Restaurant budgeting and forecasting are two of the most important financial processes you perform in your business, regardless of its size. Unfortunately, many restaurateurs make mistakes when performing them. Accurate and efficient budgeting and forecasting lead to the growth and development of your restaurant’s operations. Therefore, you always need to look for ways to improve budgeting and forecasting at your restaurant.
Below are 6 ways to improve budgeting and forecasting to build a strategic plan that meets your business’s financial goals.
1. Budget to Your Plan, Not Plan to Your Budget:
Budgeting to your plan requires you to make your spending decisions according to your actual revenue, rather than to opportunities that such spending might or might not lead to. Budgeting to plan considers the true influence that spending decisions will have on the restaurant’s finances rather than dealing with it later. It also helps you address opportunities you did not add to your original budget.
For example, your restaurant has an opportunity to grow by acquiring a competitor or targeting a new customer base. However, doing so requires assuming substantial debt in order to finance the acquisition or purchase new equipment or additional inventory. Budgeting to your plan will take into account the effects these costs will have on your budget in both the short and long term and then plan accordingly. Alternatively, planning to your budget will just go ahead with the debt and explore its impact on the budget later.
2. Improve budgeting and forecasting by keeping them flexible:
The change is consistent in your restaurant business as the year progresses. And for that, any budgeting and forecasting you do regularly must be able to adapt. Accordingly, your accounting team shall deal with metrics based on up-to-date information. Additionally, your operations should include a review of your budget and forecasts, if not monthly, then quarterly. So keeping these processes flexible will lead to better overall accuracy and results in better business decision-making. Moreover, you will be able to make the necessary adjustments on time.
3. Define Clear Goals:
The purpose of forecasting is to predict your restaurant’s financial future and make progress and development. Forecasting helps you make business decisions and understand their impact before you apply them. You have to be clear on the overall goals of your restaurant so that you would be able to accurately forecast your restaurant’s financial future.
Therefore, make sure that you have a clear understanding of what you want to accomplish and how – and when – you want to accomplish it, by avoiding making random guesses.
4. Build Rolling Forecasts and Budgets:
Often, restaurant leaders focus on predicting the future rather than changing it, which is a mistake. Since this sets the mindset of failure if the expected result is not met. However, a rolling forecast is a new framework in line with the changes that are happening now and can help restaurant managers make better, more relevant and strategy-based decisions.
The idea is that instead of running a restaurant based on a fixed budget created the previous year, rolling forecasts are used to reconsider and update budget assumptions throughout the year. This allows restaurants to adapt plans and allocate resources based on changes in the economy and the restaurant industry.
Implementing rolling forecasts and budgets enables you to regularly update your forecasts and budgets according to actual present business results, not what managers thought may happen many months ago. This process helps you forecast for the next quarter, not the entire year. In addition, rolling forecasts and budgets enables you to look beyond the end of the current year and align your budget with your stated plan while enhancing the accuracy of your forecasts and budgets as you consider the unexpected changes that may happen.
- Are Dynamic and well adaptable to change
- Can identify hits and misses in the budget
- Focus on real business operations rather than financial differences
- Plan success expectations rather than being a mandatory practice
- Enable restaurant leaders to compare strategic objectives and actual forecasts
Examples of Rolling Forecasts and Budgets:
5. Improve budgeting and forecasting by tracking and measuring your results:
Once you set your budget, pay attention to any seemingly minor details that may affect your restaurant’s financial health. Consider forecasting all potential scenarios that may occur by tracking restaurant industry trends, customers’ behaviors, competitor activity, and market shifts. If you are tracking your results, you will be able to figure out how to measure them compared to what you forecast and plan. This will help you adjust the processes you use to make them more efficient.
6. Invest in the appropriate software:
Excel or other spreadsheet software leaves a space for the risk of human error when doing your budgets and forecasts. Conversely, consider investing in the right cloud-based accounting system to streamline your restaurant’s operations and make them less time-consuming. The accounting system allows for more flexibility and ensures better security and cost savings. It makes budgeting and forecasting processes more accurate, faster, and with no errors, resulting in better decision making across the broader business. If you would like to know more about what this system could do for your restaurant, get in touch.