The Complete Guide to Restaurant Accounting Best Practices

For more information, see our comparison of the cash- vs accrual-basis accounting methods. Reviewing your financial reports on a regular basis will provide valuable insight into your restaurant’s performance. The profit and loss (P&L) statement shows your profitability https://www.bookstime.com/ and the financial health of your business. Depending on your sales volume and the tasks you need help with, your bookkeeper may only work on your records a couple of hours a day or week. Ideally, you’ll want a bookkeeper who is familiar with the restaurant industry.

Reconcile account statements

• This P&L gives you all your income and expenses and whether you are profitable or not,” said Miller.
• Financial software is designed to make restaurant bookkeeping simpler and more efficient for you as the business owner.
• An effective inventory management system enables the monitoring of inventory levels and alerts management to any discrepancies that may indicate theft or excessive wastage.
• As an example, if you have commingled or mixed personal finances with your business, or have been paying cooks under the table, you will want to be honest with your accountant so he can help you fix it.
• Based on the size of your restaurant, you can set up an inventory management system that optimizes food costs and reduces waste.
• Track your consumables and supplies to calculate the value of the food you have in stock and determine the average daily inventory costs.

Kristen Slavin is a CPA with 16 years of experience, specializing in accounting, bookkeeping, and tax services for small businesses. A member of the CPA Association of BC, she also holds a Master’s Degree in Business Administration from Simon Fraser restaurant bookkeeping University. In her spare time, Kristen enjoys camping, hiking, and road tripping with her husband and two children. The firm offers bookkeeping and accounting services for business and personal needs, as well as ERP consulting and audit assistance.

Using the wrong accounting period

• According to the National Restaurant Association, there are 14.7 million people in the restaurant industry.
• This includes your rent or mortgage, equipment costs, insurances, permits, and other operational expenses.
• By keeping tabs on your CoGS ratio, you can take action to reduce and contain your inventory costs.
• In leasing commercial space for a restaurant, square footage is extremely valuable.
• Restaurants with less than $1 million in profits can choose between cash or accrual accounting.

The cash accounting method is a simpler way to do accounting for your restaurant. With this method, you record income when you receive it and expenses when you pay them. Although there are many options, most restaurant and retail businesses choose the calendar year accounting period. Restaurants usually run seven days a week and might have some days with more sales. Opting for four and five-week periods, totaling 13 accounting periods gives you a more accurate comparison.

• To calculate total sales per head, take the total sales and divide that by the number of customers.
• A chart of accounts is made up of different accounts and line items that make up a general ledger.
• Restaurant accounting is also made up of essential bookkeeping processes that keep your business running.
• Remember, good bookkeeping practices are not only beneficial for your business but also for your peace of mind as a business owner.

Figures to track

• Features that are especially useful for restaurants include inventory management, payroll, and bill management.
• There are several factors to restaurant accounting, including important vocabulary, different types of expenses, accounting cycles, and items you have to track.
• At Bookkeeping Chef we are a little biased,  but more and more New York City restaurant operators are beginning to outsource their payroll, bookkeeping and accounting functions.
• This means your cooks, busboys, servers, hosts, and anyone who’s on your restaurant payroll – from front-of-house to back-of-house.
• What is most important to know are the key factors that can directly impact the success of a restaurant.

Both XtraChef and MarginEdge allow you deeper COGS and financial insights and controls directly in your POS system. It will require an additional reconciliation (if you have a good bookkeeper) of the Bill.com clearing account. You can then upload your invoices to Bill.com to allow your accountant to code them properly. You should see the information for your QBO account and can change any information through settings. One of the reasons we love connecting to QBO and to any restaurant POS system from Shogo is the steps and amount of time it takes. QBO has worked very well for all of our restaurant clients, so we recommend it 100% of the time.

Create a Profit and Loss Statement

And, at that point, it’s far too late to make changes or figure what happened. The cost of goods sold is calculated by adding the beginning inventory cost to the purchased inventory cost and subtracting the ending inventory from that amount. Tracking this metric will help you reduce and stabilize your inventory costs. You can create custom tags and categories to match your bookkeeping needs for tailored complex financial analysis and oversight. Shoeboxed eliminates manual data entry by automatically extracting critical information from receipts. You’ll be able to better communicate with your accountant and get practical ways to run your restaurant more efficiently.

Restaurant Bookkeeping 101: A Guide to Accounting Basics

Under accrual accounting, CoGS is recorded as inventory is used, not when the suppliers are paid. You and your accountant will work on certain bookkeeping and accounting tasks together. You’ll also want to know enough about accounting to monitor financial KPIs that will help you make business decisions on the fly. While you won’t leave this article a chartered accountant, we’ll give you the language you need to work with accountants and with restaurant accounting software. In other words, we’ll help you talk the talk, but you’ll still need someone to walk with.

A Beginner’s Guide to Restaurant Bookkeeping and Accounting

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