Successfully closing out a period can start the domino effect for proactively operating a restaurant versus missed opportunities for the following periods. The purpose of the Period End Financial Close is to verify accuracy so you can understand where your money is going in order to make quicker, more educated business decisions. When Closing out the period, it should start with a review of the financial statements; The Profit & Loss Statement, The Balance Sheet, and The Cash Flow Statement. Within each statement, there are even more defined areas of focus that should pop out to an operator as a must-watch for success. In this episode of The Tip Share, RASI Director of Education, Brittany Ward discusses a few key items to concentrate on when conducting a Period End Financial Close: Gift Cards and Catering Deposits.
Closing Out Gift Cards:
Gift Card Accounts are one of the most important Balance Sheet accounts from a cash flow perspective. They have a direct impact on cash flow. During certain times of the year, gift card sales will increase cash flow. However, when gift cards are redeemed and labor and food are utilized for the sales, no cash is flowing through to the bank. Forecasting and understanding gift card utilization allows you to forecast and plan cash flow. This is especially relevant during slower months.
What causes Gift Cards to reflect an incorrect balance?
- Promotional hand out of Gift Cards that are not rung in and recorded through the POS
- Multi-Unit Gift Cards where they can be sold at one location but redeemed at another
- This means the liability is captured at one location, but the sales are captured at another
- Gift Card reloads not properly set up in the POS and tracked when recording sales
- Some POS Systems allow you to reload gift cards
- If your POS allows this, verify that all activity is captured on your daily sales summary reporting
- Additionally, ensure the activity is properly tracked when recording sales
- Some POS Systems allow you to reload gift cards
- Third-Party Gift Cards have fees associated that are not properly recorded
- If you use a third-party service that charges fees to sell your gift cards, break out the fees in order to properly track the liability vs the advertising expense
How to correct inaccurate balances in a Gift Card Account:
If the Gift Card Balance is overstated (positive above what will be redeemed):
- Pull the Gift Card activity from the POS
- Compare it against the Trial Balance to determine incorrect coding or activity
- Once the activity is identified, communicate the amount that needs to be reclassed to your Accountant
- If you have multiple units where gift cards could be redeemed, compare the consolidated Trial Balance against the consolidated POS reports to confirm the balance is accurate
If Gift Card Balance is understated (less than what will be redeemed):
- Pull Gift Card activity from the POS
- Compare it against the Trial Balance to determine incorrect or missing activity
- Once identified, communicate the amount that needs to be added or reclassed to your Accountant
- If you have multiple units where gift cards could be redeemed, compare the consolidated Trial Balance against the consolidated POS reports to confirm the balance is accurate
- If selling third-party Gift Cards, verify that all fees have been recorded and properly allocated
Best Practices within the Gift Cards Account:
- Verify that all Gift Card Sales are rung in through the POS prior to card distribution
- If the POS has the ability to reload gift card balances, verify that those sales are captured when entered sales
- If fees are associated with third-party Gift Card Sales, work with your Accountant to verify the proper setup
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Closing Out Catering Deposits:
Catering Deposits reflect money that has been received but will be utilized at a later time. Understanding the cash impact and flow around these events is critical to ensuring that labor, food, and material can be purchased at the time of the event. Proper tracking of the outstanding deposits allows you to plan cash flow as the events occur as well as track the balance to ensure that all money is received for each event.
What causes Catering Deposits to reflect an incorrect balance?
- Total tender amount closed to the catering deposit non-cash tender does not match the amount of the initial deposit
- Initial deposit is not recorded or miscoded when received
- Adjustments are not properly recorded for refunds or discounts added for the event
How to correct inaccurate balances in a Catering Deposits Account:
If the Catering Deposit is overstated (positive above what will be redeemed):
- Review the POS Reports to determine the total amount that has been rang into the Catering Deposit Sales Account
- Review the Trial Balance to determine any incorrect coding or activity
- Verify that any redeemed Catering Deposits were tendered correctly in the POS
- Once the activity is identified, communicate the amounts that need to be reclassed to your Accountant
If the Catering Deposit is understated (less than what will be redeemed):
- Review the POS Reports to determine the total amount that has been closed to the non-cash tender is not more than the initial deposit
- Review the Trial Balance to determine any incorrect or missing activity
- Verify that all money received for Catering Deposits was coded to the correct GL
- Once identified, communicate the amounts that need to be added or reclassed to your Accountant
 Best Practices within the Catering Deposits Account:
- Verify that the POS is set up properly to track both the initial Catering Deposit Sales and the Catering Deposit Redemption
- Ensure that the staff working these events has proper training. They need to understand what has been paid and what will be owed at the time of the event.
- Audit the Catering Deposit balance on a frequent basis to ensure that all activity is tracked and any discounts and/or refunds are properly recorded.
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