3-Step Daily Cash Flow Tracker to Prevent $5K+ Monthly Losses in Your Bar Business

Your bar’s bringing in money, but somehow you’re still stressing about next week’s payroll. Sound familiar?

It’s one of the most frustrating things: sales look solid, your P&L shows a profit, but the cash just isn’t there when you need it. 

This episode breaks down why that happens and how to fix it before it turns into a real emergency.

*What You’ll Learn:*

🌟Why profit doesn’t mean you’ve got money in the bank
🌟The one shelf mistake draining your cash flow
🌟 How to prep for slow seasons without panic
🌟The inventory fix that frees up fast cash
🌟When bulk buying starts costing you
🌟How much cash you really need on hand
🌟 The transaction habit that delays your payday

I’m walking you through three simple things you can start doing today to stop cash leaks and get a grip on your money.

If your bank account isn’t reflecting how hard you’re working, this is the one to stick around for. 

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🚀 Snag my book "How to Make Top-Shelf Profits in the Bar Business!"
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Thank you to our show sponsors, SpotOn and Profit Assist. SpotOn's modern, cloud-based POS system allows bars to increase team productivity and provides the reporting you need to make smart financial decisions. Profit Assist works with your bookkeeping software using AI to help you make data-driven decisions and maximize your profits while giving you benchmarking data to understand how you compare to the industry at large.

**We are a SpotOn affiliate and earn commissions from the link above.

Chapters

• 0:00 Why Do Profitable Bars Still Struggle With Cash Flow?
• 1:56 What Is the Cash Conversion Cycle and Why Should You Care?
• 2:49 How Can You Trim Inventory Without Hurting Service?
• 4:26 How Much Cash Should You Really Keep on Hand?
• 7:12 Is Slow Transaction Time Hurting Your Cash Flow?
• 9:01 What’s the Cost of Open Tabs and Weak Closeouts?

Transcript

Chris Schneider 00:00  Are you tired of being profitable on paper but still scrambling to pay the bills? In today's episode, we're going to be uncovering why. You know, something like 60%, 50%. Some large number of profitable bars are still facing cash flow issues. And we're going to talk about how to properly implement systems that could save you huge when it comes to having access to capital when you need it. Hello and welcome to the Bar Business Podcast, where we help bar owners increase profits, attract loyal guests, and simplify operations so you can avoid burnout and finally enjoy your life outside of your bar. I'm your host, Chris Schneider, the bar business coach. Before we get started, a quick thank you to our sponsors, Spot On, who provide a great modern POS solution for the bar and restaurant industry in starfish. Use AI to turn your books into actionable steps to increase profits. So today we're diving into the critical difference between profit and cash flow. And we're going to explore a, well, a three step system, three things you should be doing to prevent expense emergencies.

Chris Schneider 01:05  And so I'm sure all of you that are listening, you know, you're bar owners or looking to be bar owners, you know, there's a lot of stress looking at your bank account and that your bank account and your profit don't exactly match. And we've talked about that before. Cash flow and profit are not the same thing. So you can be doing really good in business and have a PNL that looks very healthy, but struggle still to make payroll or to pay expenses when they come do at the end of the month, because you're not properly managing cash flow. So the really painful reality here is that, you know, if we're honest, a large percentage of bars have these cash flow issues and sometimes these issues can be really pronounced. And what I mean by that is if we think about a bar where you have a lot of seasonality and maybe you're in Florida and summer is your slow season, so not having cash in summer can make it hard to cover payroll, even if across the entirety of the year.

Chris Schneider 01:56  You're a profitable good business. So we're going to talk about three things that I highly recommend you do today to really get your cash flow in line. Now, the first thing I want to talk about is your cash conversion cycle. And when I say cash conversion cycle, what I'm really talking about is inventory turnover. How long does it take you to go from cash into inventory and back to cash? Right. Because we're converting our cash into inventory. I always talk about that just being money sitting on the shelf. But then how long does it take us to convert that money sitting in the shelf back into actual cash that we can spend to promote our business and to move our business forward? And so if we look at industry data, you know, ideally, in a perfect world, we would all be in, say, 7 to 10 days. I like to say 7 to 14 days. 1 to 2 weeks of inventory is what you want to have on the shelf. More than that, you're just not having access to the cash that you actually have on hand.

Chris Schneider 02:49  Because again, that cash, rather than being real cash, is bottle of booze sitting on your shelf. And so I look at a lot of bars and restaurants and I'll see. Okay, your actual inventory turnover isn't 7 to 14 days. It's not a week or two. It's four weeks, five weeks, six weeks in some cases. So it's really important to understand your inventory turnover and what you can do to move that forward. Now the easiest way to do this right, we can talk about all the math and stuff and we have before. But let's talk about some real practical ways to get this inventory under control and to make sure that you're converting your inventory into cash on a regular basis. The first thing is to start, don't look at your entire inventory. Look at your top five items, your top ten items. Pick a subset and start in there because that's going to make it easier. Now what you want to do is you want to start by looking at purchase dates. If you think about it, a lot of times when it comes to food, we buy something.

