3 Simple Steps to Achieve Operational Efficiency

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Restaurant operator reviewing checklist

Considering the uncertainty of the past year and the unprecedented changes that the hospitality industry has undergone due to the pandemic, we’ve continuously focused on the detailed specifics of restaurant accounting best practices to ensure financial success, even during trying times. While detailed specifics are a must-have in your accounting arsenal, it’s equally as important to look back and rely on the fundamentals to double-check that your foundation is solid. Here’s how to get back to the basics of restaurant accounting with three simple yet effective steps that will set your restaurant on the path to financial success, and help you achieve operational efficiency!

How to increase operational efficiencies effectively & consistently:

While every restaurant organization is unique, operational efficiency generally breaks down into the following three critical steps:

  1. Define Team Roles & Responsibilities
  2. Require Timeliness & Accuracy In All Operational Facets
  3. Review Restaurant Financial Statements

Step 1: Clearly define team roles & responsibilities

Like a sports team, everyone has a role within the restaurant and must play their part to succeed. Restaurants must utilize their entire team and depend on each individual as part of the whole. Clearly defining each team member’s roles and responsibilities is key to helping your organization move forward. There are two ends of the spectrum within this step; the Independent Restaurant Owner and Larger Restaurant Groups with multi-units or multi-concepts. It’s essential to consider what your unique organization looks like and adjust roles to your own specific needs.

Independent Restaurant Roles & Responsibilities

As an independent restaurant owner, it’s essential to recognize that you can’t do it all. It’s critical to rely on your team members and their unique talents so the business can run smoothly. Aim to understand what roles are needed and structure them to benefit both the employee and the restaurant. In the same sense, while you have multiple players on your team, each individual still needs to come through with the assist when and where required. Ideally, your bar manager should be savvy enough in kitchen purchasing where they can jump in to acquire invoices if the kitchen is swamped. A team mentality and approach always win the day!

From a financial perspective, many independent restaurant owners/operators are hesitant to let their staff view their financial data; this is one of the most significant mistakes independent operators make. Instead, trust the team you have and hold them accountable while giving them more visibility into the business. The more transparency you can provide to your staff, the more they will understand the end goal and feel part of the success as you reach it.

Restaurant kitchen team

Large Restaurant Group Roles & Responsibilities

Switching gears, let’s focus on defining roles within larger restaurant groups (maybe 8 or 10 restaurants). Managing larger groups, operators take on more of a coaching role. While there’s still the need to delegate, you’ll often find there’s an addition of higher-level functions, i.e., Director of Operations, Controller, etc. These roles hold the other team members accountable for the lower-level tasks, for which your core team has always been responsible.

From a financial perspective, it’s imperative to make sure you’re not going back into each unit trying to make corrections when sending out financials. The coach’s job is to develop their management team to run as smoothly and efficiently as possible. Any mistakes occurring can be identified and coached through education to avoid the error in the future.

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STEP 2: Ensure timeliness and accuracy is an operational standard 

A clear understanding of roles and responsibilities is essential because it empowers operators to perform tasks quickly and accurately. Efficiency comes with knowing what and when specific tasks should be performed (especially considering the last year’s roller-coaster with additional funds and loans you may have applied for; timeliness and accuracy are of the utmost importance).

At RASI, our clients typically run on one of two workweeks, either Monday-Sunday or Wednesday-Tuesday. For example, in a Monday to Sunday workweek, the team must complete all operational tasks by Monday. This timeframe enables operators to have a Profit and Loss Statement by mid-week, offering the opportunity to make quick business decisions. Additionally, you can better understand your restaurant’s financial position when you’re consistently reviewing your financial statements.

In addition to restaurant financials, it’s important to remember four simple concepts that cannot function without timeliness and accuracy. Tracking these items throughout the week helps avoid any unknowns on your P&L at the end of the week.

  1. Pay your people: Payroll is one of the most critical aspects of any business. Properly paying your team creates trust, longevity of employment and avoids costly payroll compliance issues.
  2. Pay your vendors: Instruct your team to count purchases throughout the week as they happen. RASI offers budgeting tools such as the declining budget, which tracks spending throughout the week. When you submit invoices and purchases on the day they occur, you can track spending in real-time.
  3. Pay your taxes: Impounding your taxes daily (setting them aside each day) until they’re due effectively manages cash flow because it eliminates spending money that isn’t yours. Additionally, it ensures your CPA won’t need to make any adjustments at Year-End.
  4. Count your inventory: Counting inventory is the best way to represent your true usage so you can purchase product in line with your spending. Conversely, it’s challenging to get accurate reads on waste, theft, and spoilage tracking without consistently counting inventory. 

STEP 3: Perform frequent restaurant financial reviews

Reviewing the financial documents that immediately affect your restaurant every week is a best practice for a clean bill of financial health. These include your P&L and your Balance Sheet. When reviewing your restaurant balance sheet, you can catch mistakes like over-collecting on credit card tips or unintentionally withholding money from staff (payroll errors). It’s also a great chance to review your gift card liabilities. If mistakes on your Balance Sheet mistakes get out of hand, it can be challenging to get back to balance and keep on the right track. Keep in mind; your management team impacts your balance sheet more than you may realize through things like credit card tips payable, house bank (how much money is sitting in your restaurant), and lastly, credit card purchases. It’s essential to audit that these top 3 items are in line when reviewing your balance sheet. Auditing allows you to understand the impact of your management team and truly hold them accountable.

A Sales and Labor analysis report is also a great addition to this list, so you can forecast and schedule appropriately. Lastly, you should review your Statement of Cash Flow at the end of each Period. The Cash Flow Statement represents how the Balance Sheet and P&L work together to impact your cash and operating accounts. It shows you where your cash is coming from and where it is going within a specific period of time.

Keeping up with regular financial reviews prevents you from needing to go back and attempt to remember those small yet critical details from a month ago and enables your business to close out the period in a positive manner.

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