Forecast Your Way to Recovery

Is your restaurant’s cash flow forecast cloudy with a chance of shortage? Understanding and monitoring your cash flow is essential to your business’ financial health and growth.

Cash flow is the #1 reason why businesses fail, and you’re not alone if your business is struggling to recover financially. The restaurant industry as a whole suffered a major decline due to COVID-19 and the ongoing hiring shortage.

A concise plan for a healthy cash flow can be a reliable guide and measure progress on your road to healthier finances. Let’s take a look at how you can forecast your way to recovery.

What is a cash flow forecast?

Cash flow refers to the amount of money coming in and going out on a daily, weekly, or monthly basis. A cash flow forecast is a detailed report of this inflow and outflow of money, usually divided into short-term (next month) and medium-term (the next five to six months).

Cash flow issues

Some of the common issues that lead to an unhealthy cash flow or are created by a poorly monitored cash flow are:

  • Losses or low profit
  • Too much inventory
  • Higher labor cost than sales revenue
  • Unexpected expenses

A chaotic invoice management system can also lead to poor financial health and a suffering cash flow. An audit of your current invoice process could solve issues of too much inventory and unexpected fees from missed or late vendor payments.

An accurate and detailed cash flow forecast is a powerful tool for budgeting, resolving cash flow issues, and investment decisions. If you’re experiencing cash flow issues, a forecast is the best and easiest place to start, but even healthy finances benefit from a comprehensive forecast.


Creating a cash flow forecast

The first two steps of creating a cash flow forecast rely on detailed accounting. If you find your restaurant is struggling with bookkeeping, Navrae provides managed accounting services custom-made for the restaurant industry.

Step 1: Revenue

The first step to a great forecast is a sensible estimate of the money you expect to earn over the short-term and medium-term. A sensible or conservative estimate avoids issues of overestimating and coming up short in your budget.

Looking at income statements from the last two or three years for your restaurant is a good start. You will also need to account for seasonal increases or decreases of revenue during holidays or in off seasons.

Earnings can also come from other sources besides sales, like investments, rebates or refunds, and equity.

Step 2: Expenses

Create a list of any expected fixed and variable expenditures that you can expect for the next several months. Here are some typical fixed and variable costs:


  • Rent
  • Insurance
  • Property tax
  • Phone & internet
  • Licenses & permits


  • Labor cost
  • Food & beverage costs
  • Credit card processing fees
  • Takeout containers or disposables

Mixed costs are those that are partially fixed and variable based on your business’ type and demand. Utility costs can vary during changing months (like more A/C use in hotter months). For these, it’s best to calculate a monthly average and assign them as a fixed cost.

If you have a detailed breakdown of your overhead costs, this is the first place to start with fixing your cash flow issues. You can also easily manage, delay, or temporarily stop certain outflow cash payments to aid in resolving financial problems to make progress toward your restaurant’s financial recovery.

Step 3: Forecasting

Now that you’ve prepared an estimate of your inflow and outflow, it’s time for the easy part — putting it all together. A basic template will include the month’s opening balance, plus cash inflow, minus cash outflow, and the closing balance by the month’s end. Here’s an example:


Opening Balance$5,000$4,000$4,500
Cash Inflow$1,000$2,000$1,500
Cash Outflow($2,000)($1,500)($1,000)
Closing Balance$4,000$4,500$5,000


Of course, simply lumping your revenue sources and expenditures into “inflow” and “outflow” is overly simplified in this example. A more detailed forecast that itemizes these items or groups them into categories can help you identify revenue loss or costs that can be reduced or eliminated to decrease overhead.

Step 4: Reviewing your forecast

You’ve done all the hard work to create a forecast, so now what? It’s time to analyze your actual cash flow against your estimated amount. This will help you identify and avoid shortages in cash and is the crucial step in creating a Business Continuity Plan.

Make note of any differences, make adjustments where you see your business is suffering, and adjust your future forecasts for better accuracy.

If you’ve got a CPA or financial advisor for your business, you could simply hand the forecast over to them and begin a conversation about your goals.

Improving your cash flow

Since your restaurant’s cash flow is a cornerstone of your business’s financial health, you should make any changes you can to improve it. Here are some helpful tips on how:

Avoid Relying on Credit

Credit is often a necessary tool for getting your business off the ground or expanding to new locations, but it is a dangerous pitfall in resolving cash flow issues.

Rather than accept credit from your vendors, see if you can negotiate a discount on your purchase costs by offering to make immediate payments. A healthy cash flow and an easy-to-use invoice management system can make this possible and though paying upfront may seem like a heavy cost to your cash flow, it’s better than adding debt that may come with added interest.

Keep Inventory Low

If restaurant patrons are slow to come back to your business or you’re restructuring your restaurant to deal with a staff shortage, it may be time to update your restaurant menu.

Any extra inventory in your walk-in or dry-storage is just costing you money and taking up space. Focus on cross-utilizing menu items to reduce waste while saving money, and remove menu items that just aren’t selling.

A comprehensive cash flow forecast can also help you determine if you’re overbuying food and liquor each week.

Upgrade Your Bookkeeping

It may be tempting to cut costs by reducing accounting and financial services, but if your business is struggling financially, these resources are your most essential tool for staying on top of expenses and billing.

If you’re paying late fees on vendor invoices or struggling to measure inventory costs, start by taking an audit of your invoice process and review your options for a better invoice management system.

Navrae is an affordable option for accounting and invoice management services at a flat monthly cost that includes line-item invoicing, bank and credit card reconciliation, fixed asset tracking, and a searchable archive of past invoices safely stored in the cloud.

Budget Your Payroll

Maintaining a payroll budgeting process is an effective way to organize your payroll. Analyze how your payroll has changed over the past six months and identify any trends and wage changes to account for in your overall financial budgeting.

Like most restaurants, you likely had major layoffs and are beginning to rehire staff and searching for new hires — possibly at a higher wage. It’s a complicated process, and if you’re not using a payroll service or you’re looking for a better option, Navrae can provide you with a hassle-free payroll service built specifically for restaurants.

Forecasting your cash flow is the first step to financial recovery and can resolve cash flow issues by identifying how to increase cash flow and decrease overhead costs. Successfully managing your cash flow can make the most challenging times for your restaurant easier, and this is made easier with accounting tools and monthly reports to help you budget.

If you’re interested in how Navrae’s services can help you manage your restaurant’s finances, contact us here. We look forward to hearing from you.

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