I'll admit it - I used to think cash flow was just fancy accounting talk. Then I watched three profitable restaurants in my area close because they couldn't pay their bills. Cash flow isn't revenue minus expenses - it's the actual money moving through your doors versus what's leaving your bank account.
What exactly is cash flow?
Cash flow tracks real money movement: what hits your bank account minus what leaves it during a specific period. It's different from profit because you're including non-revenue income (like loans) and non-expense outflows (like equipment purchases and loan payments).
? Example:
Restaurant De Smaak in March:
- Revenue: €45,000
- Costs: €38,000
- Profit: €7,000
But also:
- Loan repayment: €2,500
- New refrigerator purchased: €3,000
Cash flow: €45,000 - €38,000 - €2,500 - €3,000 = €1,500
You generated €7,000 profit, but only €1,500 stayed in your account. That's why you can be profitable yet still bounce checks.
The three components of cash flow
1. Operating cash flow
Your daily operations: revenue minus operating expenses like food costs, payroll, rent, utilities.
2. Investment cash flow
Capital expenditures for equipment, renovations, initial inventory. These are typically large, infrequent expenses.
3. Financing cash flow
Loans received, debt payments, owner investments, personal draws.
Calculate monthly income
Start with revenue, but timing matters more than you think:
- Cash sales: Available immediately
- Card payments: Typically deposited within 1-2 business days
- Invoiced sales (catering/events): Often carry 14-30 day payment terms
- Third-party delivery: Platforms usually pay weekly
⚠️ Watch out:
Earning revenue and receiving cash are separate events. For cash flow purposes, only actual deposits matter.
Map out monthly expenses
Categorize your outflows to maintain visibility:
Fixed costs (consistent monthly amounts):
- Rent and common area maintenance
- Insurance premiums
- Software subscriptions, phone service
- Equipment lease payments
- Debt service
Variable costs (fluctuate with sales volume):
- Food and beverage purchases
- Hourly labor
- Utility usage
- Packaging and supplies
? Example variable costs:
At €40,000 revenue:
- Food costs: €12,000 (30% food cost ratio)
- Additional labor: €3,200 (8%)
- Variable utilities: €800 (2%)
Total variable: €16,000 (40%)
Include VAT and taxes
Tax obligations create significant cash outflows:
- VAT: Net difference between collected and paid VAT, remitted quarterly
- Payroll taxes: Due monthly
- Income tax: Annual obligation requiring monthly reserves
Set aside approximately 15-20% of your profit monthly for future tax payments. This is the kind of thing you only learn after closing your first month at a loss - taxes don't disappear just because cash is tight.
Recognize seasonal patterns
Most restaurants experience seasonal fluctuations. Calculate annual cash flow to understand your full cycle:
? Example seasonal pattern:
Beach restaurant monthly cash flow:
- Peak season (Jun-Aug): +€8,000 monthly
- Shoulder months (Apr-May, Sep-Oct): +€2,000
- Off-season (Nov-Mar): -€3,000
Summer profits must cover winter losses
Improve cash flow: where can you steer?
Accelerate cash receipts:
- Reduce catering payment terms (7 days instead of 30)
- Incentivize cash transactions
- Require deposits for large events
Optimize payment timing:
- Negotiate extended terms with suppliers
- Schedule major purchases strategically
- Maintain lean inventory levels
⚠️ Watch out:
Extended payment terms improve short-term cash flow but don't eliminate obligations. Use timing adjustments to smooth cash flow cycles, not avoid payments.
Digital tools for cash flow
Excel works for basic tracking, but specialized tools offer more insight:
- Accounting software: Links to bank accounts for automated cash flow tracking
- Food cost calculators: Tools like KitchenNmbrs help determine actual profitability per menu item
- POS systems: Generate real-time sales data
The critical habit is weekly cash position reviews: current balance versus next month's requirements.
Related articles
How do you calculate your monthly cash flow? (step by step)
Gather all income for the month
Add up: cash sales, card payments, invoice payments that have come in, and payouts from delivery platforms. Watch out: only money that's actually in your account, not invoiced amounts that haven't been paid yet.
Add up all expenses you actually paid
Distinguish between fixed costs (rent, insurance, loans) and variable costs (purchasing, staff, energy). Don't forget one-time expenses like new equipment or renovations.
Calculate your net cash flow
Subtract all expenses from all income. This gives you net cash flow for that month. A positive number means you have money left over, a negative number means you spent more than came in.
✨ Pro tip
Check your bank balance every Friday at 4 PM and compare it to your 13-week rolling average. Variances exceeding 15% usually signal cash flow issues developing beneath your daily operations.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
What's the difference between cash flow and profit?
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What is a healthy cash flow for a restaurant?
What if my cash flow is structurally negative?
Should I include VAT in my cash flow calculation?
How do I handle irregular large expenses in cash flow planning?
Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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