FAQ 2 : I have worked hard all week but there is no profit.
Answer: This is a very common problem in the hospitality industry. There seems to be plenty of revenue and little profit.
I feel GST coming in a few years ago has had a big part to play in the shrinking of profits. Many restaurants and cafes are not taking any more money now than they were pre GST days so in effect they have just absorbed the GST costs and when the BAS is due it just wipes out the bank account.
I look around and see many cafes selling coffees at prices they were charging in the late nineties, so when you take GST off that they are actually going backwards.
Any smart operator will keep his GST money completely separate from other accounts, but it still appears that the money being paid to the government was at one time the profit that made it all worth while.
As restaurants do not pay much GST on produce coming in they do not have much to claim come BAS time, so 10% tax on gross turnover becomes a much larger percentage of the net profit hence the bottom line can sometimes look a bit sad. I know for a fact that there are a considerable amount of restaurants really struggling to pay GST and it is a major factor in making profit disappear.
Now I have had my whinge about GST let’s mention some ways of saving profits.
In most cases there is never one thing that swallows up the profits it is a number of issues you have to address.
A good place to start is with your wages and purchases, these are two areas that burn the money and if left unguarded can send you into a tailspin. They constantly need work and your work is never done, just keep fine-tuning.
Study those rosters intensely and you will find areas where you can save money. With your purchasing remember buy good quality fresh produce and treat it with the utmost respect keeping waste to the absolute minimum.
Once you have addressed these issues move on to every other aspect of your expenses (see havachat article). Other than rent just about every other cost in your business can be improved.
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