Cash flow is the lifeblood of your restaurant. Too little buffer and you'll run into trouble as soon as a supplier delays or sales drop. In this article, you'll learn step-by-step how to calculate how much money you need each month to pay all your bills.
What is cash flow requirement?
Cash flow requirement is the amount you need monthly to cover all fixed and variable costs, plus a buffer for unexpected expenses. It's not about profit, it's about survival.
💡 Example:
Restaurant with 60 seats calculates:
- Rent: €4,500
- Staff: €18,000
- Purchases: €12,000
- Energy: €2,200
- Other costs: €3,300
Total cash flow requirement: €40,000 per month
Inventory your fixed costs
Start with all costs that come back every month, regardless of your sales:
- Rent and lease: Including service charges and municipal taxes
- Staff: Gross salaries, social contributions, pension premiums
- Insurance: Liability, inventory, business damage
- Energy: Gas, water, electricity (take an average of 12 months)
- Phone and internet: Fixed lines, mobile, POS system subscriptions
- Depreciation: Kitchen equipment, furniture, renovations
Calculate variable costs
These costs fluctuate with your sales, but you deal with them every month:
💡 Example calculation:
At €35,000 monthly sales:
- Food cost 30%: €10,500
- Beverage purchases 20%: €1,400
- Credit card fees 1.5%: €525
- Marketing 2%: €700
Variable costs: €13,125
- Food purchases: Usually 28-35% of your food sales
- Beverage purchases: Usually 18-25% of your beverage sales
- Credit card fees: 1-2% of total sales
- Delivery platforms: 15-30% of delivery sales
- Marketing and advertising: 2-5% of sales
Buffer for unforeseen expenses
Always add a buffer for expenses you can't plan:
⚠️ Heads up:
Without a buffer, you risk that one broken freezer or absent staff member puts you in a liquidity crisis.
- Repairs: Kitchen equipment, air conditioning, POS system
- Sick leave coverage: Extra staff for absences
- Seasonal dips: Lower sales in quiet periods
- Price increases: Suppliers regularly raise prices
A common buffer is 10-15% of your total monthly costs.
Formula for cash flow requirement
Monthly cash flow requirement = Fixed costs + Variable costs + Buffer (10-15%)
💡 Complete example:
Restaurant with €35,000 monthly sales:
- Fixed costs: €22,500
- Variable costs: €13,125
- Subtotal: €35,625
- Buffer 12%: €4,275
Total cash flow requirement: €39,900
Monitor your cash flow
Don't calculate this just once, check it monthly. Costs change, suppliers raise prices, staff costs increase.
With a system like KitchenNmbrs, you can automatically track your food cost and variable costs, so you always have current figures for your cash flow calculation.
How do you calculate your monthly cash flow requirement? (step by step)
Inventory all fixed costs
Make a list of all costs that come back every month: rent, staff, insurance, energy, phone, depreciation. Add these up for your total fixed costs per month.
Calculate variable costs as a percentage
Determine your food cost (28-35%), beverage purchases (18-25%), credit card fees (1-2%) and other variable costs as a percentage of your expected monthly sales. Multiply by your sales.
Add buffer for unforeseen expenses
Add up fixed and variable costs. Add 10-15% buffer to this for repairs, sick leave coverage and seasonal dips. This is your total monthly cash flow requirement.
✨ Pro tip
Check your cash flow requirement against your average monthly sales from the past 6 months. If your cash flow is higher than 85% of your sales, your margins are too tight and you're at risk.
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
How much buffer should I maintain for unforeseen costs?
A common buffer is 10-15% of your total monthly costs. With higher fixed costs (expensive rent, lots of staff) you'd better maintain 15%.
Should I include VAT in my cash flow calculation?
Yes, calculate with amounts including VAT. You pay your suppliers including VAT, even though you'll get it back from the tax authorities later.
How often should I recalculate my cash flow requirement?
At least every 3 months, or immediately after major changes like new rental contracts, staff expansion or significant supplier price increases.
What if my cash flow requirement is higher than my sales?
Then you're losing money and need to take action: reduce costs, raise prices or boost sales. This is a warning signal that your business model isn't working.
Are depreciation charges real cash flow or just accounting?
Depreciation is accounting, but it represents money you spent earlier. Include it to stay realistic about your actual costs.
📚 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
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (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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