In Nike’s 2017 Breaking2 project, every member of the Nike team, from the runners and the battery of Nike scientists and designers, to the trainers and nutritionists, had their sights set on a singular goal – to break the 2-hour marathon barrier. Each one of the thousands of Nike Breaking2 team members had a role to play in achieving that goal.
Similarly, in the restaurant game, there are three main objectives:
- Increasing revenue
- Optimizing labor
- Controlling food costs
And every player, from the restaurant chain’s CEO to the busboy at store 15, needs to know their role in achieving these objectives. Anyone not doing their part to achieve one of the big three objectives is perceived as a cost center, and worse yet, a drag on the business.
Typically, there is one department in the restaurant industry that is perceived as a cost center – the accounting department. However, it’s the accounting department that produces the reports by which everyone is ultimately measured. Think of the accounting department as the clock in a marathon. It tells you whether or not you are on pace to meet your overall goal. What value would it be if you’re the runner trying to meet a goal but don’t see the clock until after the race has ended?
Likewise, how can restaurant managers be expected to hit their goals when they see the clock two weeks after the end of their four-week marathon?
Just like giving runners constant visibility into their time/progress, allowing them to make adjustments to their cadence and pace in order to achieve their running goals, restaurant managers need constant visibility into their overall prime costs, allowing them to make adjustments to labor, spend extra effort to boost sales, or tighten oversight on food in order to achieve their goals.
If your controller and accounting team are using generic accounting software such as QuickBooks, QuickBooks Online, Dynamics GP (Great Plains), Sage Intacct or NetSuite, it’s not possible for them to provide the real-time visibility that your operations team and restaurant managers need and therefore makes your controller position a non-strategic position within your company.
So How Can the Accounting Team Support Operations?
First, the accounting team pulls data from your point-of-sale system. The sales data creates a daily sales journal entry which represents one-third of the prime cost report (Sales/COGS/Labor), making daily cash reconciliation possible.
Next, the accounting team pulls daily labor data to create a daily labor accrual entry which is the second one-third of your prime cost report. This not only tells the story of your hourly workers, but also the story of salaried employees (such as managers) and also the burdened labor costs (i.e., taxes, benefits, and insurance). It is definitely good to monitor your sales per labor hour or transaction per crew hour (TPCH) but going back to the marathon analogy, that is like only measuring a one-mile split time, without understanding how far ahead or behind you are of hitting your ultimate marathon goal.
Using an accounting solution that imports all of your POS data daily is absolutely the most helpful thing your accounting team can do to provide the operations team with the information they need, when they need it.
Finally, the remaining one-third of your prime cost report is your cost of goods sold (COGS). And the second best way for accounting to help operations is to track the company’s inventory inside of your accounting software. Everything your restaurant business does with inventory carries the same level of importance as cash moving in and out of your bank account. In other words, think of inventory as cash on your shelves. Every time you acquire it, count it, transfer it or even waste it, it creates a journal entry in the accounting software. So, why not track inventory inside the same tool the accountants use so they don’t have to manually create these journal entries? Then, operations can access the information instantly. Without the added burden of manually creating journal entries and then manually providing the reports to operations, your controller and accounting team has more time for strategic initiatives.
Simplifying problem solving
Despite your employees’ or vendors’ best efforts, human errors are bound to happen. Discrepancies are inevitable. The smartest operators are those who can prioritize them and get to a resolution on the big ones quickly. When you can simplify a process or eliminate redundant systems, then identifying anomalies doesn’t require costly human reconciliation efforts. And problem-solving the identified anomalies is painless because a user can simply drill down into the source transactions and instantly see the issue.
For example, if there’s a discrepancy in an invoice and a district manager or store manager is able to drill down from a daily prime cost report into a scanned image of the original invoice in advance of the invoice hitting their stores, that’s an extremely powerful advantage.
Running a growing, multi-unit, profitable restaurant is challenging. It requires a team of people from many departments dedicated to a common goal, with every person understanding their part in achieving that goal. This especially includes your accountants. They can and should be strategic leaders in helping you increase your revenue, control your food costs and optimize your labor.
Here’s an example from one of our own customers: Bill Valentas, the CFO at Freddy’s Frozen Custard and Hamburgers, which has 25 corporate locations and more than 350 franchise locations, told me recently that instead of his team spending time creating reports like they used to before using Restaurant365, they now spend that time asking strategic questions and thinking about how to improve the business based on the data that is produced automatically. It has been a complete paradigm shift for the company.
Eliud Kipchoge, the world’s best marathon runner and the ultimate winner in Nike’s marathon challenge, missed the two-hour mark by 25 seconds, but he broke the world record time by two minutes and 32 seconds. By all accounts, Nike was successful in its goal to push beyond what was previously considered to be a barrier. When I reflect on Kipchoge speeding along the Monza Formula 1 track, his legs moving rhythmically as the other Nike Breaking2 team members cheer him on, I think of him as the store manager and the other team members as the department heads and the restaurant workers, because if the restaurant manager is successful, everyone wins.
Our goal is to help you be successful. Because if you’re successful, all of us win.
If you’d like to know more about how Restaurant365 can meet your restaurant-specific accounting needs, read our latest e-book, 12 Essential Functions Lacking in Your Generic Accounting System.
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Morgan Harris is Co-Founder of Restaurant365, an enterprise accounting, back office, and reporting solution specific to the restaurant industry. Harris has worked in accounting since 1998 and earned his CPA license while working with PriceWaterhouseCoopers. In his role at Restaurant365, Harris supports large accounts, strategic partnerships and executive-level sales. Harris is passionate about software and its potential to help growing restaurant businesses.