Want to know how to do bookkeeping for a restaurant?
Maybe you’re an aspiring restaurateur who wants to learn the financial management side of things. Maybe you’ve been in the business for a long time now, but want to brush up.
This post is for you.
We will cover all the basics from setting up accounting software to financial and tax reporting.
With that appetizer out of the way, let’s move on to the main course!
Setting Up Your Restaurant Bookkeeping System
Choosing the Right Accounting Software
Choosing the right accounting software is one of the first and most important steps. You don’t just want bookkeeping pricing that fits your needs or flexible plans that grow with your business. You also want software that can cater to the specific needs of a restaurant business.
Two main features to look for are inventory management features and POS or point-of sale integrations.
POS
Your POS or point-of-sale system is your cash register, card reader, or digital software that records daily transactions.
We recommend investing in one of these integrated systems for multiple reasons. For one, there are automation benefits making it a lot more streamlined. They sometimes have inventory management built-in that track stock through transactions. POS systems like these also have other features like employee management and multi-channel tools.
Note: Your existing POS system may not integrate with accounting software. Some POS systems are also locked in with payment processors and not third party systems. This is something to consider.
Inventory Management
These features streamline your stocking and restocking efforts. You can set up restocking alerts and automate your supplier orders and payments.
Developing a Chart of Accounts
You can think of your Chart of Accounts as a reflection of your business operations. While businesses usually have the main 5 accounts, the sub accounts show a more specific and unique picture.
For restaurants, these sub accounts vary depending on size and complexity.
Some common sub accounts you might have include
- Food costs (CoGs)
- Rent and utilities
- Sales revenue
- Inventory (Food, Beverages, etc)
- Paper Products
- Payroll Taxes Payable
- Salaries and Wages
Daily Bookkeeping Tasks
Sales Tracking
If you have an integrated POS, a lot of the daily sales data goes directly to your bookkeeping software. This includes your cash and credit transactions plus sales tax that you need to remit. It can also generate a sales report for the day with all this info.
If yours doesn’t integrate, you need to input your daily sales data manually. You can do this by setting up a recurring sales receipt and inputting the information from your POS.
Expense Management
Managing expenses for a restaurant involves looking at your operational and occupancy expenses.
Operational expenses are costs that you need to run the business. For a restaurant, this includes your cost of goods sold (COGS) like your ingredients. This also includes your supplies of soap, napkins, take out bags, cups, straws, etc. Labor costs are also another factor.
Occupancy expenses are costs related to the building out of which you run your restaurant. These expenses include your utilities like rent, water and electricity. The cost of maintaining the facilities is another consideration. Other expenses in this category that some might forget about are property-related insurance and taxes.
Payroll Processing
Restaurant payroll processing can be a little bit more complex with the addition of tips and gratuities. You’ll need to decide ahead of time what system to use to pay your staff. Which staff members are salaried? Which earn primarily through tips? Do you add a service charge or gratuities to customer bills?
On top of this complication, “DIY” payroll processing is already a risky business in and of itself. You need to correctly calculate and correctly apply and report payroll taxes, for instance. Failure to do so could result in large fines which is an unnecessary expense in an industry with potentially tight profit margins.
This is one of those instances where outsourcing payroll may be a better solution. It’s a popular alternative that is also cost-effective. Because these services focus on this one aspect, there’s a lower likelihood for error or overdue wages.
Inventory Management
Regular Inventory Checks
Inventory management is always crucial for both retail and restaurant businesses. Although restaurants need to be a little more careful because they are primarily dealing with perishable goods. Some of these goods might even have a very short shelf life and need to be replenished every week.
Ever wonder why menus change and why your favorite dish got discontinued? Chances are it’s because they lost more money than they gained from offering menu item. A lot of restaurants use a technique of offering dishes with similar ingredients cooked in different styles. This way you reduce wastage and consequently, reduce costs.
Inventory management software and integrations help you reduce food waste associated with overstocking. It helps both owners and restaurant managers gauge what sells and when. They can see which items sell fast and if stocks are running low.
Supplier Account Management
A crucial part of learning hot to do bookkeeping for a restaurant well is the proper management of your accounts payable.
This is all of your obligations and debts you need to meet within a certain period.
It’s especially important in maintaining good relations with your vendors and suppliers. Suppliers are more willing to accept payment on credit if you show them that you pay on time.
Poor payables management towards suppliers could lead to
- Less/no flexibility in payment terms
- Lower priority during deliveries
- Losing your vendors and suppliers
- Tarnishing your reputation as a good business partner
One benefit to building relationships with a specific supplier is how streamlined transactions can become. They learn your ordering schedules and patterns in such a way that it almost works similar to automation.
Financial Reporting
Monthly Profit and Loss Statement
Also known as an income statement, your P&L simply shows you your revenues and expenses within that period (usually a month or quarter).
It shows gross and net profits and can reveal where to improve spending habits.
Balance Sheet and Cash Flow Statements
Balance sheets reveal your financial position through balancing assets against liabilities and equity. This is something investors look at to guage the “health” of your business.
Cash flow statements shows how cash moves in and out of the business through operating, financing and investing activities. If it shows little to know financing activity, this means you don’t rely on loans to run your restaurant. This is usually attractive to investors.
Compliance and Tax Reporting
Managing Tax Obligations
Here are the taxes you should familiarize yourself with as a restaurant owner:
- Business and Personal Income Tax
- Sales Tax
- Payroll Tax including Medicare and Social Security
- Taxing related to Tips
Most of the problems with compliance boil down to miscalculation or unfamiliarity with local regulation. For instance sales tax percentages vary based on state. For payroll, the wage-tip complexities can also lead to misreporting.
Don’t worry though, though it may seem like a lot, your accountant can help you.
Also, don’t forget that you can qualify for restaurant-related tax deductions to bring those costs down.
Regular Reconciliations
When learning how to do bookkeeping for a restaurant, you should pay extra care to practice daily reconciliation. This is where you compare your credit card, cash and bank statements with their corresponding accounts in your ledger.
You need to ensure both match and to check for errors or discrepancies.
Frequently Asked Questions
What are the most important financial reports for a restaurant owner?
The big three are the most crucial
- Profit and Loss Statement
- Balance Sheet
- Cash Flow Statement
How often should inventory be tracked in a restaurant?
That depends on the turnover of goods.
Because food is perishable, restaurants have to check this weekly and sometimes even daily
You can check on non-perishable inventory items like table napkins every month.
What are the best practices for managing restaurant payroll complexities?
- Set up processes and policies beforehand
- Have a workers handbook that contain these policies and processes
- Set up a business bank account
- Learn about the intricacies of tip calculation, distribution, and regulation
- Outsource restaurant payroll
Can technology replace traditional bookkeeping for restaurants?
With POS software and other automations, most restaurant bookkeeping is already tech-supported and even tech-dependent.
You should always know how to do the basics manually. However, we believe there’s going to be fewer instances of people having to stay hours after work doing daily recording.
How do fixed and variable expenses affect a restaurant’s profitability?
Fixed expenses remain pretty much the same every pay period. This includes things like rent or insurance payments.
Variable expenses tend to fluctuate. This includes your food costs (CoGS) and labor costs.
Both impact profitability because higher expenses mean a lower gross profit.
What Is AccountsBalance?
AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
In Summary
Learning how to do bookkeeping for a restaurant can be tricky in some areas. There’s choosing a software, learning regulations, and navigating complex tipping structures. But whether you choose to outsource or DIY, you now have a “soft launch” point to start your financial management journey.