How to do Bookkeeping for a Small Restaurant

Restaurant bookkeeping

An accountant’s duties are more far-reaching and look at more of the broader financial picture of a restaurant. Restaurant accounting software includes financial software and point of sale (POS) systems. These programs are designed to help you organize your inventory counts and transactions quickly and accurately. Account reconciliation confirms that you’ve accounted for all transactions and that the amount of cash in your account is correct.

  • Since accounting is complicated and the restaurant industry is unique you should choose an accountant expert because they provide in-depth operational analysis of your financials and tax consulting.
  • They’re also required to pay the employer’s share of Social Security and Medicare taxes based on the total wages paid to tipped employees as well as the reported tip income.
  • Here are some of the essential reports that restaurants use in their bookkeeping process with an outline of what they’re needed for.
  • Keeping tabs on your food costs will help you set menu prices and maximize profits.
  • The end-of-day sales report gives you your sales by day by category, for food, beverages, sales tax.

If you live in one of the states that offer on-time sales tax discounts, DAVO will pass that on to you. Schedule a demo of our restaurant management system today to discover which features and modules will work best for your business. And let’s be honest, it really can be if you don’t have the right tools to keep everything under control. At SynergySuite, we plug into your restaurant’s bookkeeping operations, so your business runs smoothly. By analyzing different revenue sources, you can determine which areas of your business are the most profitable—whether that’s food sales, alcohol sales, merchandise purchases, or catering.

How NEXT helps restaurants thrive

This wouldn’t be a full-time position, and they’re a separate person from your business accountant. Thus, they have no control over or connection to the daily ordering and sales in your restaurant. As an incentive for restaurants to report employee tips collected on the employee’s W-2, restaurants can claim a tax credit on their tax return equal to 7.65% of tips reported by employees.

Restaurant bookkeeping

If you are looking for a cloud-based accounts payable system we would highly recommend Bill.com. Bill.com allows you to add various users with different permissions. If you want to automate all the above steps to create a daily sales journal in QBO we highly recommend taking a look at Shogo. We have been using Shogo for years to automatically create the daily sales journal from various restaurant POS systems to QBO.

To calculate the costs, divide the staff into groups of back-of-house and front-of-house and figure out which group is costing you more. This is a helpful bookkeeping process that verifies every transaction across your accounts so that your ending balance matches. If your accounts don’t reconcile, it may be a sign that funds are being misused, or worse being stolen.

Modern accounting software can easily automate the account reconciliation process. Keep tabs on your revenue and use your accounting records to figure out how much you earn from food sales, merchandise sales, catering jobs, and more. Pinpoint how much revenue you make on a daily basis and then break them further into categories. Connecting your accounting software to your POS will automate the collection and organization of transactions and financial data. Along with your POS, it will help you keep a close watch on your financial performance in real-time. Accounting software also takes away the cumbersome burden of manual accounting while eliminating the effort, time, and errors that come with it.

End-of-day sales report

Restaurant accounting is the organization of financial records so that the owner has a better understanding of the restaurant’s financial position at any given time. These financial transactions range from the cost of inventory, equipment, and utilities to the prices on the menu. A restaurant bookkeeper oversees the finances and budget for the restaurant. Restaurant bookkeeping with accurate accounting records is one of the most important aspects if you want to run a successful restaurant.

The chart of accounts records high-level transactions like revenue, expenses, assets, liabilities, cost of goods sold, and equity. Each of these buckets is further categorized into smaller ones, such as meat costs, alcohol costs, staff wages, marketing, utilities, laundry, etc. “Cost of goods sold” refers to the products you buy that make up your product.

Getting your financials right can actually help your business deliver on that very passion that motivates you in the first place. Restaurateurs and investors use EBITDA when they’re looking to sell, buy, or invest in a restaurant Restaurant bookkeeping to help guide their buying decisions. It’s a tool for a valuing a restaurant and gauges a restaurant’s earning potential. Your breakeven point represents how much revenue you need to earn to cover your expenses.

