In the fast-paced and competitive world of the restaurant industry, money management requires perfection exactly as much as your new signature dish. There are lots of areas where restaurant owners have to budget and keep an eye on, from daily sales to tricky tax codes. 

Without a robust bookkeeping and accounting system, even the most popular eatery can quickly find itself in financial trouble. 

This guide explores the essentials of restaurant accounting services, offers actionable steps for effective financial management, and shows how it’s beneficial to work with experts when it comes to reducing costs/opportunities.

What Is Restaurant Accounting?

It is the branch of accounting specifically created for the food sector, tailored to food-service establishments. As opposed to accounting on its own, restaurant accounting services consider the very specific needs of the industry, such as:

• High sales volume: On a daily basis, restaurants deal with hundreds of sales, a majority of which are in cash, credit card, or digital payments.
• Inventory management: It is often required to track the inventory of perishable items to reduce waste and figure out food ingredient costs.
• Managing work hours of the hourly-paid workforce: Tip payments and staff turnover during different seasons are difficult to control.
• Following set regulations: Taxes governing tipping and applicable expenses for health codes need to be followed.

Like any other business, restaurant accounting deals with recording transactions and analyzing financials and reports to facilitate decision-making.

Restaurant accounting services are helpful for owners to understand profitability, cash flow metrics, and other deficiencies that need improvement.

How to Do Restaurant Accounting?

Effective restaurant accounting services require a structured approach. Below is a step-by-step breakdown:

Set Up a Chart of Accounts

Create a customized chart of accounts (COA) to categorize income, expenses, assets, and liabilities. Restaurant-specific categories might include:

• Food and beverage sales
• Cost of goods sold (COGS)
• Labor costs (wages, benefits, payroll taxes)
• Utilities, rent, and equipment maintenance
• Marketing and promotions

Track Daily Sales and Expenses

Use a point-of-sale (POS) system to automatically record sales data. Reconcile daily cash registers and credit card receipts to ensure accuracy. 

Track expenses such as:

• ingredient purchases, 
• vendor payments, and 
• overhead costs. 

When you outsource bookkeeping services, they take care of all these tasks while you can dedicate your time to more critical business functions. 

Manage Payroll and Labor Costs

Labor often represents 25–35% of a restaurant’s revenue. Implement software to handle hourly wages, overtime, tips, and tax withholdings. 

Monitor labor costs against revenue to avoid overstaffing or understaffing. 

Monitor Inventory

Inventory management is an important aspect of controlling food costs. Restaurant accounting services conduct weekly counts of perishable items and use the First-In, First-Out (FIFO) method to reduce spoilage. Calculate the food cost percentage using the formula: Food Cost %= (Cost of Ingredients/Revenue from Food Sales)×100Aim for a food cost percentage between 28–35%.

Reconcile Accounts Regularly

Outsource bookkeeping services to reconcile bank statements, credit card accounts, and vendor invoices monthly to catch discrepancies or fraud. This step ensures your financial records match actual cash flow.

Generate Financial Reports

Key reports include:

• Profit and Loss (P&L) Statement: Shows revenue generated, costs and expenses incurred, and net income throughout an identified time period.
• Balance Sheet: Shows all assets, liabilities, and equity at a point in time, giving a summary of changes over a period of time.
• Cash Flow Statement: Shows the movement of cash within the business, highlighting any cash liquidity risks.

Stay Tax-Compliant

Restaurants must comply with sales tax, payroll tax, and income tax regulations. Deduct eligible expenses (e.g., equipment depreciation, employee meals) and maintain records for audits.

How Restaurant Accounting Services Can Help?

While some owners handle bookkeeping internally, partnering with restaurant accounting services offers significant advantages. Here’s how professionals can transform your financial management:

 

Expertise in Industry-Specific Challenges

These restaurant accountants specialize in the business and its operations, like tracking COGS, menu pricing, and seasonal change impacts. These restaurant accounting services can spot the issue of a highly popular but low-profit dish and suggest measures to be taken.

Time Savings for Core Operations

A restaurateur multi-tasks in various operations, such as releasing new recipes, managing customer relations, and providing quality control feedback. 

When you outsource bookkeeping services, you have time for growth strategies, staff training, and improving the dining experience as they take care of the rest.

Advanced Tools and Technology

The use of POS system-compatible cloud accounting software, such as QuickBooks or Xero, drastically improves the accuracy and time efficiency of professional restaurant accounting services. With automation comes reduced human error alongside real-time financial insights.

Cost Control and Profit Maximization

Accountants identify inefficiencies within food, labor or overhead expenses by analyzing the financial data. For example, adjusting portion sizes or renegotiating vendor contracts, as well as minimizing food waste, improves margins.

Tax Planning and Compliance

Restaurant accounting services can represent your business and greatly minimize the penalties and stress of audits. They are the ones who file taxes, ensure thorough tip reporting, and use the business expenses in audits to maximize deductions.

Scalability

Accounting requirements grow with the business, and when you outsource bookkeeping services, you can easily transition with plans to scale, be it opening a new location or expanding your menu. The accounting needs of a company increase with the business, and when you outsource bookkeeping services, achieving scaling plans becomes simpler. 

When Should You Outsource Bookkeeping Services?

• You’re overwhelmed by paperwork: Falling behind on reconciliations or payroll.
• Financial reports are unclear: Struggling to interpret P&L statements or cash flow forecasts.
• Facing an audit: Need expert guidance to navigate complex regulations.

Conclusion

Implementing processes to track sales, control inventory, and review financial statements fully guarantees your profitability. For many, the complexities of the industry make partnering with restaurant accounting services a necessity.

When you outsource bookkeeping services, you’ll get the correct support in maintaining accuracy, compliance and financial strategy. For a niche industry with thin margins and lots of competition, bookkeeping is more than just numbers — it is the recipe to age and scale.

Start by measuring your current financial operations and taking that first step in aligning your restaurant with expert accounting services like Elevar Accounting.

FAQs

What are the key benefits of restaurant accounting services?

Specialized restaurant accounting services offer:

• Accurate tracking of food costs and COGS (Cost of Goods Sold).
• Real-time financial reporting (P&L, balance sheets, cash flow).
• Payroll management for hourly staff, tips, and tax withholdings.
• Tax planning and compliance to avoid penalties.
• Insights to optimize menu pricing and reduce waste.

How often should I reconcile my accounts?

Restaurants should reconcile bank statements, credit card transactions, and vendor invoices monthly. Daily reconciliation of cash registers and POS systems is also recommended to catch discrepancies early.

What are the signs my restaurant needs professional accounting help?

Consider outsourcing if you:

• Fall behind on payroll or tax filings.
• Struggle to interpret financial reports.
• Notice inconsistencies in inventory or cash flow.
• Spend excessive time on paperwork instead of operations.
• Face an audit or regulatory scrutiny.