Are you pricing your products correctly? Your average gross profit margin might not be sufficient to cover your overhead expenses. Evaluate your products one by one and look for opportunities to increase your prices without affecting overall demand.
Compare your margins if it is on a par with the industry average. Is your average margin comparable to the nearest competitors in your area? Your prices might also be too high; you might want to lower your prices to make it more competitive. Lowering your prices can boost your volume sales and increase your cash revenue.
2. Train your staff to upsell.
You can get more revenue if every customer who buys food from you will buy additional items. For example, you can run a promo wherein a customer gets to buy a particular food item at 20% off for every product ordered. Upselling can bring in significant incremental revenue that can help boost your cash flows.
3. Develop loyal customers.
Encourage your customers to visit your store more regularly by giving them incentives. You can reward loyal customers with a special gift if they have purchased an accumulated number of items from you. When you develop loyal customers, you can be guaranteed of regular cash flows monthly.
4. Tighten your inventory levels.
Avoid overstocking supplies by ordering items that you expect will be disposed of within the projected selling period. Any excess inventory that is not consumed on time means additional costs, as this is inventory that you could have converted to cash. Less cash flows mean higher opportunity costs.
5. Watch out for spoilage and theft.
With inventory, you also have to watch out for spoilage and employee theft. If the processing of food supplies is not efficient, it might lead to higher spoilage costs. If you do not have internal controls, your staff might take home food supplies without you even knowing it. If this happens, your inventory consumption will increase and that leads to higher costs of sales, hence lower profit and cash flows. Monitor your inventory turnover carefully and implement policies that will secure it.
6. Stretch out your payables.
Try to negotiate for longer credit terms with your suppliers. Normally, if you have already been doing business with a supplier for some time, you can arrange friendlier credit terms that can allow you to pay slowly. Of course, you should keep your promise, otherwise you risk losing the trust of your suppliers and might not be granted the same privilege again. When you stretch your payables, you are able to maximize your cash flows by using it for other productive activities.
7. Review your fixed expenses.
Identify which expenses are fixed and which are variable. Fixed expenses are not changed by the level of your sales—so, even if you do not generate revenue at all, these expenses will still occur and you are obliged to pay for them. Examples are salaries of staff, rent, and marketing, among others. Cut costs by finding a way to save on marketing expense by maximizing the promotional value of your business; by agreeing with your staff the future salary increases will be based on annual bonuses; or by negotiating with your landlord a suspension of rental rate increase for a number of years in exchange for a longer term.
8. Review your variable expenses.
The higher your revenue, the higher your variable expenses will be. Examples of variable expenses are electricity bills, water bills, and commissions. Study your power consumption. You can lower electricity expenses by closing the restaurant during off-peak hours. Review your commission structure. Consider increasing commission rates if higher revenue is achieved to encourage your sales staff to work harder. The increase in revenue should be more than enough to offset the increase in variable expenses, so that will get your net positive cash flow.
Cash flow is the lifeblood of any business. Without it, no business is going to survive no matter how profitable it is. If your business is growing, there is no reason why you should run out of cash. There are many ways to increase cash flows from within; you just need to manage it properly.