Chris Schneider 03:37  We take a Sharpie, we write the date on it when it comes to foods, we never do. So start looking at purchase dates on your top items, and then figure out how long it takes to get rid of them. Now there's again, math we can do, but you can just look at purchase dates, look at what's on your shelf and figure it out. And when you do that, see what that is? You know, if if that is 7 to 14 days, great. Just make sure you keep doing that. If that's 21, 28 or more days than you have a problem. And so what you want to do is you want to reduce your inventory. Now, we always have to be careful when we talk about converting inventory into cash and how we want to be in that 7 to 14 day turnover, because some of what a lot of you do, and what I used to do when I owned a bar, is bulk buying, and bulk buying is going to, well, keep your inventory on the shelf longer, but it's also going to save you money in the long run.

Chris Schneider 04:26  So there is a give and take here, but particularly when you hit slower seasons in your slow season, I don't care where you are, everybody has a slow season, even if that's just, you know, January and November, which tend to be slow months across the country and across the world in those months. Make sure you're running your inventory as tight as possible. You want as much cash in your bank account and as little cash as possible on the shelf when you know cash flow is going to be tight. The second thing I would say that you should really look at when you're thinking about how can I optimize my cash flow in my business, is you need a cushion, right? And you need a cushion in your bank account. Why do you need a cushion? Because then I guess what if cash flow is a little short for a day or two, it's not going to hurt you. Now, a lot of people, a lot of bars and restaurants, their cushion is 2 or 3 days, five days.

Chris Schneider 05:15  And I'll be honest with you, that's not enough. I always say in your checking out, you should have a cushion of at least 14 days. And I don't like to really go above 14 days in a checking account because we're not earning any interest there. It's not really helpful for us. but you want that 14 day cushion to cash in your checking account and then make sure that anything above that, some of that's your money as an owner. Right. That's distributions you're going to take, but also dedicate an emergency fund and come up with some amount that every week you're looking at and you're saying, can I move this over there? Can I move this over there even if it's 100 bucks. 200 bucks, it adds up over time. So you want to have your cash flow reserve of two weeks in your checking account, and then you want to have a savings account where other accounts, where you're building up additional weeks or even months of cash on hand so that your business is not interrupted. If you hit a cash problem, or if you're forced to shut down for a little bit, or if you know there's a natural disaster and you're a tourist based business so there aren't tourists for a few weeks, you have to be able to survive those issues.

Chris Schneider 06:20  Now, if you're doing that and you're under that 14 days, you better figure out a way to get that back there and in a later date. Or if you're curious, I do have a system to do that. So feel free to reach out and we can talk about that. And a really good way there. But the bottom line here is you need at least a couple weeks in your checking account all the time of cash. You need an emergency fund. You need to have an amount of money that goes to that emergency fund every week so it can grow and build and protect your business if you come across cash flow issues. Again, the big thing I want you to understand here, if you don't have cash, you don't have a business. You can't buy things. So make sure you have this cash in place. Now, the last thing I want to point out real quick, as we're just touching on cash flow and things you can do to help ensure that busy, slow whatever's going on in your market, you have the money to maintain your bar is look at your transaction time.

Chris Schneider 07:12  So we could look at a metric that we could call velocity indicator. And that's the average time from order to payment for customer transactions. Now this is going to depend on the type of bar you are. But if you're doing high volume it's really important to keep that transaction time really low. Right. We want to get the order, put it in the POS, get paid. Boom. Done. Right. A lot of high volume bars. You're not keeping tabs open unless you're holding a credit card or something. So if you are high volume, focus on that. Closing the tab. Let's get the order. Let's bring it in. Let's close it. Boom. All of that within just a few minutes. If you're not high volume. Hey, that's not going to apply. But what I'm saying here, the reason why we're so worried about how long it takes you to get that transaction done. Close out the tab, get paid, actually accomplished your cash flow. That's when you've actually gotten the cash flow that you need.

Chris Schneider 08:02  That's when you've actually taken cash from the customer. So a bunch of open tabs are great, but a bunch of close tabs is money in the bank. So make sure that you're making that payment process as simple as possible. Make sure all your tabs are getting paid for, because quite frankly, if you're giving stuff away for free, whether that's employee theft or just poor training, poor procedures, so those tabs aren't getting closed out and people are walking on them. You're not getting the money you should to support your business. So today we've talked about three things that you need to absolutely watch for your cash flow. Watch that inventory. Turn over those cash conversion cycles. Try to keep that as close to that 7 to 14 day range as possible. Make sure that every day you're looking at how much of a cash cushion you have, that you have enough cash sitting around to cover. Ideally a couple of weeks of expenses in that checking account and that you're working on stacking some cash away for savings. And also, if you are high volume, make sure you're looking at that transaction time, because that transaction time is going to dictate a lot of how quickly you get paid and how frequently you get paid for what you're doing.

Chris Schneider 09:02  And so a big thing to remember from this episode, yes, your PNL matters. Your profit matters. We love profit, but profit is only great when you have cash. You can be a profitable business, not have cash, and end up in the same situation that you would be if you didn't have any profit at all. So make sure you're monitoring your cast, make sure you're maximizing your cash flow, and make sure you have enough cash around for a rainy day. That about wraps it up for today. If you enjoyed today's insights, make sure you like, subscribe and leave a review. If you are ready to take your bar to the next level, schedule a strategy session with me by clicking the link in the show notes below. Until next time, have a great day and we will talk again later.