I've watched too many profitable restaurants close because they ran out of cash to pay rent. Profit and cashflow aren't the same thing—you can show profit on paper while having zero cash to pay bills. This disconnect catches more restaurant owners off guard than you'd think.
The difference in a nutshell
Profit is what remains after subtracting all costs from revenue. It lives on your P&L statement.
Cashflow is actual money moving in and out of your bank account. These numbers can be worlds apart.
💡 Example:
Restaurant De Smaak in December:
- Revenue: €45,000
- Costs: €38,000
- Profit on paper: €7,000
But in your bank account:
- Actually received: €41,000 (card payments processing, some cash)
- Actually paid: €42,000 (suppliers, rent, wages)
- Cashflow: -€1,000
Result: €7,000 profit, but €1,000 short in your account.
Why do profit and cashflow diverge?
Several factors create this gap between your P&L and bank balance:
- Payment timing: December sales might not hit your account until January
- Inventory purchases: You buy ingredients today, use them next week
- Depreciation: Equipment costs spread over years on P&L, but you paid upfront
- VAT collection: You collect 9% VAT from customers but must remit it quarterly
- Loan payments: Principal repayments leave your account but don't appear as P&L expenses
This timing mismatch represents one of the most common blind spots in kitchen management—owners focus solely on P&L profitability while their cash position deteriorates. I've seen it destroy otherwise successful operations.
💡 VAT effect example:
You sell for €10,900 incl. 9% VAT:
- Revenue on P&L: €10,000 excl. VAT
- Received in account: €10,900
- Must remit to tax authority: €900
- Actually available: €10,000
That €900 VAT isn't profit, even though it sits in your account temporarily.
Inventory and cashflow
Inventory creates massive cashflow swings. Buy €5,000 in ingredients and that money exits your account immediately. But your P&L only recognizes those costs after you actually use the ingredients in dishes.
⚠️ Watch out:
Many restaurant owners see P&L profits and assume they're thriving. But continuously building inventory destroys cashflow while P&L profits remain steady.
Depreciation vs. actual expenses
Depreciation complicates things further. Purchase a new oven for €12,000 and here's what happens:
- Bank account impact: €12,000 disappears immediately
- P&L impact: €200 monthly for 60 months (depreciation)
Year one shows €2,400 in oven costs on your P&L, yet you've paid €12,000 cash. That €9,600 difference hits your cashflow hard.
💡 Cashflow planning example:
Restaurant with €8,000 monthly profit:
- Profit per P&L: €8,000
- Minus: loan repayment: €2,000
- Minus: extra inventory: €1,000
- Plus: depreciation (non-cash expense): €1,500
Actual cashflow: €6,500 monthly
Why both numbers matter
You need both metrics for proper restaurant management:
- P&L profit: Reveals if your restaurant concept works financially
- Cashflow: Determines if you can cover immediate obligations
Restaurants can generate profits for months then collapse from cashflow problems. Or lose money temporarily but survive thanks to strong cash management.
How do you control both?
Most small restaurants track only P&L performance. But simple cashflow forecasting makes a huge difference:
- Project weekly income streams
- Schedule fixed expenses (rent, wages, supplier payments)
- Plan VAT payment dates
- Budget major equipment purchases
Food cost calculators show dish profitability. For cashflow planning, you'll need basic spreadsheets or accounting software.
How do you create a simple cashflow forecast?
Forecast your weekly income
Look at your average revenue per week from the past 3 months. Account for seasons and events. Calculate how much is cash (immediately available) and how much is card payments (1-2 days delay).
Plan your fixed expenses per month
Make a list of everything you pay every month: rent, insurance, wages, gas/water/electricity, software subscriptions. Note the date you pay each item, so you don't get surprised.
Account for VAT and taxes
Deduct from your revenue the VAT you need to pay (usually quarterly). Also plan your income tax and other tax payments. This money isn't yours, even though it's in your account.
✨ Pro tip
Check your actual bank balance against next week's scheduled payments every Monday at 9 AM. If the gap is less than €2,000, delay any non-essential purchases immediately.
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
Can I make profit but still have no money?
Absolutely—this happens frequently in restaurants. Your P&L shows profit, but payment timing, inventory buildup, or loan repayments drain your account. That's why cashflow planning matters as much as profit tracking.
Why doesn't VAT appear on my P&L but shows in my account?
VAT isn't your revenue or profit—you're collecting it for the tax authority. Your P&L only shows revenue excluding VAT since that VAT gets remitted later. The full amount hits your account temporarily, but most of it isn't yours to keep.
How often should I check my cashflow?
Weekly minimum, focusing on the next 4 weeks ahead. What major expenses are coming and do you have enough to cover them? With tight margins, daily monitoring isn't overkill.
What if my cashflow consistently lags behind profit?
You're likely accumulating too much inventory or tying up cash in equipment purchases. Review your buying patterns and consider if recent investments were essential. Negotiating longer payment terms with suppliers can also help bridge the gap.
📚 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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