Topic · Restaurant Business Plan Mastery: From Concept to Execution
Cash Flow Statement
Objective: By the end of this lesson, you will be able to read and build a cash flow statement and use it to avoid running out of cash. You will be able to:
- Separate operating, investing and financing cash flows.
- Reconcile net profit to the change in cash.
- Build a monthly cash flow projection for your plan.
Profit is not cash
Most restaurants that close do not fail because the concept was unprofitable — they fail because they ran out of cash. The cash flow statement shows the actual money coming in and going out, in three groups.
Example: Bistro 60, Month 1
| Cash flow statement — Month 1 | Amount |
|---|---|
| Operating activities | |
| Net profit | $8,600 |
| Add back depreciation (an expense that uses no cash) | $2,000 |
| Increase in inventory | ($1,000) |
| Increase in accounts payable (bills not yet paid) | $1,500 |
| Increase in prepaid expenses | ($500) |
| Cash from operations | $10,600 |
| Investing activities | |
| Purchase of a combi oven | ($8,000) |
| Cash used in investing | ($8,000) |
| Financing activities | |
| Loan principal repaid | ($1,000) |
| Owner’s withdrawal | ($1,000) |
| Cash used in financing | ($2,000) |
| Net change in cash | $600 |
| Opening cash | $29,400 |
| Closing cash (matches the balance sheet) | $30,000 |
The business earned $8,600 of profit but its bank balance grew by only $600: most of the cash went into a new oven, extra inventory, the loan and the owner.
The three sections
- Operating: cash from running the restaurant — sales collected, suppliers, staff, rent paid.
- Investing: buying or selling long-term assets such as equipment, renovations or a vehicle.
- Financing: loans received and repaid, owner investments and withdrawals.
Build a monthly cash projection
- Start with your opening cash, then list expected receipts and payments in the month they actually happen — rent on the 1st, payroll every two weeks, quarterly tax remittances, annual insurance.
- Plan for seasonality: a slow January or a summer patio season changes cash dramatically.
- Never let the projected closing cash fall below your minimum reserve. If it does, adjust the plan before it happens: delay a purchase, arrange a line of credit, or change the opening budget.