How to eliminate cash flow problems in your café business
14 December 2016
Posted by Equus Partners
Is cash flow (or rather a lack of it) in your café business keeping you awake at night? You’re not the only one. The good news is there’s a way to say “Goodbye” to cash flow problems, and “Hello” to a good night’s sleep. Let me tell you the story about Harry, and how he managed to eliminate cash flow problems in his café.
Harry was a café owner, and a pretty successful one at that. All three of the cafes he owned had great front and back of house teams and receptive management, which meant Harry could focus on developing his product and team, along with distribution and sales.
Harry’s financial dilemmas
But despite all this, Harry still felt he was repeating a lot of the mistakes he was making back when there was just the one café. And the biggest one of all was failing to plan for cash flow surprises. BAS, taxes, salaries and superannuation payments were a never-ending source of stress—not to mention a lot of sleepless nights. And the fact he had a fantastic team of staff and suppliers he didn’t want to let down made him stress even more.
He knew what the problem was. He wasn’t putting any money aside for these future payments. But Harry was reluctant about changing any of his payments, his business structure, or the way he looked at his financials. And his accountant wasn’t much help either, having never suggested changes or prepared any cash flow projections he could rely on.
There was another reason for Harry’s reluctance: he liked seeing the money in his transaction account, and ready access to it. The thought of transferring funds to another account to provide for expenses made him nervous. What would happen if the transaction account ran low?
When Harry met Savvy
Carlos, a friend and fellow café entrepreneur, invited Harry over to his new café (his fifth) for lunch. As they ate, Carlos mentioned that thanks to his adviser he’d never felt so in control of his cash flow.
Intrigued, Harry asked Carlos what this adviser had done for him.
Carlos and his adviser were looking at financial reports that helped Carlos manage his money. His adviser also started forecasting cash flows so Carlos had a ballpark of how much they’d need to pay in GST, PAYG and Superannuation each quarter.
Being able to quickly see how much money they’d need (and when they’d need it) meant they could put money aside each week to cover future commitments. Carlos always knew he’d have enough money in his transaction account to cover everyday expenses, which was comforting. And whenever something came up out of the blue, they would take action together to quickly deal with it.
Seizing the opportunity, Harry asked Carlos for his adviser’s contact details. He wanted what Carlos was having.
Business booms when you get cash flow right
Harry is now happy with his business. He sleeps soundly, knowing his café business’ cash flow will always be healthy. In fact, sorting out his cash flow problems gave him the confidence to expand his business by making improvements he had wanted to make for a while.
If you’re experiencing cash flow problems in your café business, or would like to know more about how to improve it, don’t hesitate to get in touch with us.
Because everyone deserves a good night’s sleep.