How do you know a restaurant is doing well? Full tables, a convivial atmosphere and plates returning to the kitchen empty. These are great indicators that your business is booming. But they say nothing about the financial shape of the business – only a budget can accurately assess this. However, many restaurateurs aren’t consistent with their budgets. Surprisingly, some haven’t even looked at their budgets since they formulated their business plans.

But a budget is one of a restaurant’s most essential resources. It helps you to anticipate costs, set financial parameters within which to operate and set reachable targets, among others. With a strategic approach and our budgeting tips, you’ll find that your restaurant’s budget isn’t a chore, but something you will come to rely on to ensure your establishment’s success.

Assess your current shape

First evaluate your business’s current situation. Find your last budget (even if it’s your business plan) and check how closely it resembles the reality of your restaurant’s finances. If they don’t match, determine by how much you missed the mark. Does anything come in significantly over or under budget? Were there any costs you left out entirely? It’s important that you’re as thorough as possible with your assessment because it can reveal a wealth of insights that will make future budgeting easier. You can highlight blind spots and identify patterns that might provide you with revolutionary intel into your restaurant’s operations.

Prepare the budget

Now that you know the financial state of your restaurant, it’s time to improve on it by formulating a detailed and well-informed new budget – this is also known as the real work. While each restaurant deserves its own budget, there are four important elements every restaurant budget must include. These are:

  • Sales

Your sales say a great deal about the profitability of your restaurant, which is why this is an essential inclusion in your budget. Compare your current sales with the sales from previous years to spot key trends.

  • Overheads and incidentals

These are all the expenses that go over and above your fixed costs. It can seem hard to scope for these expenses because they vary from month to month. But over time, you’ll be able to average them out. The important thing is to stick to this average as closely as possible.

  • Controllable income

This indicates the expenses that management can control (such as wages and food costs). A well-run establishment has a consistent, controllable income.

  • Net income

The money left over after all your expenses have been paid constitutes your restaurant’s net income. It’s very useful to compare this number over different periods to get a good measure of your establishment’s long-term financial status.

Hire an accountant

Besides everything else you already do, the financial management of a restaurant can be overwhelming. This is why it’s wise to invest in an accountant sometimes. It’s an additional expense but is well worth it. An accountant can help you structure your budget and will consult you regularly to track your business’s financial progress. Your accountant will also be your go-to financial advisor and offer you a wealth of budgeting tips. Think of it this way: you get back the money you spend on the accountant in the form of time that you can dedicate to managing and growing your restaurant.

Conduct regular reports

Your budget is not set in stone. You’re supposed to change and adapt it with everything else in your restaurant. This is easily done when you (or your accountant) conduct regular reports.

The frequency of these reports is up to you. There’s always something to report on daily (staff labour and menu item sales), weekly (prime cost) and monthly (profit and loss analysis). Insights from these reports form the foundation upon which you will make your budget adjustments.