You made $40,000 last month but can't pay this week's invoices because your cash timing is broken. I've helped restaurants fix cash flow crises across the Pacific Northwest, and profitability doesn't equal cash in the bank. Here's how to manage cash flow so you're never scrambling to cover payroll.
Separate your business and personal finances completely. Mixing accounts makes it impossible to understand cash flow and leads to "borrowing" from the business that never gets repaid. One business checking account, one business savings account, one personal account. Transfer your salary on a schedule like any employee. Clear separation prevents disaster.
Track cash flow weekly, not monthly. Monthly statements are too slow to catch problems. Every Monday morning, review what came in last week, what went out, and what's coming due this week. Weekly visibility lets you adjust before running out of cash. Monthly reviews mean you discover problems after it's too late to fix them.
Build a cash reserve equal to two months of operating expenses. Calculate your monthly fixed costs—rent, utilities, insurance, minimum payroll—and save double that amount. This buffer prevents one slow month from creating a crisis. Getting to this reserve takes time, but even one month's buffer dramatically reduces stress.
Negotiate payment terms with suppliers that match your cash cycle. If customers pay you immediately but suppliers expect payment in seven days, your cash flow is tight. Request thirty-day terms from suppliers so cash from sales covers those bills. Better terms mean you're not constantly fronting money for inventory.
Time major expenses to high-revenue periods. Don't schedule equipment purchases, renovations, or other capital expenses during your slow season. When you make $60,000 in July and $30,000 in January, plan big expenses for summer. Timing spending to cash availability prevents borrowing during lean months.
Use credit strategically for predictable expenses, not emergencies. A business credit card for recurring expenses like software, insurance, and supplies works fine if you pay it off monthly. Using credit cards to cover payroll because you're out of cash means your cash flow is broken. Fix the underlying problem.
Reduce your personal draw during slow periods. If winter is consistently slow, take less salary those months and more during busy summer. Maintaining the same personal draw year-round when revenue fluctuates forces you to drain reserves or use credit. Flexible owner compensation smooths cash flow.
Analyze which days of the week generate the most cash. If Friday and Saturday represent sixty percent of your weekly revenue, you need that cash deposited quickly. Push for same-day or next-day credit card processing. Waiting five days for credit card deposits kills cash flow when you need money for Thursday deliveries.
Review and cut unnecessary recurring expenses quarterly. Those software subscriptions, unused services, and convenience purchases add up to thousands monthly. Every eliminated expense improves cash flow permanently. Most restaurants have $500-1500 in monthly recurring charges they don't actually need.
Watch your inventory levels carefully. Inventory is cash sitting on shelves not working for you. Ordering too much or carrying slow-moving items ties up money that could pay bills. Lean inventory management means cash available for operations instead of frozen in unused product.
Plan for tax payments quarterly, not annually. Owing $15,000 in taxes every quarter is manageable. Owing $60,000 annually creates a cash crisis. Set aside twenty-five to thirty percent of profit monthly into a separate tax savings account. When quarterly taxes come due, the money's already there.
Get payment from customers faster when possible. If you run catering or events, require fifty percent deposits upfront instead of full payment after service. For regular dining, ensure credit card tips get to you daily. Every day money sits with customers or processors is a day you can't use it.
Managing cash flow requires discipline around timing, reserves, and spending that most restaurant owners never develop because they focus on revenue and profit instead of actual cash availability. RestaurantDestinations.com directories bring customers and revenue to your restaurant, but proper cash flow management is what ensures you have money available to pay bills when they're due.
Quick Action Checklist
Weekly Cash Flow Review (Every Monday):
- Check current bank balance
- Review last week's deposits and expenses
- List bills due this week with amounts
- Confirm cash available covers this week's obligations
- Note any shortfalls and plan solutions immediately
Monthly Financial Habits:
- Transfer fixed owner salary on same date monthly
- Set aside 25-30% of profit for quarterly taxes
- Review all recurring subscriptions (cancel unused)
- Update 3-month cash flow projection
- Compare actual spending to budget
Cash Reserve Building:
- Calculate monthly operating expenses (fixed costs)
- Set target reserve at 2x monthly expenses
- Save 10% of profit until reserve goal met
- Keep reserve in separate high-yield savings account
- Only use reserve for true emergencies
Payment Term Optimization:
- Request 30-day terms from all suppliers (vs 7-day)
- Negotiate same-day or next-day credit card processing
- Set up ACH direct deposit for staff (faster than checks)
- Push for electronic invoicing and payment
- Review and optimize payment processing fees quarterly
Expense Timing Strategy:
- Schedule major purchases during high-revenue months
- Delay non-critical expenses to cash-positive periods
- Plan equipment upgrades for busy season
- Avoid large payments during predictably slow months
- Stagger recurring annual expenses throughout year
Inventory Management:
- Review inventory weekly (don't over-order)
- Calculate inventory turnover ratio monthly
- Reduce slow-moving items that tie up cash
- Order to par levels, not bulk discounts
- Convert excess inventory to specials before spoilage
Tax Planning:
- Open separate savings account for taxes only
- Transfer 25-30% of profit monthly to tax account
- Pay quarterly estimated taxes on time
- Work with accountant to optimize deductions
- Never use tax savings for operations
Personal Finance Separation:
- Separate business and personal bank accounts completely
- Pay yourself fixed salary on schedule (like an employee)
- Never "borrow" from business for personal expenses
- Adjust personal draw during slow seasons if needed
- Document all owner draws properly
Credit Management:
- Use credit card for recurring predictable expenses only
- Pay off credit card balance monthly (no revolving debt)
- Establish business line of credit before you need it
- Never use credit cards to cover cash flow shortfalls
- Monitor credit card processing fees (negotiate if high)
Revenue Acceleration:
- Require deposits for catering/events (50% minimum)
- Same-day credit card deposit processing
- Daily tip payout to staff (improves accuracy)
- Invoice commercial accounts immediately after service
- Follow up on unpaid invoices within 7 days