Mastering Restaurant Bookkeeping in 5 Simple Steps

restaurant accounting POS laptop

How to Do Bookkeeping for a Restaurant in 5 Simple Steps

Restaurant bookkeeping involves financial and accounting practices that track your business’ 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. Not only will this help you complete restaurant accounting tasks like settling deposits at the end of the day, but it can also be useful for long-term financial analysis. 

Your sales data can be used to help you automate parts of your inventory management with restaurant inventory management software, updating inventory counts as food and drink items are sold. Calculating labor costs as a percentage of sales and other labor cost metrics rely on sales data. Finally, information about your sales can be analyzed to spot historical trends, create future sales projections, and inform decisions about restaurant scheduling.

How to Generate a Daily Sales Report

Most modern Point of Sale (POS) systems can now automate tracking daily sales and provide you with a daily sales report. This frequent sales summary can help you address small issues as they pop up and allows you to respond before the issues become persistent, long-term problems.

Integrating Your POS System with Your Restaurant Management Software

To use your POS system as a sales tracking tool, consider using a POS system that is fully integrated with your restaurant management software. Although there are many different software solutions, without fully integrated tools, you may be required to create workarounds with manual imports and exports, a frustrating roadblock to streamlining bookkeeping.

If your POS system and restaurant operations software are fully integrated, your restaurant accounting software can automatically collect and organize financial data and sales transactions. Full integration replaces manual data entry, automating general ledger entries and reducing the time and errors in your bookkeeping. With real-time financial information, you can track your books in real-time and understand important inventory and labor data.

Step 2: Streamline Accounts Payable

How to Set up Accounts Payable

Managing the process of recording, approving and paying your vendors is both time consuming and error prone. Keeping track of multiple invoices and frequent deliveries can be difficult, but keeping your AP balanced is key to maintaining positive relationships with vendors.

To streamline the accounts payable process, some restaurant management systems 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 a bookkeeping technology especially 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

Efficiently managing your payroll is an essential task in restaurant bookkeeping. Accurate payroll data can help you understand your labor costs. 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 quite high, because filing payroll taxes incorrectly or late can lead to steep penalties. 

Outsourcing your payroll is a surprisingly affordable option to ensure your payroll is consistent and your accounting is 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 payroll process. If your POS system is fully integrated with your restaurant 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 system. Bank reconciliation involves analyzing all of 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 of your transactions and your financial reports are accurate. While bank reconciliation requires analyzing large amounts of data, it is essential to ensuring you have the full picture of your operations.

Because restaurant businesses have a high number of transactions, monthly bank reconciliation used to take hours or days for a restaurant owner or manager to complete. However, modern restaurant accounting tools make bank reconciliation a fast, efficient, and accurate process. 

Restaurant accounting software can automatically match your records against your accounts, helping you track incorrect deposits, lost invoices, or cash variances. This can also help you catch any accounting errors, and future mistakes are made less likely with the 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 data about your restaurant financial and operational reports regularly is one of the keys to success and a healthy bottom line. Understanding essential reports, such as your profit and loss statement and your prime cost (your food and labor costs), is important to maintaining a healthy business.

Review Your Profit and Loss Statement Daily 

Your profit and loss (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 analyze the day-to-day strengths and weaknesses of your business, taking steps in the moment to effectively counter any issues before they become persistent problems.

Profit and loss statements and other financial reports allow you to drill down into your restaurant’s sales and profit performance, helping you identify problem areas based on reports and trends. This is especially valuable for restaurants with more than one location, as financial reporting can be run across all locations, in a comparative analysis, or drilled down to certain 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 can help you maintain a streamlined 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, using bookkeeping tools can help you keep track of your labor costs, the other part of your prime cost. An integrated restaurant management system 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.

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