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!
TL;DR – Bookkeeping for Restaurants
Restaurant bookkeeping isn’t your typical small business accounting. Daily sales, inventory that spoils, staff tips, and multiple income sources make it more complex. Setting up the right systems early is key to staying compliant and profitable.
Here’s a quick summary of what we detail later in the article:
- Choose the right bookkeeping software
- Integrate your POS system
- Set up inventory management tools
- Create a chart of accounts
- Establish daily sales tracking
- Define expense categories
- Implement payroll processing
- Schedule regular reconciliation
- Organize supplier accounts
All this may be overwhelming for you. But if you need an expert hand, AccountsBalance is here for you. We understand how challenging it can be to manage numbers while expanding your business. That’s why we work with restaurateurs and other business owners to give them accurate, reliable financials they can actually use.
Book a call today.
What Is Restaurant Bookkeeping and Why It Matters
Restaurant bookkeeping is all about keeping track of where your money’s coming from and where it’s going. That means recording sales, expenses, payroll, inventory costs, vendor payments, and overall cash flow. Done right, it gives you a clear view of your finances and helps you make smarter business decisions.
While this might sound similar to bookkeeping in any business, the fast-paced nature and unique challenges of the food service industry make restaurant bookkeeping complex and diverse.
However, accurate bookkeeping is essential for keeping your restaurant running smoothly. Good records help you:
- Know how much you’re making and spending
- Comply with tax regulations and prevent expensive mistakes
- Make smart decisions about budgeting, pricing, and personnel
- Manage cash flow and pay bills, payroll, and other obligations on time
- Develop solid financial reports for internal planning and external compliance.
With accurate records, better control of cash, and smarter planning, you’ll thrive in a competitive industry.
Differences Between General and Restaurant-Specific Bookkeeping
General bookkeeping covers basic financial tasks, but restaurant bookkeeping goes further by focusing on day-to-day operations, inventory, labor costs, and seasonality — factors that are critical to running a successful food business.
Also, the fast-paced nature and operational structure of restaurants require a more specialized approach.
Let’s look at the differences in detail:
Top Bookkeeping Software for Restaurants
Bookkeeping doesn’t have to be a headache. With the right software, you can easily stay on top of your restaurant’s finances, track costs, and keep things running smoothly.
Here are the top bookkeeping tools you can consider:
1. Restaurant365
Restaurant365 is specifically designed for restaurants and offers robust bookkeeping features, including daily sales tracking, real-time inventory updates, and vendor invoice management.
It connects directly with your POS system to pull in daily transactions, helping you automate journal entries and maintain accurate records.
Key Features:
- Streamlines vendor invoice processing and payment tracking
- Real-time tracing of inventory and labor costs
- Robust financial reporting tools
- Excellent for multi-location restaurants looking for centralized control
Although best suited for larger businesses, it may seem overwhelming and costly for smaller ones.
2. QuickBooks Online
QuickBooks is a popular and versatile solution that suits most types of food businesses. It enables simple tracking of expenses, sales, inventory, and payroll.
The availability of a mobile app and wide app integration make it ideal for busy owners who need to manage finances on the go.
Key Features:
- Easy setup and user-friendly design
- Integrates smoothly with POS and payroll systems
- Customizable financial reporting
- Mobile access for real-time tracking
One downside is that adding extra features can increase the cost; some POS integrations may not be perfectly smooth.
3. Xero
Xero has easy yet effective bookkeeping software with a strong focus on real-time data and cloud connectivity. It integrates with a wide range of restaurant tools like Square, Hubdoc, and Deputy.
Its intuitive dashboard and clean interface make it great for owners who prefer clarity and control.
Key Features:
- Real-time cash flow monitoring
- Integrated payroll across all U.S states
- Easy reconciliation of bills and bank feeds
- Excellent third-party app ecosystem
One thing to keep in mind: their lower-tier plans offer just basic features, and it might take some time to learn your way around if you’re new to this.
4. Wave
Wave is a good choice for small food businesses that want simplicity within a budget. It has a beginner-friendly interface, so bookkeeping tasks like tracking expenses, reconciliation of transactions, and reporting sales become easy.
Key Features:
- Interface is clean and simple
- Automatic bank reconciliation
- Great for owners with basic bookkeeping needs
- Includes invoicing and receipt scanning at no extra cost
While these tools make financial tasks easier, using them without any proper knowledge of bookkeeping can still lead to mistakes. What you really need is someone who knows how to manage accurate books.
