The month is over. The month has ended.

You should then check the bank account of the restaurant.

It wasn’t the number you were hoping for.

This gap can be a source of frustration for restaurant owners since they think that profit and cash available should tell the same tale. They aren’t. A P&L is a measure of the financial performance of a company over time in time, whereas your bank account shows the time frame of money moving in and out of the business.

Understanding the difference will alter the way that a restaurant’s owner is able to view their financials.

Check out what happens in a normal week. Customers pay for meals. Paying employees is necessary. Food and drinks are issued. Rent is getting closer. The time of debits to credit cards is different. Sales tax has been collected, but the money is subject to an obligation.

In the meantime, next week’s purchase has already begun.

When you concentrate on revenues and the numbers at the end of profits, it is easy to miss out on a great deal of activity.

The clue could be hidden in the Prime Cost

Food, beverages and labor costs are worth a closer examine when restaurant profitability begins to fall.

Prime cost consists of both goods and labor. The Bookkeeping Chefs’ advice places the cost of goods sold between 60% and 65 percent of the revenues for a variety of establishments. They also recommend regular monitoring of the week instead of waiting until the month ends.

Effective cost management for primes is less about worrying about a single percentage and more about spotting changes quickly.

Imagine that the restaurant usually performs in line with its goals, but this week’s percentage increases. Perhaps the overtime rate is up. Maybe beverage costs were stable but food costs increased. The manager can review menus as well as waste, portions sizes, vendor invoices, and purchasing if the food percentage is greater.

The percentage is a source of concern. The answer is found in the activity of the restaurant.

The reason this conversation can be relived is because everyone can still remember the details of what transpired.

The details are much more difficult for you to remember the next day or two.

When the vendor invoices arrive

The restaurant will be able to pay later for the food items it buys. It’s because of this timing that analyzing profits alone will not address all cash issues.

Vendor invoices should be recorded, received and tracked before being paid. In a business that has numerous suppliers, doing that manually could become an administrative burden.

Automating accounts payable helps to streamline this process by reducing repetitive handling of bills and payment information. Systems for bookkeeping that are linked can give owners a better image of their obligations even if they haven’t yet been paid.

That’s useful because the bank’s balance as an individual can appear more healthy than a restaurant’s current position.

Today, there may be an amount of $80,000 in the account. This amount could have a different meaning depending on other elements like rent as well as payroll, vendors and other obligations in the coming days.

That leads naturally to cash flow forecasting.

What will happen with the money we have received after we’ve received the funds we’ve expected and met all of our obligations?

It is important to know what the distinction is when deciding if this week is a good opportunity to replace equipment, buy more items, or conserve the cash flow.

You may not be rightfully entitled to all the money you thought.

The sales tax illustrates this especially well.

The money a restaurant gets from its customers will eventually have to be handled in accordance with its tax obligations. If these cash-flows are combined with operating cash, they can provide a false perception of the amount of money that is available for spending.

Regularly maintained records help restaurants to comply with the sales tax laws as well as providing a complete image of their financial condition.

It is for this reason that restaurant accounting works better when financial obligations aren’t separated from other responsibilities.

Prime cost affects margin. COGS and future payment are affected by the purchase of vendor products. Payroll affects both the labor and cash percentage. Taxes on sales affect cash availability. The P&L shows financial performance, forecasting can help management look ahead.

The pieces link.

Bookkeeping Chef assists in bringing these pieces together using restaurant-specific reports as well as system integrations. For operators who don’t want to work all night reconciling financial data, specialized outsourced bookkeeping services will handle most of the accounting work without having to remove the owner from the financial conversation.

The last point is vital.

The idea isn’t for restaurant owners to stop looking at their books since someone else is handling them. It’s essential that owners have access to information so that they understand what’s happening.

If the P&L indicates that the restaurant made money, but the bank account feels extremely unbalanced, don’t think that one of the numbers must be wrong.

Find out what happened between you and your partner.

The answer to this question will give you more insight into the restaurant’s location than the name.