Owning your own restaurant is a challenging but rewarding experience. The seven out of 10 single unit restaurant owners can attest to this fact.
It can be very profitable, too. The restaurant industry racks up around $766 billion per year.
Is your slice of that $766 billion being accurately managed? If not, money could be falling through the cracks and your business could suffer for it.
Margins can be thin in the restaurant business, but with our 10 restaurant accounting tips, you can feel confident managing your money.
Get a handle on your cash flow — keep reading and take notes!
1. Learn the Lingo
Restaurant bookkeeping can be daunting. It’s more fun to come up with a new recipe than to face all of those facts and figures.
One of the best ways to learn accounting is to learn the lingo. Once you have the vocabulary to understand and explain what’s happening with your bottom line, you can begin to organize your finances correctly.
Terms like prime cost, in the red/black, or the exact definition of revenue go a long way towards making your money manageable. Look up some basic definitions, like accounting terms for dummies, and start applying them to your accounting practices.
2. Keep Up With It Every Day
Be diligent when keeping a record of what money comes in and goes out of your business. This will give you a clear overview of what your cash situation is like.
In a report like this, accuracy matters, too. You might be tempted to round up but that will throw off your entire system.
You’ll need to be precise to ensure you pay your fair tax rate, know how much to invest in your restaurant, and get a heads-up if you’re running low on funds.
3. Use the Right Tools
Are you using a dusty old notebook with barely legible handwriting? Worse — did you spill some sauce on it and now all of March’s numbers are wiped out?
That’s no way to run your restaurant, especially when there are so many great tools you can be using.
Start with your POS system. Your POS system can be part of your daily expense and income tracking and help with your daily restaurant accounting.
Using a digital, cloud-based ledger is another way to get an overview of your finances. Something like even Google spreadsheets is easily searchable and accessible from anywhere.
4. Make Your P & L Statement
Other businesses might make a profit and loss statement quarterly or even once a year but a restaurant profit and loss statement should be made on a weekly basis.
The reason why the restaurant industry is different is because the product moves so fast. You’re using your resources every day and not only that, unused food spoils and impacts your bottom line.
It’s a smart idea to take a look at your profits and losses weekly and then do a bigger overview once a month. This way, you’ll see where there’s an opportunity to make more money or cut unnecessary expenses.
5. Know Your Expenses
Speaking of expenses, do you really know yours?
If you’ve been reluctant to do a deep dive on what goes into running your restaurant every day, here’s where you need to stop and get specific.
Restaurants are unique in that they have expenses that are used up every day. From napkins to produce, making rough estimates only hides important details you can use to be more efficient.
Take a look at your weekly bill. Are you paying some of them on autopilot?
Once you’ve mastered the specifics of your expenses, don’t rest on your laurels. Re-evaluate them every quarter to see if they’ve changed.
6. Outsource Your Payroll
This might seem like an unnecessary cost. It feels like doing the payroll should be part of regular accounting for restaurants.
There’s a good reason why we advocate sending your payroll to someone else.
Payroll taxes and laws are constantly changing. Keeping on top of it is a headache and one mistake can cost you a lot of money.
While it costs you a bit of money, it frees up more of your time. See if you’ve got the cash to outsource your payroll.
7. Consider Tips
Tips are another unique aspect of the restaurant industry. You still need to factor them into your accounting even if they’re not considered restaurant income.
The reason for this is that you and the employee are still required to pay taxes on tips. They must report them for this reason although you wouldn’t consider them part of restaurant revenue.
8. Pay Your Taxes
Your restaurant’s income is subject to several taxes.
Employee payroll involves payroll taxes, social security, Medicare, and state unemployment taxes. Sales in the restaurant itself are considered retail and subject to state and local sales tax.
Then you must pay federal income tax as well.
All of this seems overwhelming but it just emphasizes the importance of understanding how much is coming in and going out each month.
9. Ask Other Restaurant Owners
Still stumped on how you should run things in your restaurant? Why not ask other restaurant owners what they do?
You might gain more insight into things you were doing wrong but also what you got right.
Tap into your local community for information regarding their restaurant bookkeeping practices. There’s a wealth of knowledge out there for you to discover, all you have to do is ask.
10. Hire An Accountant
If you’re still feeling overwhelmed or your business has grown enough to justify the expense, why not hire an accountant?
Let them take over the day-to-day bookkeeping issues and free up your time to focus on running a successful business.
Restaurant Accounting Made Simple
Restaurant accounting doesn’t have to be a struggle. While you might feel daunted at first, once you get everything in order, you’ll find that it can even be fun!
Once you learn where you can save, you can start to dream of where you can spend and re-invest in your dream.
Learn more about running a successful business — check out our small business advice blog today for the latest information!