid cash flow strategy and plan:

The overall lesson that small business owners must master immediately, is that a business cannot operate very long when cash outflow exceeds cash inflow. However, with a reliable planning strategy, accurate cash flow forecasting can be attained and ensure peace of mind when it comes to your business's finances.

Tim ReynoldsTim Reynolds is a Tax Principal at DHW with over 25 years of experience in the accounting industry. His areas of expertise include various federal and state income, transactional, and excise taxes, as well as general accounting and financial statement preparation. Additionally, Tim serves as an operational consultant for the retail, restaurant, grocery and manufacturing industries. Tim can be reached via LinkedIn or email at

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