Six Reasons Why You Should Review Your Financial Reports
As a restaurant, café, or takeaway owner or manager, you should be regularly reviewing your financial reports to monitor the financial health of your business.
Financial reports provide valuable insights into your business’ financial performance, allowing you to make informed decisions and take proactive steps to improve your profitability. Owners who do not have their finger on the pulse of their business will likely to make poor financial decisions since they don’t have enough information on hand to make a good one!
Here are six reasons why you should regularly review your financial reports:
1. Track revenue and expenses
Your financial reports will show you how much revenue your business is generating and how much you are spending on expenses. This information is critical to understanding your profit margin and making decisions about pricing, menu items, and cost controls. By reviewing your financial reports regularly, you can identify trends in revenue and expenses and take action to address any issues before they become larger than one of your nan’s Sunday roasts.
2. Analyse cash flow
Cash flow is the lifeblood of any business, but especially food and hospitality businesses where margins are typically exceptionally tight.
Your financial reports will show you how much cash is coming in and going out. By monitoring your cash flow regularly, you can identify any issues early and take steps to improve your cash position. For example, if your cash flow is tight, you may need to quickly adjust your spending or explore financing options to ensure you have enough cash to cover your expenses.
3. Identify profitability
Profitability is a key indicator of the success of your business. Your financial reports will show you how much profit you are generating and where that profit is coming from.
By analysing your profitability regularly, you can identify areas where you can improve. For example, if you notice that certain menu items are more profitable than others, you may want to focus on promoting those items or adjusting your menu to include more profitable items.
Likewise, you may want to ditch items off your menu completely if they are not adding money to your bottom line.
4. Identify areas for improvement
Regularly reviewing your financial reports can help you identify areas where you can improve your businesses’ financial performance. For example, if your staffing costs are high, you may need to adjust the size of your team or explore ways to improve efficiency. If your food costs are high, you may need to review your menu pricing or negotiate better prices with your suppliers.
By identifying areas for improvement as quickly as possible, you can take proactive steps to address them before you end up in a whole world of trouble.
5. Create a strategic plan for success
Your financial reports can also help you plan for what lays in store in the future.
By analysing your financial performance and forecasting future revenue and expenses, you can develop a strategic plan to grow your business. For example, if you want to open a second location for your takeaway, you can use your financial reports to identify how much capital you will need and develop a plan to secure financing.
6. Ensure compliance
Finally, regularly reviewing your financial reports ensures compliance with tax and regulatory requirements.
By monitoring your financial performance, you can ensure that you are paying the correct amount of VAT to HMRC, payroll taxes, and other mandatory taxes. You can also ensure that you are complying with other regulatory requirements, such as minimum wage laws and health and safety regulations.
Have your most important numbers just one click away
As part of our management reporting service at MSF Associates, we can help you set up the key reports you need so that the most important information is always just a click away.
As regularly as you would like, we can supply you with a periodic view of your reconciled account summary that will include a year-to-date total for each category of income and expense, and most importantly, your profit for the year to date. It will also include a periodic purchase ledger report showing you how much money you owe to your suppliers. The firms we work with consistently tell us that they find this service invaluable.
Book a call with one of our experts or call us on 0113 240 4100 if you’d like to find out more about this. As specialist accountants for food service businesses: restaurants, cafes, and takeaways, we understand you and your business inside and out and know the best way to help you.
