Like many businesses, restaurants live and die by their cash flow. The volatility and unpredictability of the industry makes cash flow management a key factor to success.
How big of an issue is cash flow?
According to Aditya Narula, head of customer experience and success for Kabbage, a small business financing company, cash flow is an ongoing issue for restaurants of all sizes.
“Margins are particularly thin due to food and employee costs, which typically consume more than half of all goods sold,” Narula said. “Compound that with a highly seasonal business reliant on tourism, holidays and weather, as well as ever-changing taste preferences, competition, shifting customer expectations, rising property costs and more—it requires diligence to maintain a healthy cash position to build and maintain a successful restaurant.”
All restaurants will face one or more of these problems at some point in their life. Unfortunately, all those problems can cost a restaurant valuable capital if they are not handled appropriately. The key to those who successfully traverse the problems is how they decide to approach those problems financially.
There’s an old saying when businesses begin looking for financial assistance: “let the bakers bake.” Simply put, that means businesses need to find financing options that allow them to keep being who they are without becoming overburdened with repaying their loans.
Technology is helping businesses alleviate the stress of repaying loans by reducing the amount of time a business needs to wait before their loan application is approved. Some financial institutions will approve a loan within minutes and release the capital in the same day.
Another way technology is improving the way businesses approach financing options is by providing operators with up-to-date information that helps them make critical decisions in real time. The Internet of Things (IoT) allows kitchen equipment such as a refrigerator to self-monitor its performance and alert the operator when it’s time to be maintained. Other POS software act as data mining machines, allowing operators to see where their business is succeeding and failing with accurate data to support those inferences.
How Can I Utilize Technology to Make Financing Work for Me?
The first consideration any business owner who is looking for extra financing should consider is the burden of repayment. You should never take out a loan that’s too big. Taking out one that is too small can have the same detrimental effects as well. So, business owners should prudently consult their data in order to see if a financial infusion makes sense. If there’s no room to handle a monthly repayment plan, it may be time to unload some assets, like inventory or re-structuring rent payments, in order to raise the capital necessary to stay above water.