How to spot and fix financial leaks in your restaurant operations

Have you ever left the triple sink faucet running by mistake? Or maybe you accidentally left that bag of bread open overnight (why are those twist ties so easy to lose?). We all have a lot of things to juggle, and it’s easy to make mistakes or miss the details. But when it comes to restaurant operations, missing the small stuff can have real financial consequences (more than just less-than-stellar French toast). 

Spotting financial leaks in your restaurant can feel a little like a game of “Where’s Waldo?” Holes in your processes can be easy to miss, but the longer they go on, the larger their impact on your business. Whether your next restaurant milestone is scaling your business or just getting a better grasp on your budget, filling any financial holes is the first step in the right direction. 

So, how do you spot and fix the financial leaks in your restaurant? What steps can restaurant operators take to prevent money from going down the drain unnecessarily?

Before we explore a few money-saving solutions, let’s take a look at three signs your restaurant has some hidden leaks and may be in need of some financial TLC.

Three signs your restaurant might have some hidden financial leaks

• Inconsistent financial statements - a little financial fluctuation is normal, especially with varying expenses like food and labor costs (and a not-so-sneaky thing called inflation), but extreme variations can be a sign of a bigger problem. If your numbers are starting to rise and dip more than a roller coaster, it’s a sign that your restaurant may be in need of a financial tune-up. 
• Outdated systems - old systems are another tell-tale sign of financial leakage in your restaurant. Do your accounting and POS systems give you headaches over should-be simple tasks? Are they lacking in user-friendliness or efficiency? Worst of all, do they not even work with your RMS? Outdated systems can slow down your workflow, increase the chance of inaccurate data and may lack the advanced features needed to catch those hard-to-notice financial leaks. 
• Poor cash flow management - losing track of expenses? Regularly delayed or missed payments to vendors? Feel like you’re constantly living under a bill avalanche? If your cash flow is a continuous point of struggle or confusion, it may be a sign of some hidden financial leaks in your business. 

Now that we’ve taken a look at some of the signs of financial leaks in your restaurant, let’s explore a few ways to spot financial leaks faster and patch them up before things get out of hand. 

Four tips for spotting (and fixing) financial leaks in your restaurant

1. Run your numbers regularly

Running a restaurant is a lot like training for a marathon; consistency is key. It’s pretty hard to improve your restaurant’s finances and spot leaks without real-time data on key aspects of your business. 

Daily and weekly monitoring should include things like your Prime Costs, inventory levels, P&Land daily sales. Monthly monitoring should include your plate costs and website engagement.  Regularly reviewing your data not only helps you keep better track of important expenses and overall profits, but also makes it much easier to spot hiccups in your calculations.   

Fixing the leak🔧✨: Now that you’ve increased how often you’re tracking your numbers, you can identify patterns and focus on where things may be getting out of control. Consistently low sales on certain days of the week? It might be time to introduce a new special or adjust hours. Have a menu item that has great margins but doesn’t sell well? It might be time to spotlight it on your website or social media.

2. Make sure your software is up-to-date

Financial leaks in your restaurant aren’t always a case of user error. Slow, outdated systems can lead to outdated data, damaging your business and your profits. Picking an RMS, POS, and accounting system that is not only user-friendly but compatible with one another can help patch up those unchecked financial leaks in your business. 

When choosing the right software, make sure you have a list of wants and needs specific to your restaurant, to ensure you’re getting the best bang for your buck. 

Fixing the leak🔧✨: Audit your current systems. What’s working and what’s not? What are your biggest pain points? What are the short and long-term financial goals for your restaurant? Once you’ve answered these, you’ll know if you’re due for a system upgrade. 

Alternatively, if you’re already content with your software, how can you optimize it even more? Consider reaching out to customer support to learn about new features or money-saving tips you may not be aware of.

(PS: Learn more about choosing the right RMS here.)

3. Reduce your waste

The average restaurant spends around 25% - 35% of sales on food, with roughly 4%-10% of all inventory ending in food waste. Leaks like this can be tricky to spot, but with a few adjustments, you can cut back on waste and optimize your operations in the process. 

Knowing where you can cut back starts with looking at what you already have. How often do you audit your inventory? What about your menu? Is waste reduction something you talk about with your staff or something you’ve tried to tackle on your own? 

Fixing the leak🔧✨: Use recipe management tools to optimize your menu through standardizing recipes, comparing performance across menu categories and locations and keeping tabs on your theoretical menu costs. Get creative about choosing ingredients that can be used across multiple dishes. Getting a better grasp on how you manage inventory can also help reduce those pesky financial leaks in your restaurant.

4. Involve your team

They say there’s no “I” in team (but there is one in “rhubarb pie”, which is always a good idea). You don’t have to carry the weight of restaurant financial repair on your own. Consider involving your staff, especially those who are most familiar with your operations. 

Involving your team increases your financial peripheral and perspective. You never know who may have noticed a leak you might’ve missed. Including staff allows you to tackle a hurdle from multiple angles, leading to a faster resolution and a stop to profit leaks, and encourages them to take ownership of controlling costs and waste. 

Fixing the leak🔧✨: Find incentivized, collaborative ways to encourage staff suggestions for ways to cut back on unnecessary costs. Divide staff into teams, with each team focusing on one way to tackle a cost-cutting category of their choice, such as recipe optimization or improving inventory. The team with the best cost-cutting idea wins a prize, such as a gift card.  Encouraging staff insights through activities is a way to make things collaborative, ease the stress of trying to figure it out yourself and fix the leak faster.

Spotting leaks doesn’t have to feel like playing detective. While patching up financial gaps in your business can be tricky, it’s much easier when your approach is consistent, collaborative and paired with the right software and processes. While some leaks may have a longer repair time than others, they’ll be worth the wait. Now that you know what to look for (and how to fix it), you’re well on your way to fixing those leaks in your restaurant operations.