Long hours, high overhead, wasted food and difficulty making profits are just some of the challenges to success for restaurant owners. Yet, for those who love the business or who dream of having a place where everyone knows your name, there’s no other opportunity that comes close. An often neglected aspect of restaurant management is bookkeeping. Unfortunately, once you are behind on your restaurant accounting it is difficult to get caught up. Effective restaurant bookkeeping starts with you. Whether you’re running the accounting services yourself or outsourcing your restaurant accounting, staying on top of the day-to-day bookkeeping is essential to remain ahead of your competition and turn a profit.

How do you do bookkeeping for a restaurant?

Managing your finances can be one of the hardest parts of running a restaurant and also the deciding factor between success and failure. If you’re new to bookkeeping for a small business restaurant, this overview will help you understand common financial tasks such as handling payroll and paying quarterly taxes. It will also cover the importance of choosing an accountant that specializes in the restaurant industry to your business’s bottom line. Follow these tips and best practices to make sure you’re keeping your books in order.

• Record Sales Daily

One of the first items you will have to figure out is how to properly record your sales. Many small business restaurant owners find using QuickBooks for restaurants as an effective software recording system. Picking the right accounting software for your restaurant will help you organize your inventory counts and transactions quickly and accurately. Record your sales entries thorough your point of sales (POS) each day (not monthly or weekly). Using this method allows you to mimic how the cash and credit card deposits hits your bank account on a daily basis. Most restaurant POS systems accept credit cards and settle the batch per day. This will result in a credit card deposit or deposits hitting your bank account separately for each batch. You will need to analyze how funds are hitting your bank and set up your bookkeeping system to mirror that activity.

In addition, a daily sales report tells you how your business did that day, so you can compare with other days that week, month or year. It’s the thermometer you should check before patting yourself on the back after a hard day of work. Most restaurant POS systems will have a daily sales summary built into them and that is how you can generate the report each day. If you need to customize the report to get more detailed information you will need to work through the customization with your POS system and vendor support.

• Financial Reporting

If you are not using financial reporting for your restaurant, then you are running your business blind. With such tight profit margins in the restaurant industry it is important to analyze your financial reports on a regular basis. Just to name a few, small business restaurants must keep track of revenue reports, review profit and loss statements, calculate cost of goods sold and cost of labor.

Keeping track of your revenue is equally important as knowing your expenses. Have accounting records on hand to show how much you earn from food sales, merchandise sales or catering jobs. Revenue reports display total expected revenue for a period and how the revenue is split between food and drink. You can use revenue reports as a financial projection tool to anticipate how much revenue you’ll generate in the future. while long-term trend analysis is important, you should also pull revenue reports on a daily and weekly basis.

A restaurant profit and loss statement, or P&L, keeps all restaurant accounting information organized in one concise document. You can customize a P&L to suit your business’s specific needs. Your P&L statement reflects sales and costs, and reconciles items like sales volume, food costs, labor costs, operating costs and your profits. This report should provide you with an overall profitability health check of your business. Equally importantly, the P&L is a guiding post to drive business decisions such as when and where to cut costs, how to increase revenue or whether to change your business strategy.

Cost of goods sold (COGS) refers to the actual cost of food and beverage you buy that is used to produce your food and beverage sales. And in the restaurant business, it’s no secret that in order to make food you’ll need to buy ingredients. How well are you pricing your food and beverage and controlling your inventory at the same time?  By keeping tabs on your COGS ratio, you can take action to reduce and contain your inventory costs. Keeping track of your COGS can help you set a menu price for each item at your business, ensuring every dish is profitable.Cost of labor is the sum of all wages paid to employees, as well as the cost of employee benefits and payroll taxes paid by an employer. Labor expenses will vary for each restaurant. Will your wait staff work for tips, or will you add gratuities to every bill? Will you furnish uniforms, or provide an allowance? Waiters and waitresses that work for tips typically earn smaller hourly wages than those who don’t, but you’ll also need to pay for kitchen staff, hosts, valets, cleaners and other essential personnel. Regardless of your choices, you’ll still need to pay unemployment taxes. And if you hire full-time wait staff, you may also need to furnish benefits. Many restaurants rely on part-time or seasonal employees to avoid this expense. Once you can anticipate your busy times, you can schedule your staff members accordingly.

• Hiring a Restaurant Bookkeeper and Accountant

Restaurant success can only gain and maintain success through proper bookkeeping. With the proper understanding of restaurant accounting, your business can be profitable. A restaurant bookkeeper must check to see that orders match receipts. They typically review the day’s report for accuracy, to see if there are any errors or omissions between the orders and receipts. You can lose a lot of money if you’re not collecting payment in full on customer food orders. A bookkeeper will track your expenses and make deposit slips at the close of business each day. This involves comparing cash receipts, checks and credit card payments with sales for the day. Handling accounts payable is another an important bookkeeping process. Entering and paying bills are essential tasks to accomplish which helps maintain good relationships with your vendors. Keeping records of how much you’re spending is a necessary step in determining how much money you need to earn each week to break even or earn a profit. A bookkeeper oversees payroll and maintains records for tax obligations. A restaurant business should consider outsourcing payroll, That’s because there are liability issues and high penalty fees on the line for mistakes made in payroll. Payroll is complicated and time consuming which is why hiring an expert to do payroll will handle the complicated and ever changing local, state and federal laws surrounding workforce requirements. As a business owner you won’t have time to keep up with these changes. Outsourcing your payroll is surprisingly affordable and a necessary option for bookkeeping to ensure consistent and reliable paychecks.

There are many independent accountants and accounting firms that specialize in restaurant bookkeeping. Since accounting is complicated and the restaurant industry is unique you should choose an accountant expert because they provide in-depth operational analysis of your financials and tax consulting. Restaurant accounting can quickly become too complex for restaurant owners to handle. If you are not confident in your ability or lack the time that’s needed for accurate and thorough bookkeeping, consider hiring an accountant who specializes in that profession. One of the first places to start when handling your restaurant’s accounting is ask other chef’s how they handle their own accounting records. Knowing how a colleague approaches restaurant bookkeeping may provide insight as to how you should address your own books and records.

• Account Reconciliation

Reconciling QuickBooks accounts is the single most important piece of the entire bookkeeping process. Reconciling your accounts is the only way to know you have accounted for all transactions. You should reconcile all bank accounts, credit cards, loans, line of credit and payroll liabilities. Note that modern accounting software can automate account reconciliation. Any account that receives a statement with a beginning and ending balance should be reconciled. Account reconciliation keeps you aware of lost checks, incorrect deposits or cash variances. Account reconciliation also catches bookkeeping errors and keeps track of your transactions. You should always automate bookkeeping by linking your accounting software to your POS.

Susan Claybrook
Client Liaison, Accounting