Tags Posts tagged with "Cash Flow"

Cash Flow

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accounting basics

The key to any successful mobile food business is simple: profits. As a food truck owner, you need to make money to survive, and in order to make money, you need to know accounting basics and systems to control cash flow, reduce losses and maximize your profits. Keeping track of your finances will put you in a good place to monitor your cash flow and make the most of your business in the long run.

Accounting Basics: Cash Flow

Managing cash flow means tracking all the cash that is coming in and leaving your food truck business. With sales and expenses always playing a balancing act, estimating future cash flow can be a guessing game until you get the feel for your roaming restaurant’s business patterns, or when the money comes in versus when it goes out. Essentially, you want to strive for more income than expenses. When you are able to bring in more money than you spend, you are maximizing your net income, and overall your profits will grow.

Accounting Basics: Record Keeping

Recording your cash flow, including income and expenses, is critical to your food truck’s accounting procedures. Your income includes all cash and credit card sales received. Outgoing expenses should be recorded with the help of receipts and invoices. Your Point of Sale (POS) system typically keeps track of all credit card and cash sales, and all receipts should be filed and recorded in a Profit and Loss document (P&L). It is also essential to keep a close eye on your inventory counts.

Accounting Basics: Taking Inventory

Your mobile food business’ inventory includes the supplies, products and ingredients you have on hand to prepare and serve food and beverages. Inventory is an important factor in managing business accounting, because it represents an investment in food and supplies that are needed for you to make a profit. You should always consider your inventory as cash in a different form, and count it consistently and thoroughly.

Accounting Basics: Profit and Loss Statement (P&L)

Your profit and loss statement, or P&L, is much like an income statement for the food truck. This document serves as a report to summarize income, expenses and inventory, illustrating your business’ total profits and losses over a specific period of time. It is best to prepare a P&L each week if at all possible. This will make it easier to track numbers and comparing reports from month to month and even year to year. A P&L statement includes information relevant to your cash flow, including sales and labor expenses.

Accounting Basics: Software

Most food truck operations do not have in-house staff of accountants available to do their accounting leg-work, so many use computer programs to help record their financial information. The best software includes a Point of Sale (POS) system, financial software, and the software to integrate the two. Fully-integrated systems like these can take the burden off you and help you fully analyze your financials by running comprehensive reports.

Do you have any suggestions for our accounting basics list? We’d love to hear your thoughts. Feel free to share them in the comment section below, Tweet us or add them to our Facebook page.

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food truck accounting

In this article we’ll provide the very basics of food truck accounting and how to use those figures to understand how your mobile food business is operating.

Operating a food truck is challenging in the best of times and success depends on keeping your eye on your mobile food business’s profitability. As a food truck vendor, it is important that you understand the basics of accounting principles and especially key performance indicators (KPIs) that provides you with a snapshot on how your mobile business is doing at any given moment.

This knowledge will not only prepare you for managing your business, but also your ability to forecast any potential problems before it happens. You don’t have to become an expert on accounting, but you should be aware of these three important financial statements:

The Balance Sheet

The first food truck accounting statement you need to become familiar with is the balance sheet. A balance sheet allows you to see your food truck’s daily financial health. By analyzing each of your main business categories such as cash, inventory (if you keep one), loans and other expenses, it will provide you with a snapshot on how your business did within a certain period of time.

The balance sheet will help you keep a close eye on your inventory – especially supplies such as food ingredients, products, and any other items that help your truck run properly.  You can create accurate forecasts and see any trends appearing during the week. You will be able to make informed decisions on when to order certain supplies, or if your service window staff isn’t pushing your high value meals enough.

Income Statement

Your income statement (or in other words the Profit and Loss statement (P&L)) is another food truck accounting report that you need to understand. Normally created on a monthly basis, it’s a summary of your income, inventory and other expenses. With the average profit margin for a food trucks at 10-15%, it is important that you check your P&L statement on a regular basis as it will help you know if your food truck is profitable or is running at a loss.

Cash Flow Statement

The final food truck accounting report you will need to understand the basics of is the cash flow statement. The cash flow statement is different from your P&L report – it allows you track where your actual cash is at this moment. By managing your cash flow, you will be able to verify that you have actual cash on hand to pay employees and suppliers. You will be tracking cash flow on a daily basis, verifying cash in coming from sales against the amount of cash going out through your accounts payables, monthly expenses, food inventory, and labor costs.

The main difference between an income statement and cash flow is that the cash flow report tracks the flow of cash you have on hand (or in your bank) or your solvency.

Running a food truck can be challenging, however, pitfalls can be avoided if you keep a strict eye on your bottom line.  Keeping track of these food truck accounting reports will provide you with the guidance you need to be on top of your mobile food business.

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Food truck owners have a tendency to keep a lot of the financial details of their mobile food business in their heads. Operating in this many has its advantages since there will be no new software to learn, no danger of a system crash that loses all your data, and you can tweak your food truck budget as often as you need without sitting down at a desk.

Bookkeeping-Tips-for-Food Truck Owners

But when you don’t have a system and some processes in place, unpleasant surprises can pop up, goals can be easily missed and important paperwork forgotten. Getting a better handle on your money can help you to make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow and maybe improve your food truck profits. It can also help you to stay out of trouble with the Internal Revenue Service.

Here are four bookkeeping tips for food truck vendors:

Plan for major expenses

Put events like a major POS upgrade on the calendar a year in advance or, ideally, three to five years ahead. Acknowledge the seasonal ups and downs, something many food truck owners are reluctant to do.

You’ll avoid taking money out of your food truck business during the flush periods only to find yourself short in the slower months, when costly projects like upgrading kitchen equipment usually happen.

