Cash Flow
What is the difference between restaurant cash flow and profit?
Direct answer
Profit measures revenue minus recognized expenses for an accounting period. Cash flow measures money actually entering and leaving accounts. A restaurant can report profit while cash falls because of inventory purchases, debt principal, equipment spending, tax timing, receivables, or settlement delays.
Key points
- Profit follows accounting recognition; cash follows payment and receipt timing.
- Debt principal and capital expenditure affect cash differently from the income statement.
- A weekly cash forecast and monthly P&L answer different operating questions.
What to do next
- 1Start with the period profit reported under the accounting policy.
- 2Reconcile non-cash expense, working-capital movement, debt, owner movement, taxes, and capital spending.
- 3Maintain a dated 7- to 14-day cash forecast alongside the P&L.
Worked example
A restaurant can report $8,000 profit yet lose cash after a $12,000 equipment payment and a $4,000 inventory build, before considering other timing movements.