So much of your profitability depends on creating an accurate forecast. Offering managers $100 to $200 to come in under budget will encourage them to pay attention to every penny spent in your restaurant and focus on your profitability. Without a personal benefit, many managers may not be driven to stay under budget. Many restaurants also tie a small manager incentive to sticking with the budget to get even better performance. That way, when January rolls around and the big ice storm hits or a new competitor opens across the street, you can tap into that stockpile and stay on target for the month. The sliding open budget, however, increases the small wares budget in line with that increase, making this month perfect to stockpile for leaner months. If a higher than expected number of banquets are booked and the new movie theater opening down the road starts pushing sales to $40,000 over what was expected, then your original budget no longer applies. Imagine, for example, that your projected sales for June are $200,000 and your budget for small wares is $300. A sliding open style, however, can actively encourage your managers to see the bigger picture. Why is this flexibility so important? A good manager sticks to his/her budget and does not go over, but there is no incentive for that manager to do any more than perform at that expected level. This is especially true of the sliding open format, as it allows given categories go up if your sales are up and it goes down if your sales are down, making this format a smart option for an industry in which sales can highly fluctuate. The sliding floor and sliding open models are more flexible in alignment with the fluidity of your sales. The sliding ceiling and straight budgets provide consistent control of your costs, but the lack of flexibility does not allow you to adjust your spending when sales are unusually high or low. While all the budget styles work, there are some that can be more beneficial to your restaurant business. Sliding Open: The budget can float both up and down based on the ratio of actual to budgeted sales.The budget cannot float below the budgeted number. Sliding Floor: The budget can float up based on the ratio of actual to budgeted sales.The budget cannot float above the budgeted number. Sliding Ceiling: The budget can float down based on the ratio of actual to budgeted sales.There are several common terms for the different levels of flexible or fixed budgets. Budgeting SmarterĮvery restaurant group’s success is based on building a solid budget, and consistently operating at or below that set budget. Try not to underestimate the importance that both of these processes play in the success of your business. A forecast is more of a fluid operational tool that helps you adjust accordingly based on business conditions. A budget is a static outline of how you think your business will perform for the upcoming year. While they are closely connected, the two functions are different. Restaurant budgeting and forecasting are so important for your restaurant group’s profitability.
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