Every restaurant’s success is based on building a solid budget, and consistently operating at or below that set budget. There are several common terms for the different levels of flexible or fixed budgets, below are a few examples:
- Sliding Ceiling: The budget can float down based on the ratio of actual to budgeted sales. The budget cannot float above the budgeted number.
- Sliding Floor: The budget can float up based on the ratio of actual to budgeted sales. The budget cannot float below the budgeted number.
- Sliding Open: The budget can float both up and down based on the ratio of actual to budgeted sales.
- Straight: The budget does not float. It is locked to the budgeted number.
While all of the budget styles work, there are some that can be more beneficial to your business. The sliding ceiling and straight budgets provide consistent control of your costs, for example, but the lack of flexibility does not let you adjust your spending when sales are unusually high or low. The sliding floor and sliding open models are more flexible in alignment with the fluidity of your sales. This is especially true of the sliding open format, which is a smart option for an industry in which sales can highly fluctuate.
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. A sliding open style, however, can actively encourage your managers to see the bigger picture. Imagine, for example, that your projected sales for June are $200,000 and your budget for small wares is $300. If a higher than expected amount of banquets are being booked, and a new movie theater opening down the road starts pushing sales to $40,000 over what was expected, your original budget no longer applies. The sliding open budget, however, increases the small wares budget in line with that increase, making this month perfect to stockpile for leaner months. 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.
Many restaurants also tie a small manager incentive to sticking with the budget to get even better performance. After all, what drives managers to come in under budget if they do not see any personal benefit? Offering a manager $100-200 to come in under budget will have them paying attention to every penny spent in your restaurant, and focusing on your profitability.
Get information on how Ctuit can help you with your budgets.