Content
The first question you should ask yourself is whether or not you want to handle restaurant accounting in-house (either doing it yourself or hiring an accountant) or outsource it. There is no right or wrong answer to this question and we’re not trying to sell you on one choice over the other as we have software applications that can help no matter which choice you make. Restaurant accounting is not all that dissimilar to accounting in other businesses. As you seek to improve the financial health of your restaurant, make sure you are focusing on the right data. With so much information to collect, you may be overwhelmed on what to focus on. By analyzing your accounting reports, this is likely to be easier, enabling you to reach your financial goals.
Chances are you’ve noticed this already if you’ve ordered a bottle of wine. The same bottle that costs $15 in your local liquor store could cost $30 or $45 when you’re out. The terms “accounting” and “bookkeeping” are sometimes used interchangeably. While this isn’t entirely incorrect, the two terms refer to different activities that have a lot of overlap.
Financial Documents
For one, we’re seeing that automation is moving sales from their point of sale system into accounting software. You’re also seeing it in payroll – which is a large expense for restaurants – it can now be pulled into your accounting software on nearly a real-time basis. And, of course, receivables (like food and other orders) can be pulled into their accounting software digitally as well. The balance sheet reports your restaurant’s assets, liabilities, and equity as of a specific date.
This ensures a greater level of accuracy in the restaurant accounting processes. The system will help you track your labor and inventory costs, methods of payment, and other important information. Since accounting in the restaurant industry is quite different from other industries, look for someone who has experience or specialization in restaurant accounting. Someone who understands specific restaurant accounting features like a chart of accounts, COGS, prime costs, daily sales, and more.
Learn How We Can Impact Your Business Growth
Some retail companies can take physical inventory monthly, quarterly, or even annually. Most restaurants use the cash method, while most other businesses use the accrual method. If a business’s sales are less than $25 million annually, they can choose between the cash or the accrual method. If a business’s sales exceed $25 million annually, they must use the accrual method.
Be sure to record all sales—all money that came in—on a daily basis to make the reporting easier in the future. It can be extremely overwhelming which is why we don’t suggest you try to do it with a pen and paper. Accounting and bookkeeping software make this process so much easier. Outside of hiring someone else to crunch the numbers, using a software program is your best bet for effective restaurant accounting. This method is commonly used by small businesses, including restaurants, as it is relatively simple and easy to implement. The cash accounting method provides an accurate picture of a restaurant’s cash flow and is particularly useful for venues with a lower sales volume or irregular cash flow.
Use Restaurant Accounting Software
When you use a full-service payroll provider, they often make a few withdrawals for each pay period to help with accounting. One of those main withdrawals is the wage expense that is debited from your bank account. This bank withdrawal usually states “net wages” or similar on the bank transaction detail, and the portion of the journal entry for this should match the withdrawal specifically. A portion of the taxes paid for payroll are an expense of the company, and a portion are a contribution from your employees.
That’s because it includes both accounts payable and accounts receivable. Including both provides a more granular look at long-term financial health. It’s a relatively easy how to do bookkeeping for a restaurant method of accounting because you don’t have to keep track of accounts that owe money. That’s why it’s the most frequently used method of accounting for restaurants.
You can choose between cash basis accounting and accrual accounting depending on your profit amounts. You’ll also need to keep constant track of inventory, food and pour costs, prepaid accounts, short pays and vendor credits, and tips. In addition to our accounting and bookkeeping services, we also provide payroll help and tax preparation.
It is also important to track total sales and expenses on weekly basis to ensure the restaurant is not losing money and that it is cutting expenses where possible. Each of these numbers need to be accounted for when running your restaurant. You’ll be in a better place to determine the financial health of restaurant if you keep track of them. Your restaurant variable expenses are highly volatile and can change easily from one month to another. Documented reporting and screening of these costs is integral to keeping the business afloat. You may use a restaurant management software to make sure you track these expenses and safeguard your profits.
Automate Your Restaurant POS with QuickBooks Online
Many restaurant managers consider this report to be the most important. “Cost of goods sold” refers to the products you buy that make up your product. And in the restaurant business, it’s no secret that, in order to make food, you’ll have to buy ingredients. If you’re opening a franchise restaurant business, such as Pizza Hut or TGI Friday’s, you’ll source your food directly from suppliers as instructed by the home office. But if you’re striking out on your own, you’ll be responsible for buying ingredients, possibly every day.
A balance sheet lists your assets, liabilities (debt) and equities at a given time, providing an overarching view of your restaurant’s financial health. This presents a snapshot of your current financial situation and lets you plan your short and long-term cash flow. The accrual accounting method records revenue and expenses when they are earned or incurred, regardless of when the actual cash transaction occurs. This means that revenue is recognized when a sale is made, even if the customer still needs to pay, and expenses are recognized when they are incurred, even if the bills are still to be paid.