Restaurant Accounting: 5 Common Budgeting & Forecasting Mistakes and How to Fix Them

October 27, 2019


If you run your restaurant, then it is important to operate using restaurant budgeting and forecasting. There are many factors affect restaurant budgeting. These factors might be too much information to deal with, tedious processes to collect appropriate data and the resulting interval between collecting and applying these data. However, with the right accounting system, it is possible to deal with this information, and ensure higher levels of accuracy in forecasting, while also avoiding costly mistakes arising from poor budgeting and forecasting practices.


Why restaurant budgeting and accounting are so important?

  • Avoiding missing company objectives.
  • Avoiding running into cash flow problems.
  • Being a proactive management team instead of a reactive management team.
  • Identifying your financial goals and targets in order to examine how you are running your restaurant, determine what systems you need to invest in to change your bottom line.
  • Having a plan to generate revenue on purpose, rather than just being lucky.
  • Controlling food cost and labor cost.


Common Budgeting & Forecasting Mistakes and How to Fix Them:

1. Overreliance on Historical Data:

Historical data is very important to make decisions, forecast, budget, and identify seasonality and common trends. Nevertheless, it is not true to rely heavily on such data without keeping in mind the current situation or data. To survive in the restaurant industry world, you need to be able to adapt to industry forecasts and emerging opportunities. Accordingly, consider relying on real-time data that is relevant to the minute.


2. Failing to plan and budget for marketing:

You need to maintain a consistent working budget on at least a quarterly basis. You shall also monthly develop and present a budgeted profit and loss account in order to create an accurate cash flow forecast.

Moreover, you have to budget for marketing since it helps to generate impulses, establishing your restaurant brand identity, and filling seats. Your marketing budget is an investment in your business growth. Marketing is a controllable cost. Therefore, if sales go down in a specific month, you are able to cut your marketing budget. However, it is advisable to invest 3% to 6% of your monthly in marketing.


3. Overestimating and forecasting sales:

Consider basing your forecasts and projections on conservative trends. This is because overestimating revenue leads to unrealistic cost percentages, resulting in overspending.  Even misjudging the growth of some elements by 1% or 2% can dramatically change expectations and cause significant repercussions in overspending. Accordingly, every restaurant owner has to use every resource he has at his disposal to make informed decisions.


4. Not paying attention to external factors:

Pay attention to any factor affects your sales and costs such as street closures, festivals, bad weather, competitors’ prices, holiday seasons, minimum wage increases, food cost increases. In addition, consider keeping up with your local chamber of commerce, labor laws, and community newspaper so that you can predict external factors that affect your sales and costs.


5. Using manual processes instead of using software:

Manual, spreadsheet-based tactics leave room for mistakes, consume time, and provide only historical data instead of current. Moreover, it requires you to focus on data entry, instead of analysis of the data. So, try investing in an accounting system that seamlessly integrates with other systems so that you are not vulnerable to errors. With such a system, you can automate data entry reducing the time spent on data entry. You are also able to pull reports in real-time making quick decisions about your business. You can also have more time to conduct actual analysis improving budgeting and forecasting. Additionally, accounting software collects data effectively resulting in minimizing the risk of inaccuracies.