Payroll and accounting are some of the most complex, and critical, responsibilities for a restaurant. It is especially important to get payroll correct, because it is a heavily regulated aspect of running a business.
At the core, restaurant payroll is an accounting function. It involves tracking wages for both hourly and salary employees, their tips, taxes, benefits, and other tax considerations, and paying out wages correctly and on time.
For many restaurants, payroll is done outside of restaurant accounting software, usually on different solutions. However, the more separate systems you’re using in your restaurant management ecosystem, the more opportunities there are for issues. With separate systems that don’t fully “talk” to one another, you may be required to import data back and forth, a manual process that can be time consuming and lead to errors.
Connecting your payroll and accounting solutions through a full integration can help save you time spent on imports or data entry, as well as increase accuracy of your reporting overall. And if your accounting team doesn’t have to spend time on manually keying in labor accrual journal entries, they are able to focus on more strategic tasks.
Automating as much of the payroll and accounting process as possible is key for a streamlined payroll process. As a restaurant owner or operator, you may want to consider examining your restaurant group’s payroll and accounting integration and how it can impact your business.
Synching your accounting and payroll cycle
Your restaurant accounting runs on a defined reporting period. By keeping a consistent reporting period, you can compare financial performance over time.
For restaurants, operating by calendar month doesn’t provide comparable data, because there are an uneven number of weekend days in each month. A period with seven weekend days, as opposed to one with nine, will likely generate much different sales and expense levels.
To get useful numbers, many owners and operators opt for one of two common reporting periods: 13 accounting periods of four weeks per year, or the 4/4/5 accounting calendar (dividing a year into four quarters of 13 weeks grouped into two 4-week months and one 5-week month). These two cycles allow restaurants to compare “apples-to-apples” reporting periods that have the same number of weekdays and weekends.
Deciding your restaurant accounting cycle is step one. After that, it is beneficial to match up your restaurant payroll cycle to the same reporting period.
For instance, if you run payroll weekly or bi-weekly, a four-week accounting period allows you to align labor costs with sales, informing accurate, useful labor cost calculations. You can use this comparable data on your profit and loss (P&L) statement to review 28 days of sales, and 28 days of payroll.
If you are considering switching to 13 four-week periods, or the 4/4/5 accounting calendar, make sure to review your restaurant accounting solution. Your accounting software should allow you to choose your accounting cycle without requiring data exports or manual data tweaking.
Eliminating manual importing
If you are using a separate payroll and separate accounting system for your restaurant business, you must import data back and forth between the two systems. Especially if your restaurant group is composed of multiple locations or EINs, your accounting and payroll teams may spend exponentially more time updating multiple instances.
Full integration between your payroll software, accounting system, and point-of -sale (POS) system can help eliminate this manual import and offer substantial time savings.
If you have full POS integration with your accounting software, you can seamlessly transfer detailed labor data. Data about clock-in/clock-out time, by job and employee, can be pulled from your integrated POS, automatically creating daily labor accrual journal entries in your accounting general ledger.
This integration can eliminate manual data entry, increase accuracy, and streamline a major piece of restaurant payroll processing — all while providing visibility into your true labor costs on your P&L statement.
With this integration, you can also automate pushing data the other way, from your restaurant accounting system to your payroll software. Tips and labor punches are automatically sent to payroll from your accounting system, eliminating the need to manually export and upload the data from one platform to another, thus saving time and reducing the possibility of errors.
Automating payroll journal entries in your accounting system
Your restaurant accounting software is the centerpiece of your restaurant management, but your payroll system is also tracking a lot of data that is needed in your accounting operations and reporting.
With full payroll and accounting integration, you can designate where to record payroll taxes, net wages, and benefits in your accounting software. You can leverage the integration to organize where data is automatically stored, eliminating the possibility of incorrectly entering values that skew your general ledger or account balances.
Retaining employees with on-time, accurate payments
Payroll compliance is required to avoid hefty fines and regulatory audits. A payroll system can also help your restaurant comply with local, state, and federal payroll regulations that are continuously shifting.
However, accurate, on-time payroll is also significant in another area: employee retention. Ultimately, how you fulfill your payroll obligations will reflect on you as an employer, and your staff will take notice of any issues.
An integrated restaurant payroll system can smooth this connection with employees by automating the calculation of total wage earnings, withholding the correct deductions, and aiding payroll tax filing. With reporting taken care of, and appropriate calculations, your payroll software can help enable accurate and timely payment to employees.
In a competitive hiring landscape, your restaurant payroll can even be a tool for attraction and retention. Many restaurants are considering implementing a more frequent payroll schedule, even same-day pay, to compete with other employment opportunities. Your payroll software should be able to match your pay frequency strategy.
Automating capture of actual payroll expenses
Finally, if your payroll software is able to speak back to your restaurant accounting system, the integration can facilitate automated bank reconciliation of payroll expenses.
With full integration, after processing payroll, a journal entry can be automatically entered into the accounting system. The journal entry includes information about the summary of the expense accounts (like front-of-house, back-of-house, manager, etc.), as well as a single line for each employee’s net pay.
With this information in your accounting software, you can capture actual restaurant payroll expenses and facilitate bank reconciliation to the payroll account.
Payroll and accounting are closely linked, so having them fully integrated can create efficiencies for your restaurant group. As expenses such as labor and food costs continue to rise, streamlining operations has never been more valuable.
Restaurant365 incorporates accounting and payroll into one system that’s fully integrated with your point-of-sale system and bank. In addition, R365 cloud-based, restaurant management suite includes scheduling software, restaurant inventory management software, and restaurant operations software to create an the all-in-one solution that’s also integrated with your food and beverage vendors. Ask for a demo of Restaurant365.
If you’d like to learn more about payroll accounting, watch our recorded webinar, Essentials of Payroll Accounting for Restaurant Groups.