Profit vs Cash Flow: Why Your Restaurant Can Be Busy but Broke

Why your restaurant can look profitable on paper but still struggle for cash.

You’re fully booked most weekends. The kitchen’s buzzing, the bar’s humming, and customers are leaving great reviews. On paper, it feels like business is booming.

But your bank balance tells a different story.

You’re constantly juggling supplier payments, VAT, payroll, and card fees. Every month feels like a cash flow scramble.

So how can a restaurant that’s busy - and maybe even “profitable” - still be broke? Let’s break down the difference between profit and cash flow, and what you can do to finally fix it.

Profit

Profit is what’s left after you’ve subtracted all your expenses from your sales.It’s a theoretical number - it shows whether your restaurant made money on paper.

Cash Flow

Cash flow, on the other hand, is about timing. It’s the real movement of money in and out of your business.

• When do you pay suppliers?

• When do customers actually pay you?

• When does VAT hit your account?

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You can have healthy profits on your profit and loss report - but if your cash isn’t flowing at the right time, you can still run out of money. So, why do restaurants struggle so much with cashflow? Here’s just some of the reasons…

1. High Upfront Costs: You pay for stock, staff, rent, and utilities long before that sale turns into usable cash. Add delivery partners or card fees, and your margin shrinks even more.

2. VAT Isn’t Your Money: When you collect VAT, it can look like more money in the bank — but it’s not yours to spend. If you don’t set it aside, that next HMRC payment can cripple your cash flow.

3. Lumpy Income Streams: Busy weekends followed by quiet weekdays make it hard to predict cash flow. You might look flush on Monday and be struggling by Thursday.

4. Supplier Terms and Payment Delays: Suppliers often want payment before customers have even paid you, especially in events or catering. This mismatch creates a constant squeeze.

5. Growth Without Control: Ironically, fast growth can make things worse. More customers mean higher costs, larger orders, and bigger payrolls — before the revenue actually lands in your account.

If you’re looking for some practical steps you can take to improve your cash flow today, here’s our suggestions:

1. Separate Your Money: Use separate accounts or banking pots for VAT, staff pay, and profit. This gives you real-time visibility and prevents accidental overspending.

2. Track Your Real Revenue: Calculate Real Revenue = Total Sales – VAT – Direct Supplier Costs. That’s the true money you can allocate between profit, wages, and expenses.

3. Align Payment Terms: Negotiate longer terms with suppliers or encourage prepayment for events and large bookings. Matching inflows with outflows reduces pressure.

4. Review Weekly, Not Monthly: Check cash flow every week, not just at month-end. Spotting a shortfall early gives you time to act.

5. Stop Chasing Sales and Start Managing Profit: More sales won’t fix poor cash management. Focus on margin, not volume. Sometimes less busy and more efficient is better than full and frantic.

Profit First flips traditional accounting on its head, helping you to solve the “Busy but Broke” problem. Instead of hoping for profit at the end of the month, you prioritise it from the start:

Sales – Profit = Expenses

It’s a simple system that uses multiple bank accounts (or “pots”) to help you see where your money really goes:

• Profit Account: for your reward and growth.

• VAT Account: so you’re never blindsided by tax.

• Owner’s Pay Account: so you get paid first, not last.

• Staff Pay Account: for wages and pensions.

• Operating Expenses Account: for everything else.

  
  

By dividing income as it arrives, you’ll see instantly if your spending matches your targets, not months later when it’s too late to fix.

A “busy but broke” restaurant isn’t failing, it’s just trapped in the wrong system. Profit First gives you a way to see and control your money in real time, so you can stay profitable no matter how unpredictable trading becomes..

Want to build a profitable restaurant? Get in touch and we’ll show you how to take back control of your cash flow.