When you got into the restaurant business, you must have thought it’s a fun industry with food and beverages, and you get to make people smile with your delicious and scrumptious food. It may seem relatively simple, but underneath it all, there is a complex mechanism going on involving numbers and accounting that you may not be fond of. And one of the most vital parts is restaurant accounting.
If you want a successful restaurant business, you need an effective accounting and bookkeeping system. Without it, you will fail to keep track of all your expenses and cash flow. But, restaurant accounting can be made fun and easy by adopting ways to simplify everything, as discussed in this article.
7 Tips on Effective Restaurant Accounting
Don’t know what you are doing wrong in your restaurant accounting? Here are the top 7 tips on effective restaurant accounting and increasing profits.
1. Understand your Accounting Needs
The first step to effective restaurant accounting is to understand your accounting needs. Restaurants have some basic accounting needs that need to be identified in order to increase profits. If you are just starting out your restaurant business, hiring an accountant is a great way to make sure your accounting needs are met, and everything is done correctly.
You need professional help in understanding and interpreting information on your accounting ledgers and books. A professional accountant can also help you make sure your restaurant is complying with local tax laws and general regulations.
2. Breakdown Items to Simplify
Whether you manage your books yourself or outsource accounting, you need to simplify restaurant accounting by breaking it down into parts. You can either use accounting software or consult one of the best accounting firms for up-to-date and simplified accounting.
Even if you are using old fashion pen and paper, you need to breakdown your accounting into the following:
- Food/ Beverage Sales
- Food Inventory cost
- Cashier Summary
- Cash Receipts Worksheet
- Operating Expenses (Utilities, Payroll, etc.)
3. Pay Attention to Sales
Restaurants have hundreds of individual sales every day, and most of them are credit card transactions. Most banks require businesses to close these transactions every day, i.e., you are required to deposit these credit card receipts every day and have the bank transfer your money. These daily deposits can be a headache and require diligent bookkeeping.
Therefore, you need to keep track of all these transactions for an accurate picture of your daily sales. Daily sales are important because they affect payroll and inventory.
4. Record All Expenses
Restaurants have a lot of expenses ranging from daily expenses like daily food groceries to weekly and monthly expenses. To ensure profitability, you need to keep these expenses under check, and for that, you need to record these expenses accurately.
For example, you might have bills coming in from the vendors every week, so you need to pay these bills on time and record every day. This will not only help you keep track of all your expenses but also prepare a good budget for the future and stick to it.
5. Produce Regular Reports
Producing regular financial reports is essential for restaurants and businesses in the food industry because of the size of their daily sales. These financial reports will let you get an idea about what is happening behind scenes and weak areas that need to be improved or get rid of.
Regular financial reports will also help you with business growth and ways to increase revenue generation. Pay attention to profit and loss numbers, total sales and expenses, and payroll.
6. Keep track of Inventory
Not keeping a regular check on your inventory can result in huge business losses and even bankruptcy. This is because restaurant inventory includes food items and beverages along with labor and storage space, which is by far the largest expense for restaurant owners. Other non-perishable items in your inventory include paper towels, kitchen appliances, cleaning supplies, and also tableware, which also forms a significant portion of your expenses.
Your inventory is essential for you to calculate the total expenses and revenue generated. To calculate your bottom line, you should use the food cost percentage formula as follows:
(Beginning Inventory + Purchases) – Ending Inventory
Total Food Sales
- Beginning Inventory: dollar value of inventory purchased at the beginning of the week/ month.
- Purchases: dollar value of purchases that weren’t part of your beginning inventory.
- Ending Inventory: dollar value of inventory left at the end of the week/month.
- Total Food Sales: dollar value of your sales (weekly/monthly)
7. Outsource Accounting
You can manage your accounts yourself or opt for in-house accounting, but there are factors associated with it: cost and liability. A full-time in-house accountant has a salary of around $60,000/ annually. However, outsourced accounting services only cost around $2,500 – $5,000 per month, depending upon your business needs.
By outsourcing accounting and bookkeeping firms in Dubai, you will also avoid overhead costs like payroll taxes, medical benefits, etc. These professionals provide high-quality services and expertise at a low cost and also minimize the risk of fraud associated with your restaurant. So, make your life easier by outsourcing accounting services and save money.
Enjoy a Profitable Restaurant Business!
These are some of the essential tips for effective restaurant accounting. It may feel overwhelming, but don’t panic as you can always follow step 7 and consult bookkeeping and accounting firms for help. Just follow these steps, and you can have a good and clean accounting system at your restaurant. By following these steps, you can easily manage your food expenses and enjoy higher profits – every restaurant owner’s dream!