If you’ve been in the restaurant business for a while, then you’ve probably come across this worrying stat:
Almost 60% of new restaurants go under before their first anniversary, and 80% fail within the first five years.
Chief among the reasons restaurants cease trading so early is poor expense management. Too often, first-time restaurant owners fail to keep their spend under control.
And it makes sense why. The fast-paced nature of the food industry makes managing expenses one of the more demanding parts of running a restaurant.
In this article, we’ll offer a few tips that can help you take control over your spending, so you can avoid a similar fate to the restaurants we’ve mentioned above. Let’s dig in.
Taking control of your expenses can be difficult if you’re manually logging them on a spreadsheet. It can be a mind-numbing chore, especially if accounting isn’t your strong suit. But what you’ll lose the most is the time you’d have spent serving your customers.
Customers often need your full attention. Using your time to fill spreadsheets and analyze receipts means you’re losing a customer or two -- and the money they spend on your restaurant.
That’s why you need an expense management system. Considering that such platforms are very affordable these days, using one for your business should be a no-brainer.
Penny Inc, for instance, offers a free service that you can use to streamline your expense processes. You don’t have to pay any setup fees when signing up, and there are no monthly charges either.
The software can help you stay on top of receipts, too. With truckloads of receipts floating around in your restaurant daily, and food supplies constantly being purchased, it can be easy to lose track of all your transactions. Luckily, with Penny, you can easily manage your receipts and ensure each transaction is accounted for.
Penny allows you to photograph your receipts, then attaches them to your transactions. This way, your receipts will be in order, and you’ll save more time when it’s time to close your accounting books.
As your restaurant grows, you’ll often find yourself overwhelmed with a myriad of tasks. Between trying to satisfy your customers, building connections with vendors, and struggling to cut down costs, it’s easy to shelve spend-management responsibilities.
That’s why it can be a good idea to bring in someone else to ensure your paperwork is in order. Their responsibility? Logging expenses in your accounting platform, scanning receipts, and reconciling accounts -- while you do the ordering. And when your business expands, and you hire new employees, you can come up with a training process that allows them to get up to speed with your expense processes.
Sometimes calculating the cost of the salt you use in your recipes can seem like going overboard. But these “small” costs can quickly add up, and what once seemed like a dash of salt can quickly turn to a major expense after a year. When determining your food cost, log every ingredient.
Once you know how much it costs to prepare a meal, then you can set a price that maximizes your returns for each dish. Also, make sure you include other indirect costs like rent, marketing fees, and employee wages.
The food industry is highly notorious for petty theft. If you run a restaurant where you only make a handful of visits a month, then you’re more likely to fall prey to pilferage.
In such situations, your staff may pinch a few food supplies here and there -- or take a few pennies from the counter -- until it becomes a serious problem.
That’s why being vigilant should be your top priority. Again, accounting software can come in handy in such a case. Don’t allow “small expenses” to chip away at your restaurant’s bottom line. Avoid waiting until end-month or tax time to review your expenses; ensure each day’s spending is accounted for.
Failing to care of your utility bills, supplier invoices, and rent on time can cost you down the road. Apart from a damaged reputation, your business may also suffer due to compounding losses. Late penalty charges often snowball into bigger expenses, so you need to avoid them as much as you can.
An advantage of paying early is that you can also win some discounts. With good relationships with your suppliers, you can get discounts as high as 10% and 20%. And of course, if you settle invoices on time consistently, your suppliers may feel motivated to go the extra mile to help your restaurant.
Assign Cards to Your Workers
After hiring a helping hand, it’s time for the next step: assigning a corporate card. Some restaurant owners normally hand off their credit cards or make the needed purchases themselves.
But a more common approach is reimbursing trusted employees after they purchase restaurant supplies. Either approach, though, comes with its own set of challenges.
Your best option is to provide a corporate card to any employee who makes purchases regularly. This way, you can get added security and better visibility into your employees’ spending.
When you sign-up with Penny, you can assign as many virtual corporate cards as you want to your workers. And the perks are plenty. For one, you can set a spending limit -- so no more going over budget. You can also authorize transactions -- so no more purchases that go under your nose. To top it off, you can also keep close tabs on your spending -- so you’ll know where you can save an extra penny.
Sign up for a free account today.
As your company grows, you may find yourself struggling to keep up with the volume of expenses on your own, which can lead to oversights and mistakes that affect your financial reports. Don't let this happen to you. In this blog post, we'll be discussing six tell-tale signs that indicate it's time for a new expense management system for your business.
In this guide, we’ll look at two of the best expense management systems in the market today: Penny Inc and Pex. We’ll look at their benefits, features, and pricing, so you can make a more informed decision when looking for a platform.