The Six Dangers Of Not Tracking Your Restaurant's Business Expenses

We know, tracking business expenses really doesn’t sound very fun. You didn’t start a food business so you could fill in Excel spreadsheets or start your very own receipt shoebox collection. Therefore, some business owners have thought, “What the heck, what does it matter if a few expenses are missed?”

Well, it absolutely matters. Tracking your expenses is crucial to the financial health and success of your business.

Failure to track your business expenses can lead to at least six things, none of them good, these include:

1. Overspending

One of the biggest risks of not tracking expenses is overspending. We see this happen in food service businesses all the time. Without a clear picture of where your money is going, it is so easy to spend more than you can afford.

Overspending can quickly lead to cash flow problems, which can make it difficult to pay your bills, invest in your business, retain your staff and, ultimately, keep your business afloat.

2. Inaccurate budgeting

If you don’t accurately track your business expenses, it is near impossible to create a precise business budget.

A budget is a critical tool for managing your finances, helping you plan for expenses, set financial goals, and allocate resources. If your budget is inaccurate, you may find yourself short of cash or unable to invest in order to grow.

Are you on the cloud? If you are, you already know how this makes your life so much easier.

But if you’re not, we strongly recommend you move your current accounting system onto the cloud. We call this a real time information system. A cloud accounting system will put you in complete control of your numbers and help you create accurate budgets for the future.

3. Difficulty in forecasting

Forecasting is another important tool for managing your finances. By forecasting future expenses and revenue, you can make informed decisions about pricing, staffing, and other business decisions.

Without accurate expense tracking, forget about being able to create accurate forecasts for your business – it’s just not possible. Where you’ll be in six, 12-, or 24-months’ time is anyone’s guess.

Our business forecasting service is broken down into three packages so you can choose the one that works best for you. This service will give you a continually up-to-date picture of what your business might look like in the future. Get in touch if you would like us to take this task off your plate and add it to our own. 

4. Inability to identify cost savings

Tracking your expenses allows you to identify opportunities to reduce costs and improve your profitability. Without it, you may miss out on these opportunities, leaving money on the table. For example, if you notice that an ingredient cost is high, you can review your purchasing practices, switch to a different supplier, or analyse your pricing to reduce your costs (more on this later).

5. Missed tax deductions

Tracking expenses is also crucial for tax purposes. If you do not carefully track your expenses, you may miss out on tax deductions that could reduce your tax liability. For example, if you record your mileage for business purposes, such as attending a food and beverage conference or visiting a supplier, you can deduct your travel expenses from your tax liability. Expenses such as your accommodation costs, meals, and transportation, providing the expense is reasonable and not excessive, are also included. HMRC will likely question any excessive claims for expensive hotels or fancy apartments, so speak to us if you’re not sure if an expense qualifies.

6. Difficulty in obtaining financing

Finally, not tracking expenses can make it difficult to obtain financing for your business. Since restaurants have a high failure rate, lenders and investors want to see that you have a crystal-clear understanding of your financial performance and are managing your expenses effectively. If you cannot provide accurate financial statements and expense tracking, investors will likely be hesitant to provide financing.

As you can see, not tracking expenses can have significant negative consequences for your business. But by implementing an expense tracking system and regularly reviewing your financial reports, you can ensure your financial health and success.

Need help tracking business expenses?

At MSF Associates in Leeds, we work with clients to identify the most critical costs in their business. Once we have agreed which are the most critical costs to keep under control, we will monitor them on their behalf. And whenever we notice a sudden change, we are on the phone to them immediately.

If you think your restaurant, café, or takeaway would benefit from help with tracking business expenses, then please call us on 0113 240 4100 or book a call with our team.