Accounting is no easy task, even for a professional accountant. It’s no surprise that even seasoned restaurateurs find it difficult to calculate all their checks and balances. Things like calculating prime costs, creating a profit and loss statement, and restaurant accounting can be very confusing, if not intimidating. After all, all you ever really wanted to do was to serve great food; nobody said anything about endless calculations.
Which brings us to -
The Essence of Restaurant Accounting
Even though it can be very complicated and time-consuming, restaurant bookkeeping is a sure way to achieve a finance-driven restaurant backed by smart business decisions. This helps with restaurant management and also enables you to navigate ever-increasing threats like price-inflations, fierce competition, and, in some cases, fraud. We will take a closer look at the benefits of restaurant accounting and bookkeeping later. In the meantime, let’s look at what you will gain from this article as a whole.
This article doesn’t promise to make any restauranteur or business owner anything close to a chartered account. However, by the end of this piece, you should be able to work with any accountant comfortably. Also, you will know about restaurant accounting software out there and the best options for your business.
In all, you will learn the following:
- The point of hiring an accounting expert
- How to select the right accountant for your restaurant
- Restaurant bookkeeping basics - processes and reports
- The top restaurant accounting software
- Using a POS to complement your accounting efforts
So if you’re ready to learn how to talk accounting with the professionals and calculate your financials, let’s begin.
Why Hire an Accounting Expert?
Ever heard the old saying? “If you spend your life trying to be good at everything, you will never be great at anything.”
The fact remains that unless you were a chartered accountant in the past life, you will have difficulty with accounting principles and putting bookkeeping tasks together. Hence, being your own accountant because you watched a couple of youtube videos is the equivalent of hiring a foody DJ to be the head chef of your restaurant. Jamais!
As the saying suggests, you will do far better if you delegate or outsource your restaurant accounting to a trained and experienced restaurant accountant. Whether this accountant will be a part-time, in-house, or an accounting firm is a decision you need to consider carefully.
The right choice will either free your time to focus on the things in your business that matter most. Or you can make the wrong decision and have a nonproductive staff that only raises your cost and makes a difficult situation worse.
The right restaurant accountant is experienced in preparing the necessary accounting states and bookkeeping for businesses in the restaurant industry. You can expect the following functions from an experienced restaurant accountant:
- Prime cost analysis
- Creating forecasts and budgets
- Financial analysis
- Auditing
- Sales recording
- Handling payable accounts
- Tip reporting
- Reconciliation
- Financial reporting
- Business modeling
- General bookkeeping
The list goes on, but you get the point. It would be great if you could do these tasks by yourself, but Pareto’s law of productivity, also known as the 80/20 rule, indicates this isn’t advisable. Especially when you consider the fact that only 20 percent(surely your accounting skills aren’t part) of your input accounts for 80 percent of your outcomes. Often, you will consider the cost, but restaurant accounting shouldn’t be expensive. Even when you hire a trained expert, hence, let’s look at how to pick the right accountant for your restaurant.
How to Select the Right Accountant for your Restaurant
You should know your options when considering accountants for your restaurant. Though you might like to begin with your standard restaurant interview questions, there are three primary options of an accountant you need to consider first. These are:
- Outsourcing to a dedicated and small accounting firm
- Contract a full or part-time independent accountant
- Accounting tasks outsourced to large accounting company
As you ponder these three options, make sure to keep the following things in mind.
CPA vs. Bookkeeper
These two are different roles. Hence, you get different values and functions from the two. A bookkeeper is more simplified and task-focused. A CPA’s duties are more in-depth and involve tax consulting too.
Accounting Charges
You will find different rates depending on experience and skills. However, most accountants that are into restaurant accounting charge by the hour. Therefore, you want to cut down costs as much as possible. As such, don’t delegate any menial tasks to your restaurant account. For such tasks, you can delegate to a junior accountant and reserve the expert-level operational analysis for your CPA.
At this point, it’s clear why you should hire a restaurant account instead of going for a general accountant. A restaurant accountant will do more than a simple restaurant bookkeeping. They already know how good a restaurant’s financial statements should look. And in case of any irregularity, they are better at spotting cost leaks, trends that call for immediate interventions.
Restaurant Accounting Basics - Processes and Reports
Once you hire an accountant for your restaurant, it doesn’t mean you can walk away from all your accounting issues. You still need to know alongside your accountant on particular accounting and bookkeeping tasks. Therefore, you can’t be completely clueless about some basic accounting terms and their meanings.
Below are some of the essentials of restaurant bookkeeping and accounting.
Reports
Reports are part of daily business life. Whether you are in the restaurant or tech industry. The restaurant for your business has to be kept on a daily, weekly, monthly, and annual basis. These are essential for keeping the business’s financial standing in check. You get to know how much you spend on utilities, employee payments, restaurant entertainment, and other similar expenses.
Here are some of the reports that are important for restaurant accounting.
Daily sales report - This shows two main things. These are:
- The amount of money the restaurant made that day
- The amount of money the restaurant comped that day
Profit and loss statement - This statement indicates the following:
- The overall profitability of the business over specific periods
- The points within the business that need attention and decisions
Cash flow statement - This also displays the following information:
- How much money the restaurant has on hand at a particular moment
- Either the business generates enough cash to remain afloat or will need external funding
Revenue report - It indicates the following:
- The entire revenue of the business
- The average revenue per customer, table
- The average total number of table and receipts
Chart of accounts - This shows you the following;
- An overview of reports like cash flow, balance sheet, your land profit, and loss statement.
- Serves as a reference point for comparisons with food industry averages
Balance sheet - This sheet shows two main things
- Your debt load
- The real financial position of the restaurant
The Top Restaurant Accounting software
You and your account will make the most of your time through the use of restaurant accounting software that takes care of some of the complex calculations. This software connect seamlessly with the top POS systems for restaurants and automate the collection of important financial transactions and data.
Hence, you don’t have to go through long hours of data entry and its associated errors. In the list below, you can find some of the most reliable restaurant accounting software that will readily integrate with your restaurant POS system.
- Quickbooks for Restaurants
- SHOGO
- Xero
- Sage
A point of sale system also helps with other restaurant management tasks like reporting, keeping perfect restaurant seating, and employee management. However, it’s just like any other tool. The end results really depend on the user.
But do the two systems work together?
Using a POS to Complement your Accounting Efforts
Your POS is the James Bond of your accounting system’s Q. If you are a fan of 007 (and we hope you are), you know your accounting system does all the heavy lifting with organizing and tracking financial information. But it’s restaurant POS that’s the superstar and does more than your average cash register. With it, you can do the following with the collected data:
- See trends in customer behavior
- Optimize employee usage
- Analyze menu performance
- Obtain financial screenshots
- Create cost and sales reports
These go a long way to help with your cafe accounting and bookkeeping efforts.
Conclusion
As earlier mentioned, your chances of coming out of this article, a full-fledged chartered accountant, are slim. However, we hope you have learned valuable accounting facts through reading. At the least, this article would have pointed you in the right direction for getting your restaurant accounting done the right way. The entire process, though complex, is easy to accomplish with the right help. Whether this help comes in the form of a professional accountant, a restaurant POS system, or accounting software.
