Restaurant accounting can be intimidating. It’s a complex practice with many moving pieces measured against industry benchmarks. Not all restaurant managers speak the language of accounting fluently.

What is the importance of a profit and loss account? How to deal with the overhead costs? Restaurant bookkeeping or Restaurant accounting? Let us cover them all.

Restaurant accounting essentially involves recording transactions, analyzing entries, and interpreting quantitative data for subsequent understanding of financial performance. Often used interchangeably, Bookkeeping for a Restaurant, is a slightly different concept where transactions are only recorded in the general ledger.

The 3-BASIC ELEMENTS of Bookkeeping for a Restaurant are:

Prime Cost

Prime cost is critical to running a restaurant profitably, to cut back the costs and increase the revenue. It constitutes two of the predominant cost- COGS, and labor along with payroll, taxes, and various other benefits. The ideal Prime cost to sales ratio is 55% to 60%.
A restaurant owner must be well-versed with prime costs since they are the only ones avoidable and cutting down on other expendable costs seems pointless. Keeping track of Prime cost and applying necessary controls, in the long run, will reduce the probability of misstatements and ensure increased margins.

Cost of Goods Sold

COGS is the combination of food, beverage, and other ingredient costs which excludes one-time, unrelated inventory costs such as equipment purchase, repairs, etc.
It’s crucial to keep tabs on the COGS as it directly impacts your ultimate profit margin per dish sold and assists in establishing a fair pricing point. It does not include the labor cost or utilities and can be smoothly calculated while performing a weekly inventory check.

Choose a POS system

Whether you’re running a small bakery or a fine dining restaurant, you would need a POS system for cash management, sending receipts via text or mail, inventory management, order management, and back-office reporting.

Here are 3 of the common mistakes to avoid while Bookkeeping for a Restaurant:

1- Accounting method

Accrual or cash-based.
Though cash-based accounting seems to be the best method for restaurants considering the quantum of cash transactions, it means you simply record the transactions when money changes hands and hence, is not the ideal one.
In the accrual method, revenue is recognized when earned and expenses when paid. It is the appropriate one to opt for any industry and is more widely accepted. It will reflect the correct financial health of the restaurant.

2. Accounting Period

Selecting the right accounting period enhances the comparability of the financials. For Bookkeeping for a Restaurant, weekly periods should be set up as reporting by calendar month does not allow neck-to-neck comparison because of the uneven number of weekend days in each month. Consequently, the optimal solution for restaurants is to set up reporting using 4/4/5 accounting periods. It divides a year into four quarters of 13 weeks grouped into two 4-week months and one 5-week month. These cycles ensure the same number of each day in each period.

3. Inventory Management

Improper inventory management can make or break the business. It’s inevitable to align the processes and have a fixed system in place. Inventory counts should be carefully conducted as early as daily, weekly, especially due to its perishable nature.
A systematic and robust inventory tracking system aids in better planning and making smart business decisions.

Why seeking expert advice is important for Restaurant Bookkeeping Services?

Simply put, “They know it better”. Why would you spend your time running through complex spreadsheets neglecting the core areas that warrant your immediate attention? Instead just hire an accountant or a virtual workforce who can flip your financial books, make them look good, observe the KPIs, and help you make well-informed decisions.

Easy, ain’t it. Just tap here and your books will be taken care of.