15. May 2020

Measures to keep the Cash Flow going

By Riccardo Giacometti

Cash flow refers to the flow of money in a company. More precisely, cash flow indicates the money stream that a company has generated over a certain period of time, for example, over the course of a month or in a fiscal year. Cash flow, as an economic measure and indicator of the financial health of a company, represents the flow of all financial resources. Especially in difficult times, such as now (with the pandemic), cash flow is the lifeline of your business. The ratio is calculated from the difference between income and expenditure and indicates the extent to which a company can finance itself. Positive cash flow is generated when there is an inflow of funds, and a negative one is generated when there is an outflow of funds.

Why cash flow is so important

In addition to sales and profit, cash flow is an important variable in the company. It is essential for assessing the success of a company. Quite a few companies fail because they cannot control their cash flow. According to studies in the US, this is the case for about 80 percent of companies. That’s why good planning makes sense, even though a plan may become obsolete after a few days. The more often companies plan and continuously adapt the plan to the actual situation within the control framework, the more precisely they know about the company and are able to identify critical deviations early on and take countermeasures.

Measures to keep cash flow going

The company is like an organism. The organism must be kept in motion so that blood can circulate and all the important organs are well supplied. It is the same in a company. The company must not stand still. To achieve this, all top performers should be integrated into the cycle of constant movement and improvement. Ask regularly where there is room for improvement, and make this system part of your corporate culture. In the end, this will ensure your survival during the crisis and positive cash flow.

Tip 1: Avoid overproduction and empty your wine cellar

For restaurants and hotels, now is the time to take a close look at your menu and production line. Instead of offering the full menu and having a mise en place for the “just-in-case” situation, it is better to focus on dishes that can be produced on demand and are not too complicated or fancy. You should check every item on the menu to see if it meets the actual needs of your customer and if it is profitable.

It is best to enter into a dialogue with your Executive Chef in order to assess his needs and adjust where necessary. In this way, you avoid overproduction, as well as avoid the instance where the associated capital commitment and product costs affect your cash flow. This is also a good opportunity to sell your on-stock wines or even empty your cellar. Waiters who can sell what you have on stock are the heroes now.

Tip 2: Purchasing according to demand

Only make purchases according to specific needs. Large quantities with global purchasing at rock-bottom prices bring cost savings on the one hand. On the other hand, you reduce your liquidity. It is better to buy only the material that you actually need. A smaller order quantity from a local supplier initially leads to higher prices. However, in the long term, it reduces overall costs. For small order quantities, you can, for example, negotiate a just-in-time delivery with your supplier. In this way, you do not have to order according to a forecast requirement. Rather, you can base your order on the actual consumption. Although this increases the individual costs, it reduces the total costs and also the need for cash.

Tip 3: Implement a purchase order process

You can easily implement a purchase order system using Microsoft Power Automate. Besides dealing with handwriting and old fashion forms, in addition to slow approval times, there are various reasons why purchase order automation is the best way to gain control over ordering and your purchasing strategy as a whole. Power Automate is free with Microsoft Office 365 and helps with keeping track of the orders. I can show you how to set it up and use it for your business.

Tip 4: Avoiding waste

To successfully reduce food waste, only minimal changes are usually required. However, every business is organized differently, and the measures that have a promising effect are correspondingly diverse. It is, therefore, worthwhile to analyze your own business in detail and introduce targeted solutions. Measuring waste and making simple changes in operations can make a big difference in the fight against food waste. Simply by raising employee awareness, a large proportion of food waste can be avoided. Excess food stocks and capacities lead to additional costs. It makes sense to reduce these in your business. It is best to produce according to the flow principle. All necessary products and materials are available, but storage is kept to a minimum. This helps to avoid bounded capital in your storage rooms.

Tip 5: Control breakage

It is part of everyday life that cups and bottles tip over or are accidentally opened in the gastronomic bustle, causing the drink to no longer be suitable for sale. A strict procedure should be followed here so that you are sure your calculation is correct. Every break should be documented immediately. In order to keep the breakage list clean and complete, the product, the quantity, and also the reason for the disposal of the product should be entered. The same applies to breakage and loss of items.


The above measures are the first steps toward improving cash flow in the long term and ensuring that the business has liquid funds. If you succeed in increasing cash flow in your company, your company will always have money available. This allows you to navigate through this difficult time. Healthy cash flow helps in discussions with the bank if you need a loan to tide your business over until it picks up again.