Sometimes, as restorers we like to get into all pools. Nothing to reproach, I just wanted to record it. In fact, I know for sure because I have a restaurateur friend who has this profile.
I get the feeling that happened, and he told me he was having real problems to meet payments of your business. Of course, We were in a bar to treat such an important issue.
Cash flow problems
Obviously we do not have magic wands, but I think Most importantly KNOW, know what happens in your house, and thus make the best decisions.
The most powerful tool that we have to know what our state treasury and therefore, whether or not we can cope with payments, is he Balance Sheet. This tool also also You can help us present a reliable plan payments.
When we work with a balance sheet, we must have a clear set of concepts:
- Every business needs money to survive.
- Many businesses that fail are profitable.
- One thing is liquidity (receipts-payments). This liquid is obtained with the balance. We talk about the financial situation of the company.
- Another thing is profitability (income expenses). This performance is obtained with the income statement. We talked about the economic situation of the company.
Without delving much we know the balance comprises a ACTIVE (what it has the company) and a PASSIVE (what should the company).
Balance components and endpoints
The components of the active or passive and have a value representing a percentage. With this representation we can, among other things, calculate the working capital of our company: "Funds available for financing operations". This figure is calculated by subtracting current assets to current liabilities (Short-term payable).
In the example it would be:
current assets (630) - current liabilities (450) = 180 background maneuver.
There are a fundamental rule of financial balance which says that all current liabilities (what I) It must be matched by an active element (what I have) whose term availability is as least equal or less than the term of the debt is due.
That is, If short-term (1 year) I must 10.000, I have to have at least 10.000 in the bank. O 5.000 in the bank and 5.000 in stocks, once sold, I bring enough money to cover those 10.000 I should. It is also understood that these stocks have availability (because I sell) less than 1 year.
However, situations vary greatly between accounts and is that, as we already know, The world of business is not a field of roses. For that reason we can find in our restaurant with multifarious financial situations, as are the following. Let's see:
Possible financial situations
A.- Situation of maximum stability
It is the case that all liabilities are own resources (all liabilities is net worth). I just owe it to myself. I have no claimable or long or short term. This situation, I would not have ever seen.
B.- normal situation (Tranquil)
Would be the case where current assets is greater than the short-term liabilities (current liabilities). And the sum of the fixed assets + current assets is greater than the short-term liabilities (current liabilities) + the long-term liabilities (noncurrent liabilities).
C.- Bankruptcy (old suspension of payments)
typical situation that I owe more than I should, I do not charge, and I can not cope with payments.
Would be the case where the short-term liabilities is greater than current assets. And the sum of fixed assets plus current assets is higher than most liabilities the sum of short-term liabilities long term.
D.- Technical bankruptcy
Situation in which my financial assets (participation in other companies, we shall see what goodwill) They are greater than my own resources and also the sum of short-term liabilities + the long-term liabilities are greater than my fixed assets + current assets.
With the balance sheet, also you can value a company. we talk about book value of a company.
Enterprise Value = Total assets – Current liabilities (by third parties). In the example it would be; 1125-720= 405.
If we bought the company 500. Those 95 to be paid more to acquire the company is what is called Goodwill. This amount is paid more may be included in the assets as goodwill and it would be a financial asset.
And of course, once and I know how my balance sheet, I can use some ratios or indicators management give me extra information on the status of my business. Consider the most commonly used:
1.- Debt ratio
- Total liabilities / Total liabilities = 270 + 450/1125 = 0,64
- Indicates the level of debt, that is to say, if the company has much or little debt.
- More of 0,6. Excess debt. undercapitalized company.
- Between 0,4 Y 0,6. Correct situation in general.
- Less than 0,4. No excess debt. company capitalized.
In the case of restaurants must be taken into account if the building is proper and is paying off a loan or if rental, because if it's own long-term debt will increase significantly, for the loan.
2.- Quality ratio of debt
- Callable short-term / callable Total –> Example 450/720 = 0,625
- More of 0,5 slightly. Less than 0,5 best.
- Studies the composition of debt. Considering the short-term debt due to low quality.
3.- Liquidity Ratio
- Current assets / short term callable = Example 630/450 = 1,4
- Its value must be greater than 1 because otherwise the company may have liquidity problems. Ideally between 1,1 Y 1,5
Learn how to manage accounts for your restaurant
The use of balance should not be limited to the annual presentation of accounts by the consultant. Unlike, we must ask you to make us (or do we) a picture as shown in Example, to use it every day if necessary and We know at any time how we are at the level of cash. In this way we can know in real time our real ability to afford the payments that come according to the charges expected.
Analysis of current assets versus short-term callable be incorporated into our daily routine as managers of our establishments. If I have that information I can negotiate with my creditors reliable payment plan that in many cases will not be to your liking, but at least we have the certainty that you'll meet. Much worse would give in to their demands for payment and then not being able to meet them.
Alone with real information we can make decisions knowingly.
The truth is that the use of balance It serves many more things. Sometimes as when we prepare for buying a business or to sell ours, to go to apply for funding to banks or to negotiate payment terms and prices with suppliers. But this we leave for the next coffee.