Bookkeepers are more task-based and manage accounts payable, payroll, and posting journal entries. 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 locked down accounts payable process allows you to pay your bills on time and without error, so that your inventory shipments remain on schedule. Your controllable costs are the restaurant expenses you can control. Restaurant financial reporting can be the difference between success and failure. Cash tips for service industry workers are not considered restaurant income and are not subject to withholding. Employees still need to report cash tips—and both the restaurant and employee must still pay taxes on them.

Cash-Basis Accounting

As a restaurant owner, you should be looking at the Sales versus Cost of Goods Sold ratio, and labor costs and try to keep the prime cost under 65% of the total sales. There are a few critical reports that should be evaluated on a regular basis to understand the restaurant’s finances. Restaurant operations have a large volume of transactions and reconciling is a time taking and complex process. However, reconciling your accounts is the only way to ensure that you have recorded all your financial transactions. As part of the reconciling exercise, you should reconcile your records with bank statements, credit cards, loans, lines of credit, payroll liabilities, etc. The exercise helps track erroneous deposits, missing invoices, or sales anomalies.

Keeping track of profit and loss can let you adjust spending when necessary. These statements help you to gain insight into how your restaurant is performing. You need to decide if they‘re going to be pooled, paid by paycheck, or in cash.

Cash flow statements are helpful for restaurants because they let you know whether you have enough money coming in to cover your expenses. When you’re looking at a KPI like prime cost, you can get a better picture of just how profitable your restaurant is. Restaurant accounting software can help you to manage your books and records yourself. Going with the right software may even help you save money in the long run.

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Analyzing your P&L daily helps you identify strengths and weaknesses in your business and take proactive measures to address any issues. Calculating and tracking food and labor costs empowers you to optimize menu prices, manage inventory efficiently, and make well-informed staffing decisions. Managing a restaurant often requires the business owner to constantly attend to challenging tasks. Hence, automating repetitive bookkeeping processes is crucial in order to free up as much expert time as possible for things that truly need your attention.

You will need to analyze how funds are hitting your bank and set up your bookkeeping system to mirror that activity. Cost of goods sold (COGS) refers to the actual cost of food and beverage you buy that is used to produce your food and beverage sales. And in the restaurant business, it’s no secret that in order to make food you’ll need to buy ingredients.

Running a restaurant isn’t cheap, and most restaurateurs will require a loan at some point. There are several types to choose from, including short-term, business line of credit, and equipment financing. Some marketing efforts are low or no cost, such as printing flyers or posting on social media. Other efforts take a little more dollars, like participating in a food festival or buying a radio advertising spot. Restaurant industry laws and regulations cover everything from food handling safety to maximum occupancy to alcohol sales. Join over 1 million businesses scanning receipts, creating expense reports, and reclaiming multiple hours every week—with Shoeboxed.

Accounts payable

To put it simply, this is the process of preparing financial reports in which an accountant usually follows the accounting cycle of business transactions. Restaurants often use the four-week accounting period instead of a monthly one, as days of the week tend to affect how the business is doing, which creates a 13-week bookkeeping cycle. We recommend monitoring prime costs on a weekly basis to track fluctuations in expenses and identify areas where you can cut unnecessary costs. A restaurant’s food costs can fluctuate based on many factors, including seasonality or natural disasters. It takes more than a passion for food to run a successful restaurant. Being a great bookkeeper takes an efficient bookkeeping system to keep track of your restaurant’s financial health.

Best Practices To Catch Fraud and Theft In Your Restaurants

How well are you pricing your food and beverage and controlling your inventory at the same time? By keeping tabs on your COGS ratio, you can take action to reduce and contain your inventory costs. Will your wait staff work for tips, or will you add gratuities to every bill?

ZipBooks offers a tiered pricing system; the first tier is Starter and is free, while the next tiers are $15 per month, $35 per month, and custom-priced (for the top-tier offering). Get the summarized journal entry that your restaurant clients actually need. Complete Insureon’s easy online application today to compare insurance quotes from top-rated U.S. carriers. Once you find the right policy for your small business, you can begin coverage in less than 24 hours. Whether a server accidentally spills soup all over a customer’s expensive purse or someone slips on your floor when the entrance is wet from rain, restaurant insurance can protect your small business. Each method has its pros and cons, so you can decide what’s right for your business.

Categories: Bookkeeping

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