The most effective method of financial planning is the use of the budget - A budget is the expression of the financial expectations in the areas of sales, production and costs. A budget is a reflection of subjective values determined by the people in charge of various sectors of the business.
Budgeting is the quantifying of the goals and expectations of the restaurant determined from an analysis of past performance. This data is interpreted in the context of the present situation and an educated guess is made about what will occur in the future.
Budgeting permits you, the operator, to:- Examine past performance in a positive way.
- Permit those responsible for future performance to participate in forecasting that future.
- Become acutely aware, of how your cash flows in your restaurant
- Get familiar with the actual business health of the company.
- Realize that a budget is not ingraved in stone but can be flexible.
- Be prepared for future cash events to avoid cash shortfalls.
- Interpret the "big picture
- Analyze alternative courses of action
- Examine the facts regarding what is needed to achieve desired profit levels.
- Compare standards of performance.
- Periodically carry out a self-evaluation of the organization and its progress toward financial objectives.
- Encourage supervisors who have participated in the budget-making to establish tools.
- Get reasonable estimates of future expenses so you can set prices properly.
- Assign responsibility for those costs and revenues to staff members who have a degree ofcontrol.
- See how valid a budget is over a range of sales levels.
- Review your budget periodically for necessary revisions.
- Break down activities into short periods of time so that good appraisal of progress toward goals can be made.
- Examine menu prices, portions, work schedules etc., to ensure that they support budget objectives and visa versa.
- See if the information system generates adequate feedback.
- Determine if the budget is realistic, derived from the best information and statistics available.
Preparing a budget is the best way to focus attention on every area of cost control and thus gain the efficient and profitable operation of the restaurant
Once a budget is made and reviewed, you have a definite guidepost to measure your future performance as it occurs. You don't need to wait for weeks after the months end to learn from your auditor's report what you did in the specified month You'll know as it happens.
If your plans are to have the greatest effectiveness, be sure to include everyone into the process who has important input into the goals of the restaurant. These may include:
- All management and supervisors.
- Board of directors.
- Banker, attorney, auditor and business consultant.
- Other concerned persons.
Every good planning group develops a review and analysis procedure that permits those involved to monitor their own performance as well as revise their outlooks as required by the facts. This function should have an appointed leader, whose duty it is to see that the planning group operates as a cohesive unity to achieve pre-determined goals.
You may be this leader, or you may delegate the responsibility to someone else. Remember, however, that if you delegate responsibility, you must also give that person authority to get die job done.
Planning requires time, commitment, experience, attention to detail and objectivity to the program. You may be so close to the activities that take place on a daily basis that you can't be objective. If this is the case, then be objective about it and admit it!
Allow for periodic meetings so that planning is timely and continuous. This is an on-going activity and can't be undertaken just once and then forgotten Every meeting should be governed by a well thought out agenda which is prepared in advance with input from as many as the participants as possible.
Keep a careful record of what goes on at a planning session It does little good to expend time, effort and money and then not remember what was recommended or decided on.
Once the planning produces decisions, write them down and get them to the people concerned with undertaking their successful application Be sure that you understand the plan and that you can explain it in detail to others if necessary. Nothing can succeed if it is poorly understood by those expected to produce the results.
Have a review and revision committee, who may not be on the planning board at all. These people should be prepared to give objective reports concerning how the plans are being implemented and to provide imput into changes that may be necessary if the programs are to be really effective.
Finally, keep the people in your organization informed as to what is going on to the greatest extent possible. Be prepared to answer questions in detail The most profitable operations are usually those with the best publicized plan of action for their employees.
Mr. Lloyd M. Gordon, President of GEC Consultants, Inc. has an MBA from the University of Chicago. He has concepted more than 390 restaurants and has been consulting for over 44 years. He helps people enter the restaurant industry, points the way to profitability, and helps keep them successful. To discuss "Budget Planning and Administrative Policies" he can be reached at 847-674-6310. www.gecconsultants.com © Copyright GEC Consultants, Inc. 2008
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