Track expenses

A credit card that you use solely for business can be a basic accounting system. Most card statements categorize expenses, so you can see which outlays relate to which of your food truck operation activities. If you always use your business credit card for business expenses, you’re less likely to pay cash at, say, Office Depot and lose the receipts, forfeiting tax-time write-offs. Pens and printer paper can add up.

Also routinely jot down trips used for business, lunches and other events with cash outlays in your electronic or paper day planner. This habit can go a long way toward substantiating those items for your tax records in the event of an audit.

Often on tax returns, those numbers are too round. No truck owner drives exactly 10,000 miles for business in a year, so the IRS knows this is an estimate, an in an audit, if you can’t substantiate those numbers, the whole category can get thrown out.

Record deposits correctly

Adopt a system for keeping your financial activities straight, whether it’s a notebook you use consistently, an Excel spreadsheet or software such as Quickbooks. Food truck owners typically make a variety of deposits into their bank account through the year, including loans, revenue from sales and cash infusions from their personal savings. The trouble with this approach is that at the end of the year, you or your bookkeeper might erroneously record some deposits as income, and consequently pay taxes on more money than you’ve actually made. 

Set aside money for paying taxes

Systematically put a portion of money aside throughout the year for taxes. Then note tax deadlines on your calendar, along with prep time if you need it, to make sure you actually make payments when they’re due.

Payroll taxes that go unpaid can be especially problematic. Cash-crunched vendors can get through a down cycle by dipping into employee withholdings that they should have sent to the IRS.

If you mess with payroll taxes, you have a two-fold problem. You haven’t paid taxes due and you’ve taken money that the IRS sees as belonging to your employees. They can be very unforgiving about that.

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One of the biggest concerns for food truck owners (and other small business owners) revolves around cash flow. If cash flow problems persist they will play a major role in your mobile food businesses success.

food truck cash flow

Here are some tips for solving the biggest business cash flow problems facing food truck owners:

Organize Changes in Payroll

Payroll fluctuations have always been one of the biggest issues for food service business owners.  Turnover, new employees, layoffs and other things can all make payroll handling a challenge. The only thing you can really count on in business is change and while it’s impossible to perfectly project how things will be it’s wise to maintain a budget. Successful food trucks generally keep a tight budget and create budgeting processes for payroll organization.

Each year it’s good to set a budget. If you’re fiscal year starts in January and ends in December, start working on your budget for next year around July to September. Use your historic numbers to put together the budget.

Analyze how your payroll has changed over the years to see if you notice any trends. You probably have an idea already, but placing the numbers in front of yourself will help you see any trends that exist.

Forecast out the growth of your food truck empire and budget for new hires. Also analyze your typical turnover. This will give you a better understanding of raises and wage changes throughout the year.

This exercise of looking forward will help you prepare for how your payroll will change. You won’t come out perfect, but you should come close and that will make dealing with payroll less stressful.

Forecast Cash Flow

No cash means no business, so it’s important to understand the flow of your money throughout the year. Life as a food truck owner will quickly teach you that things can change quickly. Food  and fuel prices can go up, employees come and go and seasonality can affect the number of customers walking up to your service window.

All those factors make it difficult to manage cash flow.

We touched on how forecasting can help you with payroll. Dealing with cash flow is the exact same process only now you’re looking at your entire mobile food business.

Three to four months ahead of your next fiscal year, create a budget with your forecast for revenue each month or if you have the time, every week. Use history to guide you with your plans for growth. Factor in all the existing costs and costs that are changing as a result of the industry, economy and changes you plan on making.

Seeing the changes from week to week or month to month will give you a forecast of how much cash you’ll need on hand throughout the coming year. Your numbers won’t be exact because you can’t plan for everything, but this process will help you prepare.

Unique Solutions to Rising Food Prices

Last year was really tough on many industries. Drought struck across much of the US and that has had a huge effect on food prices in 2013. Food trucks are dealing with rising food prices and consumers are dealing with their own money issues which mean they want lower prices.

If you make the customer feel like they are getting a good value then price doesn’t matter quite as much. This means that you can still charge what you need to as long as the customer feels they are getting value.

This doesn’t mean you can charge the same price for less food or lower quality food. Customers will notice and they’ll feel cheated. What it does mean is you have to find ways to give the customer more without having it add much or any cost to your business.

One creative way some mobile food vendors are dealing with food prices is to grow their own or source locally. This process can have similar costs to other sources and customers might be willing to spend more to support the community.

Another way is to find higher margin side dishes or other add-on items to add to the men to offset increases in main menu items.

For example, if you have to raise the cost of a steak is it possible to add on a free soda with purchase? It’s a tough economy and that means getting creative with the menu to combat rising food prices.

Stick With a Unique Focus When Dealing with New Competition

Even with all the issues facing the mobile food industry it seems like there are more trucks on the street every week.

While most food truck owners do not look at other trucks as competition, an influx of new trucks in your area can bring some stress on revenue, which obviously has an effect on cash flow. When a new truck first shows up there is an initial curiosity. Customers will try it out and that can dip into your revenue in the short-term.

The best way to approach this issue is to keep the focus of your food truck narrow.

Figure out who your single most important customer group is and do everything you can to serve them. Find your niche and be the best at it.

This is where you have an opportunity to focus on a niche. Do all you can to be the best there is. You’ll earn a loyal following and should only suffer very short dips in revenue if your menu or service becomes stale.

This will even out your revenue and cash flow situation making things much more manageable.

You can also do things like use modern payment methods like Square Mobile Payments to add more convenience for your customers by allowing them to pay with credit or debit cards.

There will always be issues that you’ll face. It’s part of the territory that comes with being a food truck owner. Use the tips above to help you with some common food truck cash flow problems.

If there are additional cash flow issues you’re facing please feel free to share them in the comment section below. 

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