How to Manage Restaurant Accounting

restaurant bookkeepers

Hire an experienced person or company to 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. Restaurateurs and investors use EBITDA when they’re looking to sell, buy, or invest in a restaurant to help guide their buying decisions. It’s a tool for a valuing a restaurant and gauges a restaurant’s earning potential. Payroll is responsible for calculating and distributing employees’ paychecks. Payroll also keeps a financial record of deductions, bonuses, vacation, sick time, and overtime.

restaurant bookkeepers

Food costs depend on the type of restaurant, but normally are around 28-35% or revenue. Restaurant bookkeeping 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. Along with your POS, accounting software helps you keep an eye on your financial performance in real-time.

What is restaurant accounting?

You’ll also want to know enough about accounting to monitor financial KPIs that will help you make business decisions on the fly. The key to quickly calculating your prime cost in QuickBooks is having your chart of accounts set up properly. You need a parent account for both Costs of Goods sold as well as Payroll costs. Then you want subaccounts under each of those with the level of detail you desire. Any account that gets a statement with a beginning and ending balance can be reconciled. Account reconciliation ensures that you are looking at accurate financial reports.

In other words, we’ll help you talk the talk, but you’ll still need someone to walk with. Prime cost accounts for all your labor costs and your cost of goods sold. For every dollar you earn, the prime cost is the amount of that dollar that goes to labor (your staff) and product (food items).

Focus on Insights, Not Invoices

Whichever way you look at it, restaurants operate with razor-thin profit margins, emphasizing how crucial it is to keep on top of your restaurant accounting. While the accrual method can be more complex and time-consuming, it gives a more accurate picture of a restaurant’s financial health as it considers current and future obligations and revenue. This is the money that you need to pay to suppliers for the goods and service they provide. That’s everything from your delivery partners, to utilities and broadband internet, right through to rent for your premises. This is a helpful bookkeeping process that verifies every transaction across your accounts so that your ending balance matches.

  • 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.
  • Or maybe you’re already a well-established restaurateur looking for ways to minimize your costs and boost your profit line.
  • It’s essential to find a bookkeeper who understands the nuances of the food and beverage industry, including both front-of-house operations and back-of-house management.
  • The next step is a POS system that is fully integrated with your back office and accounting.
  • This is the money that you need to pay to suppliers for the goods and service they provide.

This equates to a whopping ten percent of the entire workforce in America, and most of these workers are hourly and part-time staff. Do more for your restaurant clients in less time with fewer resources. XtraCHEF automates the busy work, so both you and your client can focus on business success. Having sufficient cash on hand is critical for providing change and employee tip-outs, but you’ll also want to keep reserves in the bank for credit or debit expenses. Here are some of the specific tasks that restaurant bookkeepers tackle. When back office runs smoothly it sets up your business to boost productivity and keep costs low.

Account Reconciliation

Modern POSs leverage data analysis tools to give you additional reporting insights into sales by section, voids, and staff activities so you can assess staff performance and cut costs. At first blush, cash-based accounting might seem like the best kind for restaurants. It records income as it enters your bank account and records expenses bookkeeping for startups when they’re paid. You should review your prime costs, CoGs, inventory counts, and labor on a weekly basis, not a monthly basis. These KPIs are controllable, but they can also easily get out of hand if not monitored. If you’re monitoring these figures on a weekly basis, you can patch any cost leaks without incurring too many damages.

  • When using analytics, you’re not just asking “what,” but you’re going deeper to answer “why?
  • Not all industries have to deal with tips, weekly reporting periods, and hyper-sensitive labor and inventory metrics.
  • Even though business owners try to learn to manage their finances on their own, others opt to hire a professional so they can focus on the parts of their business that matter to bring in sales and revenue.
  • This ratio can be calculated on an hourly, daily, or monthly rate, and will give you insight into how much your restaurant costs to run.
  • And in the restaurant business, it’s no secret that, in order to make food, you’ll have to buy ingredients.
  • Your breakeven point shows how much revenue you need to earn to pay for your expenses.

Financial software is designed to make restaurant bookkeeping simpler and more efficient for you as the business owner. Prime costs account for all the costs required to produce and distribute your product. For every dollar that comes in, your prime cost is the amount of that dollar that goes to people (your staff) and product (your menu items). Reconciling accounts keeps you aware of lost checks, incorrect deposits, or cash variances.

Before we dive into restaurant profit margins, it’s important to note that these numbers can differ depending on factors like the type of cuisine, location, size, and overall efficiency of a restaurant’s operations. When you calculate break-even point in dollars, you’re estimating how much revenue your restaurant will need to generate to end with a $0 balance at the end of a certain period of time. Underestimating your weekly income could make it look like your business is losing money when it’s not. Alternatively, overestimating your income could cause overspending because you weren’t working with an accurate budget.

The four-week cycle eliminates the need to accrue payroll if you have a bi-weekly pay period. Your P&L statements will then reflect 28 days of actual sales and 28 days of actual payroll. To ensure they’re the very best they can be at their jobs, it’s important that restaurant bookkeepers understand how restaurant accounting differs from accounting in other industries. If they’ve come from a manufacturing or retail accounting background, for example, restaurant accounting may seem foreign to them. And it’s critical that they know the big picture, so they can effectively perform their restaurant bookkeeping duties.

Leave a Reply

Your email address will not be published. Required fields are marked *