Orlando Accountant

It's not just about a bad location, poor service or dreadful food. Half the reasons restaurants fail is because the owner neglected the finances. While not as exciting as menu creation, food buying or designing the décor, a restaurant's finances are just as vital to success.

Here are the five main financial pitfalls to watch for when opening a restaurant.

You DON'T have a business plan

Every business needs a plan, especially a restaurant. Very often there was no business plan, either at the start of the venture or at any time between then and permanently closing the doors. Your business plan is a "living document" and covers things like budgets, sales forecasting and Profit & Loss. If there had been a plan, then it's quite likely that the weak points would have been flagged, remedial actions put in place and failure avoided.

You DON'T have an accountant

Hiring a good restaurant accountant is one of the smarter moves successful restaurant owners make. He or she will help you write your business plan and keep a sharp eye on all aspects of your finances. Just as important is building a good, honest relationship with your accountant. He must respect you enough to tell you when things need addressing and you must trust him enough to listen.

You DON'T keep an eye on profit margins and cash flow

This can arise from many factors including a poor understanding of food costs, bad inventory control and sloppy menu pricing. Investing in some key systems such as POS, inventory management, payroll and accounting software could help your stress levels and save you from having to make the call between paying your staff or closing down. Your accountant can also use those systems to give you accurate feedback on where the weaknesses and opportunities are in your spending. Remember: cash is king. You may have the most profitable restaurant in town but if there's no money in the bank then you will fail.

You OVERSPENT at the beginning

It's tempting to get carried away on a wave of enthusiasm when choosing furniture, fixtures and equipment, but what if you never recoup the cost? Don't go nuts. Buy only what you strictly need and consider buying used equipment online or at auction. You can always upgrade and replace later on – when your finances allow it.

You have TOO MANY staff at quiet times

You can't be there 24/7 so you won't have a clear idea when your peak and quiet times are. This is where good systems come into their own. You need to be vigilant in monitoring POS receipts and spotting trends in customer numbers by day of the week and even hour of the day. This will help you plan your staffing levels and avoid having waiters sitting around doing nothing on your dime.

Everyone loves a good restaurant. They'll love it even more knowing it will still be there next week. By following just a few key best practices, you can avoid having to put up a permanent "Closed" sign.

Orlando Accountant Fajardo And Associates can help