What Can Happen if You Don’t Have a Budget?
Well for one, you can easily go out of business. The only way to make sure that you have enough sales to cover your expenses is to create a budget and abide by it. Creating a budget may not sound like a fun thing to do and maybe even a little intimidating, but having a budget is crucial for you to be able to control your business finances. Zig Ziglar said, “If you aim at nothing, you will hit it every time.”
A Budget is a Road Map
If you want to save a lot of money in very little time, set a budget. You should start your budget with zero and then challenge every expense. Compare your budgeted sales and expenses to actual every month so that you can adjust your marketing efforts quickly and react and regain control over your spending.
10 Tips for an Annual and a Monthly Budget
1) A budget takes some thought. Plan to work on it several sessions during one week. Work on the budget with everyone who’ll be affected by it.
2) Be realistic and specific to your situation.
3) Refer to your financial goals when setting priorities.
4) Use round numbers.
5) Last year’s amounts should be used as a guide, not a straitjacket.
6) Prepare a zero-based budget (income-expenses=0)
7) A monthly budget helps you react and adapt the next month’s budget if unexpected expenses occur. Divide annual expenses that you don’t pay monthly by twelve so they don’t sneak up.
8) If your business has irregular income, determine expenses that are a priority and pay in order of priority. (Always pay your accountant!)
9) Categories can be moved around while maintaining the zero-based budget, but savings are only spent on planned purchases.
10) Consider using software like Intuit Quickbooks. Or ask an accountant to help you.
How Do You Determine Budgeted Amounts?
Sales: Prepare budgeted sales based on historical sales and adjust for price changes, better control, and planned promotions.
Food and beverage costs: Prepare budgeted food and beverage costs based on weighted average historical costs.
Labor cost: Prepare budgeted labor costs based on historical information and adjust for wage increases and scheduling improvements.
Other costs: Prepare other budgeted costs based on historical information adjusted for current changes.
What About a Weekly Budget?
The margins in the restaurant business are so small that it is essential for the restaurant owners and managers to have a good understanding of what is affecting the restaurant’s profit on a weekly basis. A weekly budget will help the restaurant owner in the following areas.
- Guidance for staffing
- Guidance for purchasing
- Evaluation of managers
- Detection of theft
- Evaluating marketing efforts
- Controlling costs
For more information on weekly budgeting and reporting please see our blog “The Importance of Weekly Reports in Quick Service Restaurant.”
Our blog “Efficient Scheduling of Employees in Quick Service Restaurants” covers how to control labor costs.
If you have any questions or would like additional consultation or assistance with designing a budget for your quick service restaurant, we are here to help. Please contact Allen & Company, PC at our Kennesaw office at (770) 428-6229.
Allen & Company, PC - a CPA firm serving Kennesaw, Marietta, Acworth, Woodstock and north Atlanta. Providing accounting, financial statement audit, taxation, and advisory services for individuals and businesses. Extensive experience working with franchised quick service restaurants and other franchised businesses.