6 Reasons to Outsource Finance and Accounting to Maximize Restaurant Profit Margin

“Eating is a necessity, but cooking is an art” goes the industry adage. On that note, keeping the business in top financial health and the account books up to date is nothing short of science – the rules are steadfast, and we are bound to follow them faithfully with no room for interpretation.

Continuous innovation is the only way to stay ahead in a competitive market. To maintain healthy profit margins, while ensuring the best possible quality and customer experience, the restaurateur must actively focus on what they do best in relation to the business and conscientiously leave everything else to the experts.

Responsible and effective financial governance is essential for success in the restaurants and hospitality industry. Sustaining growth over time typically involves a significant investment in staffing, training, technology upgrades and other overheads. Administration of payroll, managing stock, tax compliance, etc. are vital elements which are recurring in nature and require specialist knowledge to be continuously available.

Outsourcing everything but the chef and the waiters who run the daily operation is a viable option in this scenario, for reasons such as:

Cost-effectiveness

For many restaurants, employing a full-time in-house finance team is a major burden on their budget. This includes a lot of overhead expenses including salaries, benefits and management costs. To equip them with the training and technology they need is an additional investment. Outsourcing the financial management and accounting duties to a reliable partner can help the restaurant to offload all the overheads and replace it with a single predictable monthly cost, usually a retainer fee or a set fee based on specific services provided. The outsourcing company would have access to advanced financial management software platforms and highly trained employees that the restaurant can benefit from at a fraction of the full cost.

Access to domain expertise

A financial management professional will presumably be well-updated in his/her domain best practices and the tax laws that businesses in each sector must comply with. Any newly introduced financial regulations that have the potential to impact the restaurant’s business would be best understood and managed by a specialist professional. Any restaurateur navigating the complex financial landscape of the UK hospitality industry would greatly benefit from the support of such a specialist team.

Operational efficiency

Typically, an outsourcing company in this sector would be doing business with several restaurants and/or restaurant chains, concentrating exclusively on the critical aspect of finance and accounting for each of them. They can focus on elements like process efficiency, regulatory compliance, service delivery quality and industry best practices more effectively than their clients who have so much more on their plate to deal with. The restaurant management can devote their attention to core business activities, such as improving menu offerings and enhancing customer service, with the assurance that financial management is taken care of by experts. This is undoubtedly a more efficient use of the restaurant’s resources, promising better returns than a fully in-house model.

Better cash flow management

Effective cash flow management is critical for the sustainability of any business, especially in a cash-intensive sector such as hospitality and food services. An effective outsourcing solution can give the restaurant management access to crucial business data at their fingertips. This can help generate better forecasts, improve the quality of decision-making, effectively manage accounts receivable, ensure timely availability of funds, and give them the capability to negotiate favorable supply contracts to optimize their margins.

Enhanced reporting and analytics capabilities

In a heavily competitive and intensively monitored industry such as hospitality, it is good business sense to keep the financial data clear and transparent. This allows the business’s financial health to be effectively monitored, while detailed financial reports can be generated to provide key information in a secure manner to regulators and stakeholders. Insights into key performance indicators (KPIs) such as profit margins, labour costs, and inventory costs allow the management to view the trends, determine areas for improvement, and drive profitability.

Scalability and flexibility

The management needs of a restaurant depends on its size, which means that as the organization grows, its needs become more complex. Outsourcing is a practical approach to achieve the flexibility required for scaling financial services (up or down) as the restaurant may need based on season, or growth prospects. Opening a new location, revising the menu, surviving an economic downturn, etc. are some scenarios where this flexibility becomes necessary.

Conclusion

For restaurant owners seeking better profitability and financial stability for their business, outsourcing is a smart and effective strategy. Not only does it provide access to specialist expertise and flexibility need to navigate the complicated domain, but it also paves the way for financial success by allowing the restaurant management to capitalize on their core proficiency and deliver exceptional culinary experiences, without distractions. The key, of course, is to find the ideal outsourcing partner who can meet the restaurant’s needs and help them achieve their goals in a sustainable manner.