Your cash flow is simply the movement of money into and out of your bar. Money flows into the bar when patrons buy drinks. Money flows out of the bar when you pay the electric bill.
If you think keeping your checkbook balanced is a challenge, consider how tough it is when you don’t know what your paycheck (in this case, your sales) is going to be and when it might find its way to you.
This example shows how cash flow fluctuates over the course of a month. In the example, there had to be assumptions made about your business to put this example into motion, so here’s what the assumptions are:
You started the month with no money in your account.
You’re working on a 30-day month.
Your sales are constant at $2,500 each day.
Your rent is $2,000 each month, paid on the 15th.
Your operating expenses (like food costs, labor, and so on) are 88 percent of your sales.
You pay half of your bills weekly (on the 7th, 14th, 21st, and 28th) and the other half on the last day of the month (the 30th). Some people include payroll in the bill category here.
Half of your diners pay in cash, while the others pay with credit cards.
Your credit card companies charge you 3 percent of the total transaction for the privilege of taking their cards. They deposit the remaining funds into your bank account with a three-day lag time.
You deposit your cash every day.
After all is said and done, you end the month with a little cash left over and you don’t run out along the way. Nicely done! But when you realize how little you had on a few days of the month, you can see that depositing your cash regularly (at least a couple times a week) is essential.
Think about how delays in transmitting your credit card charges, spending extra money when you buy something in bulk, and so on, can affect your cash flow. Lots to watch out for!