That’s where AccountsBalance comes in. Reach out today and let’s organize your restaurant’s finances.
How to Set Up Your Restaurant Bookkeeping System
Before anything else, you need to have a strong foundation for your bookkeeping process. Setting up a system the right way saves time, prevents costly errors, and makes everything else, like reporting, taxes, and planning, much easier.
Here are the crucial steps to correctly set up your bookkeeping system:
Choosing the Right Restaurant Bookkeeping 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
You have to be committed to your books if you want accurate finances. There are a few things you need to track every single day to keep your records up-to-date:
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.
Why Inventory Management Matters in Restaurants
Food costs are one of the biggest expenses in a restaurant business, and it is directly tied to your inventory. Managing it well can mean the difference between profit and waste.
Let’s look at more reasons why it’s important:
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 in Restaurant Bookkeeping
Reports are not just some paperwork you need to maintain. You can utilize them to know how your restaurant is performing, and they also help you make smart decisions based on real numbers.
Let’s discuss the two types of financial statements relevant to restaurants:
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
Staying compliant is never an option for any business, let alone restaurants.
Here’s what you need to do to stay on top of your finances and avoid legal troubles and penalties:
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.
How to Find the Best Restaurant Bookkeeping Services
The hospitality industry is quite distinct from mainstream niches like e-commerce or SaaS.
So, to find the right bookkeeping service for your restaurant, you need to make the right choice.
Here’s how:
1. Look for Restaurant-Specific Experience
Restaurants face unique challenges that most businesses don’t, such as tracking daily sales, managing changing labor costs, and handling complicated inventory.
Make sure your bookkeeper understands the food service industry and has proven experience managing restaurant finances.
2. Evaluate Their Services
A good bookkeeping service should do more than just record transactions; it should also provide valuable insights and guidance.
Ensure that the provider offers everything your restaurant needs, such as:
- Daily sales reconciliation
- Inventory and cost tracking
- Payroll management
- Cash flow monitoring
- Tax prep and reporting
3. Verify Tools and Technology
The tools your bookkeeper uses directly impact the accuracy and efficiency of your finances. To achieve high accuracy, they need to use modern, connected platforms that integrate with your POS, such as QuickBooks, Xero, etc.
Regardless of the software they use, the more important thing is how well they utilize it to streamline data, track sales, and flag issues early.
4. Check Credentials and Certifications
A qualified bookkeeper should have solid credentials. Look for certifications like:
- QuickBooks or Xero certification
- AIPB (American Institute of Professional Bookkeepers)
- NACPB (National Association of Certified Public Bookkeepers)
- A degree in accounting or business (preferred but not always required)
5. Ask About Communication and Reporting
Your bookkeeper should provide clear, timely reports and be able to explain them precisely.
You want someone who can break down your numbers in plain language and alert you to issues like cash flow shortfalls or overspending.
6. Read Reviews and Ask for References
Don’t rush in; before you commit to a bookkeeping service, check online reviews and ask them for references.
Even if you can get a quick chat with other restaurant owners who’ve worked with them, it can help you avoid upsetting surprises and find out what it’s really like to work with them.
Best Practices for Effective Bookkeeping
Here are some best practices to ensure accurate bookkeeping for your restaurant:
- Prioritize accuracy: A small mistake in sales or payroll can lead to big problems later. Keep things clean by using a consistent system, checking your numbers, and balancing the books regularly.
- Monitor prime costs closely: Prime costs are the combination of Cost of Goods Sold (COGS) and labor expenses, which typically account for 60-65% of a restaurant’s total costs. Bookkeeping should help you track these closely to identify overspending or inefficiencies.
- Review financial reports regularly: Review your financial reports, like profit and loss statements, cash flow summaries, and labor cost breakdowns, on a weekly or monthly basis to gain insight into menu performance, cost trends, and overall profitability.
- Ask for advice and learn from peers: Bookkeeping doesn’t have to be a solo effort. Consult with other restaurant owners, your POS provider, or a professional bookkeeper to gain valuable tips for effective bookkeeping. A seasoned bookkeeper can also flag blind spots and help you avoid common pitfalls in the industry.
Frequently Asked Questions
Here are answers to some commonly asked questions that many restaurant owners worry about:
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
You can explore a sample financial report to understand how these statements are structured and what insights they offer.
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:
Conclusion
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.
