The Ultimate Guide To Restaurant Accounting
Getting a restaurant up and running is a challenge. Keeping a single establishment or franchise profitable over months and years is even more so. What separates the restaurants that quickly fail from those that have been established for an extended period?
Sales & Expenses
Point-of-sale (POS) Transactions
Accounts Payable & Cash Management
Taxes & Compliance
Restaurant Accounting Formulas
Payroll Processing for Accounting
You could argue – and we’d certainly agree – that taking advantage of a restaurant accounting software and service is the most significant single factor determining long-term success. As the leader in automated, expert accounting for the restaurant industry, RASI has put together an ultimate guide on restaurant accounting as an educational resource for you:
- Understanding the different types of accounting for restaurants
- Key factors to consider in restaurant accounting
- Determining efficient methods for cost analysis, accounting cycles, and more
- Grasping the importance of payroll for accounting in the restaurant industry
- And much more
With comprehensive and best-in-class restaurant accounting services, RASI can help any sized restaurant – from small, single eateries to nationwide franchises – make their accounting system work for them
Accounting in the restaurant industry generally falls into one of three categories:
- Software-based accounting system.
- Internal accounting practices – Controlled by a restaurant’s management team or financial personnel.
- Tech-enabled, cloud-based platforms – RASI’s restaurant accounting platform combines the best qualities of the first two methods. We offer our restaurants complete control using streamlined software paired with the expertise of compliant, continually updated accounting tools, resources, and a team providing continued education to ensure financial goals are met.
Before deciding which route to take with the accounting for your restaurants, you should determine your restaurant’s specific goals, factor in budgetary considerations (how much you’re willing to spend), and see if a 3rd-party solution is a good fit.
Let’s dive into the first important step – factors to consider when setting up your restaurant’s accounting system!
Accounting for Restaurants: Key Factors to Consider
Let’s lay the foundation for accounting in the restaurant industry; the following factors are essential for any operator to understand restaurant accounting. If you can grasp these ideas, it’ll make your decision that much easier for outsourcing!
Sales & Expenses:
The two fundamental elements of any budget, sales, and expenses, ultimately help determine if your restaurant is profitable. Sales include food & merchandise sales, reward program revenue, and other similar transactions. Expenses, meanwhile, encompass any costs associated with running your restaurant: food, labor, taxes, accounts payable, rent, etc.
Point-of-sale (POS) Transactions:
POS transactions are recorded at the exact time and place they occur. These types of restaurant accounting transactions add up quickly, and it helps to have a POS integration system for any establishment with multiple locations, a merchandise portal, and other revenue streams that stream directly into your accounting system.
Hitting your operational targets and creating a precise budget is paramount for success in the restaurant industry. This is only possible through streamlined financial reporting that spits out real-time data for operators to make timely business decisions based on facts and numbers.
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Accounts Payable & Cash Management:
What’s the current situation of your restaurant’s cash on hand? How about money coming in from accounts receivable or money going out for accounts payable? Increasing timeliness and accuracy surrounding your Accounts Payable helps you proactively manage your accounts payable and cash position. Figuring out how to track cash management is one of the more overlooked aspects of restaurant accounting; you should always have complete visibility into your cash flow to make more educated business decisions.
Taxes & Compliance:
You can’t forget about Uncle Sam here. When performing accounting for restaurants, it’s critical to factor in taxes and compliance. This category includes everything from wage garnishment to payroll tax returns to 401(k) reporting to industry legislation and regulations. Forgetting these factors can mean crippling penalties and fees in an already low-margin business.
Every chef strives to optimize their menu, but many don’t know where to begin. The basis for all effective menus begins with proper inventory management. Understanding the correlation between menu items and contributed sales, proper purchasing habits, and how inventory all affect the successful management of COGS can be overwhelming without a restaurant accounting platform that addresses each of these areas.
Restaurant Accounting Formulas:
For the diehard financial analysts and accounting geeks out there, the importance of knowing basic and advanced accounting formulas is hard to overstate. Check out our comprehensive formulas page for accounting in the restaurant industry – tons of helpful information in there!
The Accounting Cycle: Focus on Frequency
Regardless of what type of accounting for your restaurants you ultimately decide, here’s a recommendation on the most successful accounting cycle: weekly works best!
Some restaurants prefer to work on monthly accounting cycles, but we recommend the methodology of comparing apples to apples rather than apples to oranges. What does this mean? A monthly accounting system is an apple-to-oranges approach. The number of days within each month varies; each month begins and ends on a different day.
Within a thirteen 4-week period, or a 4-4-5 accounting cycle (for each quarter, the first financial period is the first four weeks, the second period is the following four weeks, and the third period is the final five weeks), you’re ensuring all your data is streamlined to compare apples to apples because you’ve consolidated your months/days into very specific periods.
Additionally, we recommend an across-the-board method of weekly restaurant accounting reviews for all your data so that all your revenue, costs, expenses, payroll, and other reporting is consistent every week, every year, for all your restaurants… apples to apples!
The Importance of Payroll Processing for Accounting in the Restaurant Industry
Transforming payroll processing from a necessary function into a tactical, operational tool is one of the most underrated aspects of strategic restaurant accounting. Accurate, efficient reporting is a necessity to master this strategy. For larger restaurants and franchises, in particular, having a restaurant accounting system with a built-in payroll platform keeps all your data streamlined.
Additionally, the game has completely changed for operators paying their people properly when it comes to payroll compliance. RASI provides best-in-class payroll features with a dedicated team who understands and maintains restaurant industry compliance with Local, State, and Federal Mandates, including Tip Credit, PTO, Regular Rate of Pay, and Surcharge in all states!
Controlling labor costs in this new environment will require a more strategic, compliant-based approach – Can you identify, down to the shift, where you are losing money in comparison with sales and recognize specific job codes that need adjustments to make the most profitable impact when creating schedules? Utilizing an outsourced restaurant bookkeeping, accounting and payroll platform can provide all these actionable insights and more!
Getting Started with Accounting for Your Restaurants
OK, it’s time to implement a restaurant accounting system. Now that you have a basic understanding of the building blocks and foundational concepts that drive accounting in the restaurant industry, you might be wondering how to get things up and running.
RASI works with various point solutions to ensure your back office has the tools and resources to handle the unique challenges associated with restaurant accounting. With a well-rounded solution, you can manage labor compliance, benefits administrators, lenders, marketing solutions, and more!
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We’re here to help get your restaurant accounting off the ground whenever you’re ready! Whether starting from scratch or needing a wholesale change to your outdated platform, RASI offers the best solutions that align with any budget. To get started, request a demo or send us your questions today!