One challenge for entrepreneurs when they run a food business is managing their finances. With efficient planning and management, entrepreneurs can manage finances effectively and transparently report their long-term business. Food business financial management involves managing the budget, recording expenses or recording income, managing inventory or cash flow and obtaining business certificates.
As a food business owner, you need to have a clear understanding of your financial situation to make informed decisions. This is important enough to explain that the business being run is financially stable and positioned to continue to grow. Managing a business is different from designing a business plan, entrepreneurs need to make a business plan first. Only then learn to manage and implement the business plan that was previously made.
Food Business Financial Management
To have sound financial management, entrepreneurs need knowledge and supporting human resources. Let’s take the example of a small Cafe serving breakfast and lunch. The Cafe has been operating for a year and has experienced several financial challenges, so how do they manage their finances? There are at least 9 stages that they have carried out, including:
Designing a Budget
One important aspect of effective financial management, especially in the field of food and beverage, is making a budget. This is a financial plan that outlines the estimated income and expenses per period (monthly and yearly). With a budget plan, the Cafe entrepreneur can plan their expenses well, avoid overspending, and ensure they have transparent cash flow to operate their food business.
Entry and Exit Notes
Recording cash out and income is also necessary for Cafe entrepreneurs, because this is the standard for managing Cafe finances effectively. They can see all expenses, including raw materials, labor, rent, utilities, and operating expenses. By doing so, Cafe owners can identify areas where they might be overspending and can make budget adjustments right away.
Keeping records is important in the financial management of a food business in a nutshell. Employers can maintain up-to-date records of all financial transactions, including invoices, receipts, and account statements. Thus, these entrepreneurs can see their financial performance and are able to make decisions based on structured data.
Managing inventory needs to be done in managing a food business, especially for a Cafe entrepreneur. Make inventory reports systematically so that you can ensure the company has available stock to meet customer demand. Thus, overstocking and under stocking can be avoided, which causes waste and loss of profits.
Manage the Cash Flow
Cash flow management needs to be done by cafe entrepreneurs when planning their finances systematically. Instead, view and manage the rate of cash flow periodically, including the rate of cash flow in and out. By doing so, they can ensure that the business has enough cash to meet expenses, pay for purchases from suppliers and to continue growing its business.
Negotiations with Suppliers
Negotiating with suppliers will help entrepreneurs save spending money on spending on raw material supplies in the kitchen. As a food entrepreneur, you can shop around and compare the prices of different suppliers to find an offer that fits your budget. Next, all you have to do is negotiate payment terms and additional discounts to save spending capital for the long-term cycle.
Managing debt should be your main concern when you are preparing financial management for a culinary food business. The cafe entrepreneur has also taken care of managing their debts, including loans and credit card balances. Also, make timely payments to avoid late fees and penalties and maintain a good credit score.
See Profit Margins
Seeing profit margin records is the basis for running any business. Entrepreneurs need to calculate profit margins in detail so they know whether the results can offset existing business costs and whether they are profitable for them. Smart entrepreneurs are able to identify chronic areas to increase prices or reduce costs to increase profit margins.
Cooperate With Professionals
Seeking professional advice can assist employers in coming to an informed decision. Please consult with accountants, financial advisers and professional business mentors to help manage the finances of the culinary food business that is being run properly. So, you are not wrong when you are going to manage it.
Analyzing Food Business Financial Report Data
Analyzing financial report data turns out to be a major aspect of food business financial management. This financial data report will describe in detail the financial condition of the business, and can be used as a reference in making business operational decisions.
Steps that can be taken to start analyzing food business financial report data include:
1. Review the Profit & Loss Report
The profit & loss report provides a summary of incoming income, expense data, and expenses for a scheduled period. This overview can show the profit & loss of the business in months and years. By reviewing the profit & loss report, the owner of this food business can identify areas of strength as well as weakness in his business operations. For example, if the cost of goods sold is too high, the owner will need to review and streamline his production costs.
2. Analyzing the Balance Sheet
The balance sheet is able to provide an overview of the financial position of any business, including the culinary food business. The balance can be set at one point in time weekly, monthly and yearly. The balance sheet data report shows current asset data, total liabilities and initial capital. Checking the balance sheet, will let the food business owner know whether the business has a number of assets to complete one liability. If you have more liabilities than assets, the owner needs to take corrective action to align his balance sheet.
3. Calculate Projected Financial Ratios
This financial ratio projection illustrates insight into the current financial condition for all businesses, including the non Cafe culinary sector. The three main ratio projections that should be calculated include:
- Gross profit margin ratio : This measures the profitability of a business and is calculated by dividing the gross profit data by the revenue data.
- Inventory turnover margin : Turnover ratio will measure the efficiency level of a business managing its inventory. Dain is calculated by dividing the HPP (cost of goods sold) data by the average inventory data.
- Margin current ratio : This will describe the level of ability to pay obligations in the short term. And calculated through the division of data from current assets with data on current liabilities.
4. Analyze the Cash Flow Data
The cash data report describes the flow of funds in and out of the amount of cash for one rotation in the food business. Analyzing cash flow data reports, will make data for owners when they want to know if they have enough cash to meet their expenses, in order to support the growth side of the business. Reports of cash flow data are loaded into three special forms, including:
- Operational data flow : This describes the cash flow for data going in and out of business operations, such as sales, payments to suppliers, and employee payroll.
- Capital activity : This will account for cash flow data from capital, such as capital purchases or asset acquisitions.
- Flow of financing: This will describe the state of cash flow data from business financing activities, such as credit loans and non-capital equity.
5. Compare To Industry Standards
Finally, food business owners should compare financial statement data against existing industry standards. This is done to see what their performance is like against competitors in the industry with the same category. At least involve research with industry benchmarks through a comparison of the main financial margin ratios and business margin ratios.
If it is underperforming and underperforming relative to industry benchmarks, owners need to take smart action to improve their food business’ systems and financial management simultaneously and sustainably. Industry standards have their own ISSO license, meaning employers need to look through official government agencies.