The Cash Flow Problem Hiding Behind “Good” Labor Percentages
Your labor percentage looks fine. Maybe it’s 29%. Maybe 31%. Whatever your target is, you’re hitting it.
Your accountant isn’t worried.
Your P&L says you’re profitable.
So why does the bank balance never seem to agree?
If you’ve ever looked at a “good” labor report and still wondered why there isn’t more cash left at the end of the month, you’re not alone.
The Gap Between Profit and Cash
Here’s something they don’t teach you in restaurant management courses:
Profit is a calculation. Cash is what’s actually in your bank account.
You can be profitable on paper and still feel broke. You can hit your labor targets and still watch your bank balance stay flat month after month.
The P&L says one thing.
The bank account says another.
This is why so many operators say, “The business is doing fine—but I don’t feel it.”
In my last post, I explained why labor percentages don’t help you decide what to schedule in the first place (Why Your Labor Percentage Doesn’t Tell You What to Schedule). This is the other half of that problem: even when the numbers look good, cash can still quietly leak out.
Where the Cash Goes
For most restaurants, labor is the culprit—but not in the way you’d expect.
It’s not that you’re wildly overstaffed. If you were, you’d notice immediately. The problem is subtler: you’re slightly heavy, consistently, across most weeks.
An extra hour of Monday prep that nobody questions.
A cushion built into Tuesday lunch “just in case.”
A closing shift that’s always two people even when one could handle it.
Each of these decisions makes sense in the moment. That’s why they’re so hard to see in the numbers.
But they compound.
The Math (and Why It Hides So Well)
Let’s say you’re scheduling six extra hours per week that don’t actually need to be there. At $16/hour fully loaded, that’s about $100 per week.
$100 per week is $5,200 per year.
That doesn’t show up as a red flag on your P&L. Your labor percentage still looks fine because you’re averaging across busy days and slow days, good weeks and bad ones.
Averages are great at hiding small, consistent mistakes.
But that $5,200?
That’s real cash that left your bank account.
Every payroll, a little more than necessary.
Why It Doesn’t Feel Like Overstaffing
The tricky part is that overstaffing doesn’t feel like overstaffing.
It feels like being prepared.
You’re not scheduling people to stand around. You’re scheduling coverage. You’re making sure you’re not caught short. You’re trying to protect service and your team.
Preparation feels responsible.
Guessing just happens to be expensive.
And when you don’t have a clear target for how many hours you actually need, you tend to guess high.
The Fix Isn’t Cutting—It’s Knowing
The fix isn’t to slash hours blindly. That just hurts service and burns out your team.
The fix is knowing the right number before you write the schedule.
If you knew that Tuesday lunch needs 12 hours of coverage—not 15—you’d schedule 12. Not because you’re cutting corners, but because 12 is enough.
The problem is most operators have never calculated that number. So they fall back on gut feel, last year’s schedule, or an industry percentage that doesn’t actually fit their operation.
What Changes When You Know the Number
When you have a real target—not a percentage to check after payroll, but an hours number to schedule toward—something shifts.
You stop adding cushion by default.
You stop copying last week’s schedule because it’s easier.
You stop hoping it works out.
Instead, you schedule with intention.
And the cash that was quietly walking out the door? It starts staying where it belongs.
Not dramatically.
Not overnight.
But consistently.
That’s the difference between a business that looks profitable on paper and one that actually builds cash.
Kwan Howard helps independent restaurant operators stop leaking cash — and make better weekly decisions about labor, scheduling, and operations.
Download the free guide:
Before the Schedule: The Cash Cost of Guessing
