How To Master Restaurant Bookkeeping in Five Steps

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Restaurant bookkeeping involves financial and accounting practices that track your detailed costs and revenue. With organized financial practices and relevant, sophisticated reporting, bookkeeping can help you create a strong foundation for your business decisions. Bookkeeping involves day-to-day finances and budgets, but effective bookkeeping practices also can help you make operational decisions about food, labor, and overhead costs. 

With the many moving pieces involved in a restaurant, a seamless accounting process can be difficult. Add the unique features of the restaurant industry, from short-lived inventory to payroll including wages and tips, and bookkeeping becomes a fast-changing, time-consuming challenge. However, being able to easily access sales, inventory, and labor data allows you to quickly make informed decisions. To keep up with bookkeeping, many restaurant owners are turning to restaurant accounting software designed to organize and automate common bookkeeping tasks. 

Whether you are doing bookkeeping yourself or using an accountant, good bookkeeping habits can help you stay ahead of your competition. Understanding the five steps for restaurant bookkeeping will provide you with an essential overview to maintaining a healthy business.

Step 1: Record Sales Through Your POS Daily

Track Your Daily Sales

One of the most fundamental pieces of bookkeeping is tracking your daily sales and entering them into your accounting system. Daily sales can be broken down several ways, but probably the most important breakdown is cash and credit sales. You can also breakdown sales by food vs beverage, or any number of metrics.

Your sales data can be used to help you automate parts of your inventory management, updating inventory counts as food and drink items are sold.

How to Generate a Daily Sales Report

Modern POS systems can now automate tracking daily sales and provide you with a daily sales report. Review this report every day to ensure your numbers are accurate and address any issues if they’re not.

Integrating Your POS System with Your Restaurant Management Software

Your POS system probably has a daily sales summary built in. The next step is a POS system that is fully integrated with your back office and accounting. This integration gives you a connection between sales and your general ledger and accounts payable.

This automation replaces the need for manual data entry, automating general ledger entries and reducing the time and errors in your bookkeeping. With real-time financial information, you always have the most up-to-date information to understand inventory and labor data.

Step 2: Streamline Accounts Payable

How to Set up Accounts Payable

Recording, approving and paying your vendors – also known as your accounts payable – is both time consuming and error prone, but it is key to maintaining positive relationships with vendors.

To streamline the accounts payable process, some tools offer AP automation, an end-to-end AP solution. AP automation allows you to quickly capture paper and electronic invoices and route them through customized workflows for approvals. Once invoices are processed, payments can be sent directly and securely through the same dashboard. Automating accounts payable is a new tool for restaurant owners and managers that can save time, make invoice approval faster, and increase productivity. AP automation is particularly important for growing restaurants, because it makes it possible to scale volume and operations without greatly increasing the size of your accounting staff.

Step 3: Simplify the Complexities of Payroll Processing

Though paying employees may seem like a simple task, it’s actually very complex. Employee payroll is subject to regulation about tip reporting, state unemployment, payroll taxes, Social Security, and Medicare taxes. The level of liability for restaurant owners doing their own payroll can be high because filing payroll taxes incorrectly or late can lead to steep penalties.

Outsourcing your payroll is a surprisingly affordable option to ensure your accounting is consistent and reliable. By hiring a professional payroll service, you can not only ensure you are obeying regulations, but you can also save hours of your time every pay period.

If you choose to do your payroll in house, it’s wise to automate the process. If your POS system is fully integrated with your accounting system, you can automate payroll data collection and reduce any errors due to manual entry. Your labor data is directly transmitted to your payroll provider and labor accrual journal entries are created automatically.

Step 4: Reconcile Your Bookkeeping with Your Bank Accounts Frequently

Your restaurant makes a lot of different financial transactions, which are listed on your bank statements, credit cards, and POS. Bank reconciliation involves analyzing all your recorded financial transactions and ensuring your bookkeeping records match all bank accounts, payroll liabilities, lines of credit, loans, and credit cards. Reconciling your accounts ensures you have recorded all your transactions and financial reports accurately. While bank reconciliation can be time consuming, it is essential to have a full picture of your operations.

Because restaurants have a high number of transactions, monthly bank reconciliation used to take hours or days for a restaurant manager to complete. Today’s restaurant accounting tools make bank reconciliation a more efficient and accurate process by automatically matching your records against your accounts. This helps you track any incorrect deposits, lost invoices, or sales discrepancies. It also helps you catch any accounting errors through automated data transfer.

Step 5: Analyze Your Numbers to Stay in the Black 

The restaurant industry is known for tight profit margins, and without financial reporting, you are running your business blind. Analyzing your restaurant financial and operational data regularly is one of the keys to a healthy bottom line. By looking at a few essential reports, such as your profit and loss (P&L) statements and your prime cost (food and labor costs), you can accurately track your restaurant.

Review Your Profit and Loss Statement Daily 

Your P&L statement reflects the sales and costs of your restaurant during a given time period. The P&L reconciles items such as sales, food and labor costs, operating expenses, and your profits.

While running a P&L used to be time consuming, with restaurant management software, it’s now easy to run the report daily. Analyzing your daily or weekly P&L statement allows you to see the day-to-day strengths and weaknesses of your business, and take the necessary steps to effectively counter any issues before they become persistent problems. This is especially valuable for restaurants with multiple locations, as it can be run across all stores in a comparative analysis or drilled down to different categories.

Calculate Food Costs 

As one part of your prime cost, your food costs are one of the biggest expenses for a restaurant. Using your restaurant bookkeeping to stay on top of your food cost numbers helps accurately track Cost of Goods Sold (CoGS).

Your CoGS is based on your inventory, and it directly affects the profit you make on menu items. By calculating and tracking your food costs, you can help ensure a healthy profit on each plate and make informed decisions about menu price and menu engineering. Tracking your inventory and food costs can also help you maintain more accurate inventory management, minimizing waste and theft.

Calculate Cost of Labor

Finally, bookkeeping tools help you keep track of your labor costs, the second part of your prime cost. An integrated restaurant software pulls labor and sales data from your POS, allowing you to access real-time labor metrics and identify historical trends. With reports in hand and future sales projections, you can optimize labor by leveraging forecasting or smart schedule tools. Calculating your cost of labor can also help you see where you may need to make changes, such as implementing restaurant scheduling software or investing in more staff training.

Conclusion

Restaurant bookkeeping can be challenging but learning the basic practices can be simple. Tracking your costs, inventory, and revenue through bookkeeping can help understand your business from the ground up. And when you understand your foundation, you can make impactful, long-term changes that add to your bottom line and help your business grow.

Restaurant365 incorporates restaurant accounting software and restaurant operations software into an all-in-one, cloud-based platform. For 12 tactics you can start implementing today to streamline your restaurant accounting, download the accounting e-book, 12 Crucial Functions for Successful Restaurant Accounting.