The Basics of Restaurant Budgeting

Your restaurant may have a great menu, loyal customers, and an unbeatable location, but without effective restaurant budgeting, none of those factors matter. A strategic and accurate restaurant budget plan is your establishment’s roadmap to success; In other words, it’s the most trustworthy guide to your profit. 

Too often, managers and entrepreneurs don’t know how to budget for a restaurant in the restaurant industry. However, without this critical financial information upon which to act, it’s impossible to know whether you’re heading for a profit, break-even scenario, or a loss.

RASI’s restaurant accounting services are ideal for anyone seeking much-needed expertise and input for their restaurant budgeting practices. For this article, we’d like to share some insight on restaurant budgeting basics, how to budget for a restaurant, devising a reliable restaurant budget plan, and as a bonus, touch on budgeting in terms of restaurant incentive planning for your team!

Happy male at restaurant bar

Restaurant Budgeting Basics

While there’s no official manual for how to budget for a restaurant, and every operation has unique financial needs within its own four walls, the basics of restaurant budgeting remain the same.

Here’s a general outline of how to budget for your restaurant:

Define and calculate costs

For managers not sure how to budget for a restaurant, start from square one and lay out all your costs. Intimately understanding your monthly expenses helps to form a realistic budget. From food and labor costs to promotional costs and more, we find it best to start at the top of your Profit & Loss Statement and work your way down. Keep in mind that some costs fluctuate while others are fixed (learn the difference here). It’s important to note that a solid accounting platform can help streamline your cost management tasks.

Forecast sales and labor

Sales and labor forecasts go hand-in-hand with restaurant budgeting; the more accurate your budget is, the more successful your forecasting will be. The best forecasts are the most honest assessments of your current and future sales and labor needs. Consistency is key and having on-point financial reporting resources keeps your forecasting on track.

Track sales against costs – and adjust as needed 

We mentioned it briefly before, but utilizing POS data is a great way to make your restaurant budgeting work in your favor. A practical, workable, sustainable budget starts with accurate, real-time data, and it’s critical to have reliable POS integration in place to ensure your sales are always up-to-date and transferred directly into your restaurant accounting platform for analysis. For costs, our multi-unit inventory & theoretical costing tools help account for the other side of the equation.

Restaurant operator looking at paperwork on table

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Focus on a robust cash management plan

Once you account for the above items, you should regularly review your restaurant budget plan in terms of a Budget vs. Actual; i.e., what you budgeted vs. what you’re spending. Additionally, you’ll want to ensure you have a strategic cash management plan that works for your current situation and is agile enough to anticipate turmoil and unexpected events down the road.

BONUS: Don’t forget restaurant incentive planning

Here’s a “cost” that you should recognize within your budget to benefit your restaurant in the long term. Well-planned and thoughtfully structured incentives for high-performance employees are the ultimate two-way street advantage. With proper restaurant incentive planning, your guests enjoy superior customer service, and your establishment experiences less turnover and a happy, productive workforce. 

Remember, incentive planning can apply to your customer base as well! In this case, incentive planning revolves around loyalty programs. The outdated method of tracking loyalty programs – cards, stamps, and paper-based mediums – are a thing of the past. With a comprehensive accounting system and consistently tracking metrics, you’ll know exactly what your customers are spending, when they’re spending, and what will incentivize them to return to your restaurant.

For a more in-depth look at budgeting, our popular blog post, Smart Budgeting: The Key Ingredient to Any Restaurant’s Success, is an invaluable resource in helping you navigate the often-times turbulent waters of forming a restaurant budget plan. This widely-viewed blog post touches on how to budget for a restaurant, items to account for in your budget, monthly expenses, different expense categories, the differences between fixed, variable, and semi-variable costs, and much more. Check it out today!

Restaurant operator looking at paperwork on table

Restaurant Budget Plan: Frequency

To fully optimize your restaurant budgeting plan, RASI recommends weekly financial reporting. Fifty-two weekly budget tweaks per year may sound excessive, but given the current climate of highly variable expenses and volatile inflation, it’s always best to trust the frequent cadence of a regular budget than one that is always trying to account for past oversights and predict unknown variables in the near and long-term future. Many companies enjoy better visibility on their restaurant budgeting by adopting a weekly reporting schedule. Just one benefit is tighter controls of prime costs, which allows greater flexibility to spend profits on as-needed initiatives.

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Request a demo and discover our powerful accounting tools to see how RASI can assist with your restaurant budgeting! Make sure you have the professional, experienced accounting platform ready to work for you – contact us today!

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