With money constantly passed over the bar and contactless cards beeping away as someone buys a round, you’d think that pubs and bars were naturally very liquid businesses (no pun intended). Those in the business will know that’s not necessarily true – hospitality businesses face the same cash flow problems that any other small business with a lot of overheads would.
Some of the most common causes of negative cash flow include late payments, high pricing and failing to sell enough as a result, and overpaying for stock. Worryingly, it’s cited as the reason why 4 in 10 businesses never reach their 5th birthday.
If your cash isn’t flowing like you want it to, there are ways to get it moving healthily around your business again.
1. Get comfortable with the difference between profit and cash flow
Profit is one thing, cash flow is quite another. Your profits might look good, but if they’re being eaten up by suppliers, utilities, and other costs, you could still end up cash flow negative. Healthy cash flow will help a business survive long term, so don’t focus on what looks like healthy profit, there could still be problems lurking underneath.
2. Automate your forecasting
Forecasting doesn’t necessarily require a good maths brain; some accounting tools will do it all for you. You’ll get a snapshot of your money coming in, going out, and how they work together, without having to touch a spreadsheet. It’s an insight you can’t afford to miss out on.
3. Update your special offers, not your prices
How much you charge for different drinks depends on all kinds of things, but the offers and deals you advertise can make a big difference to sales and they’re in your hands. Consider your local area – would a post-work happy hour fit the customers? Are you appealing to the Saturday night cocktail crowd? Would 2-for-1 increase spend on slow weeknights?
4. Talk to your suppliers
Most suppliers would rather negotiate than lose a customer, so don’t be afraid to pick up the phone and talk about how much you’re paying them. Make sure you have a figure in your head you’d like to compromise on, but be willing to stretch a bit. The longer you’ve been with them, the better your chances.
5. Negotiate payment terms with suppliers too
If one of your suppliers won’t move on price, they might be willing to discuss your payment terms. If you can pay for their usual product or service in more manageable chunks, you’ll avoid having large sums leave your business bank account all at once, and you’ll be able to plan your cash flow better.
6. Secure finance to cover expenses
If cash flow is a recurring problem, you can get business finance to make sure you have enough to replenish new stock, renovate, or whatever you need to develop. There are more ways to repay than you might think, including merchant cash advance, which takes a small percentage from each card transaction until you’re back in the black.
7. Ask private parties to pay in advance
If you host bookings and parties in your bar or pub, your payment terms need to be quite strict to avoid a last minute let down. Asking for at least a 50% deposit will secure the room, cover you for any expenses you need to provide, and make cancellations a lot less likely.
8. Use ‘Just-in-Time’ stock management
If you’ve got a room full of stock you haven’t used yet, it’s time to change how much you’re ordering. Just-in-Time involves buying less and only as needed, not in anticipation of what you might need. It’s used to forecast accurately and keep stock costs down, and was first introduced by Toyota.
9. Keep accurate tax records, or pay someone to do it for you
Being surprised by a bigger tax bill than expected will blast your positive cash flow. Pubs and bars in particular have different charges to pay, including late-night levy and Machine Games Duty. If you don’t have time to manage it yourself, hire an accountant, or allocate bookkeeping to a trusted member of your team, so they can preempt any brown envelopes.
10. Look at all your overheads in detail
You’ll be wasting money somewhere – every business does. Look at every outgoing, from staff to spirits, and work out where the inefficiencies are. You’ll be surprised how much you can cut from your budget when you force yourself to be shrewd.
Need help with cashflow?
If you accept credit and debit card payments from your customers, the Merchant Cash Advance could be the perfect business finance solution for you. We will provide you with the money you require, and every working day we will take a small pre-agreed percentage of your card transactions until the advance has been paid back.
The amount you have to repay will fluctuate depending on how much you process through your terminal, this means on a slow day you will pay back less and on a busy day you will pay back slightly more. It’s finance that works with the dynamic of your business.Get A Quote