Restaurant Accounting: Two Restaurant Bookkeeping Methods

You need to know what you’re spending, what you’re earning, and whether you’re turning a profit. Without these key pieces of information, you can’t expect to https://www.bookstime.com/articles/bookkeeping-for-franchises-the-complete-guide run a restaurant successfully. Not only can they help you when tax season rolls around, a restaurant accountant can also advise you on long-term finances.

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. Essentially, this is a refund of the employer’s portion of payroll taxes on reported tips. Only tips in excess of the minimum wage are eligible for the credit. Employees are required by law to report tips to the employer, who then includes the tip income on the employee’s Form W-2. Employers are required to retain employee tip reports and withhold taxes based upon wages and tip income received by the employee and to deposit this tax.

Restaurant-Specific Bookkeeping

These fixed costs typically make up the minority of your restaurant expenses. You must record precise amounts of money for every expense and all revenue. Rounding up or down by a few cents or dollars can add up over the course of a week or month and begin to affect your bottom line. Reconciling accounts will make you aware of incorrect deposits, cash variances, lost checks, and more.

Since your POS logs revenue coming in and much of the money going out of your restaurant (credit card refund, food cost, labor), you can use it to analyze sales and costs. You should review your prime costs, CoGs, inventory counts, and labor on bookkeeping for restaurants a weekly basis, not a monthly basis. These KPIs are controllable, but they can also easily get out of hand if not monitored. If you’re monitoring these figures on a weekly basis, you can patch any cost leaks without incurring too many damages.

Restaurant resources

You’ll also learn to take control of your prime costs and adjust menu pricing based on demands and inventory costs. New and experienced restaurant owners can use it, whether they’re beginners or experts at accounting and bookkeeping. It can also be integrated with payroll companies or QuickBooks for those who need more thorough accounting services. However, if you need in-depth accounting services, you will need to integrate with QuickBooks or choose another restaurant accounting software. Keeping track of your revenue is equally important as knowing your expenses.

• Restaurant owners need to keep track of when a bill is received, when it’s due, and that it actually gets paid in a timely manner.
• Getting the recommendations of other successful restaurateurs can help you determine if you’re prepared to handle accounting issues on your own, or whether you should consider hiring an outside firm.
• As you grow you will have to continually modify your bookkeeping system to meet your needs.
• Equally importantly, the P&L is a guiding post to drive business decisions such as when and where to cut costs, how to increase revenue or whether to change your business strategy.
• This software also creates photocopies of the invoices which can be referenced in the case of discrepancies or (everyone’s favorite) audits.

This website is using a security service to protect itself from online attacks. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. With everyone that goes into keeping your books up to speed, it might make sense to hire a qualified and accredited finance professional to help you.

Bookkeeping

Food cost, or liquor cost in bars, is an important expense ratio in the context of restaurant accounting. That’s because it’s calculated by taking the cost of all the ingredients needed to make the item once. It’s a relatively easy method of accounting because you don’t have to keep track of accounts that owe money. That’s why it’s the most frequently used method of accounting for restaurants. Financial software is designed to make restaurant bookkeeping simpler and more efficient for you as the business owner. Underestimating your weekly income could make it look like your business is losing money when it’s not.

• If you come from a predominantly culinary background, the thought of balancing your restaurant’s finances might seem overwhelming.
• Calculating prime costs will help you boost profit, increase efficiency, and cut costs.
• Calculating food costs will indicate whether you are making a profit from each item on the menu.
• The company’s primary goals are to make managing your restaurant easier, make more money, and deliver a positive experience to your customers.
• For example, cross-reference sales by menu category to determine the best time to run a half-price appetizer promotion.

This statement enables you to analyze the financial progress of your restaurant. With this statement, you’ll be able to determine where you are making or losing money. To put it simply, this is the process of preparing financial reports in which an accountant usually follows the accounting cycle of business transactions.

Step 3: Simplify the Complexities of Payroll Processing

Remember, servicing your commercial ovens and refrigerators will probably cost more than what you pay for your Frigidaire at home. The key to quickly calculating your prime cost in QuickBooks is having your chart of accounts set up properly. You need a parent account for both Costs of Goods sold as well as Payroll costs. Then you want subaccounts under each of those with the level of detail you desire. Any account that gets a statement with a beginning and ending balance can be reconciled. Account reconciliation ensures that you are looking at accurate financial reports.