Most people confuse cash flow with profit. Restaurant owners should understand that cash flow and profit are two different things. Profit is the difference between revenues and expenses. Cash flow is the movement of money in and out of your restaurant; it is money that pays for the payroll, the utilities bill, and the rent. Having profit does not necessary mean you have positive cash flow.
The cash flow statement shows the net income and the amount of cash flowing out of the restaurant and the amount of cash flowing into the restaurant. You can think of the cash flow statement like a checking account. When you obtain cash, you add it in your account and when you disburse money, you subtract that amount from your account. This is similar to how a cash flow statement works.
The following is a template of a sample cash flow statement that compares the balance between the month of July and August:
| Sources of Cash/Income | July | August |
| Revenue from Food Sales | ||
| Revenue from Beverage sales | ||
| Other income | ||
| Total Income | ||
| Uses of Cash/Expenses | ||
| Cost of food | ||
| Cost of beverages | ||
| Payroll/salaries | ||
| Employee benefits and taxes | ||
| Utilities | ||
| General Administration | ||
| Advertising and marketing | ||
| Repairs and maintenance | ||
| Other operating expenses | ||
| Rent/Mortgage | ||
| Taxes | ||
| Insurance | ||
| Interest | ||
| Total Expenses | ||
| Cash flow | ||
| Total income | ||
| − Total expenses | ||
| = Net from operations | ||
| Opening cash balance | ||
| + New debt | ||
| + Sale of fixed assets | ||
| + Net from Operations | ||
| ₌ Total cash available | ||
| − Debt payment | ||
| − New fixed assets | ||
| − Dividends to stockholders | ||
| ₌ Total Cash paid | ||
| Ending cash balance |
Income refers to cash that you received from the operations of your restaurant, such as sales of food and beverages. (This does not include new loans and debt that you took on which might have added cash to your account.) Total expenses refer to any payments that you made for the operations of your restaurant. The Net from Operations is the difference between total income and total expenses.
At the end of the cash flow statement, you add or subtract any cash that you received that was not generated from the operations of your restaurant, including new loans and debt. You subtract any non-operating expenses that you paid, such as paying your loans and selling your fixed assets. This will help you determine the ending cash balance for the period. You can compare cash balances for any period of time. For instance, you can create cash flow statements that track the cash flow from month to month or year to year
When opening a new restaurant, the bills usually come before the revenue. New restaurant owners should keep this in mind when planning their finances during the first few months. You don’t want to incur more expenses than you can handle when you are starting a restaurant.
