Restaurant Bookkeeping 101: Maintain Your Books with This Easy-to-Follow Guide

As a restaurant owner or manager, you know that running a successful establishment requires much more than curating meals and providing impeccable service. It also demands a firm grip on your finances, ensuring that your financial transactions are logged at the end of each day. If you need a guide to help organize your financial records, the CPAs from C.E. Thorn, CPA, PLLC have provided bookkeeping services to restaurants in the Triangle area for many years and are here to help you get your accounting records in order too. 

In this guide, we will walk you through the fundamental principles of restaurant bookkeeping and accounting, offering you an easy-to-follow roadmap to keep your financial records in order. 

Important Factors of Restaurant Accounting 

Managing a restaurant requires proper bookkeeping practices, including logging accounts receivable and payable so you can identify whether you’re reaping a profit or not. Without these key pieces of information, your business can suffer. In addition to keeping up with your financial records, you should be able to interpret the data and communicate the key information to your team so everyone is on the same page.

Now, we’re going to take a look at restaurant accounting basics as well as some factors that are specific to restaurant accounting.

Cost Control and Inventory Management

Tracking inventory levels, monitoring food and beverage costs, and implementing cost-control measures are vital aspects of restaurant accounting. Regularly analyzing inventory turnover rates and conducting variance analysis can help identify areas where costs can be reduced or controlled more effectively.

Revenue Tracking and Analysis

Monitoring revenue streams includes tracking sales by day, shift, and menu item, as well as analyzing sales trends over time. Effective revenue tracking allows restaurant owners and managers to make informed decisions about pricing strategies, menu changes, and marketing initiatives.

Payroll Management

Labor costs typically represent a significant portion of a restaurant's expenses. Properly managing payroll is crucial for maintaining profitability while ensuring fair compensation for employees. Restaurant accounting involves accurately tracking employee hours, calculating wages, and managing payroll taxes and benefits.

Tax Compliance

Navigating the complex landscape of tax regulations is a critical aspect of restaurant accounting. Ensuring compliance with federal, state, and local tax laws requires careful record-keeping and timely reporting. Working with tax preparation accountants who specialize in the restaurant industry can help mitigate the risk of tax-related issues and maximize available deductions.

Cash Flow Management

Effective cash flow management involves monitoring cash inflows and outflows, optimizing payment terms with suppliers, and forecasting future cash needs. By staying on top of cash flow, restaurant owners can avoid liquidity issues and ensure the smooth operation of their businesses.

Fraud Prevention and Internal Controls

Implementing robust internal controls is essential for safeguarding restaurant assets and preventing fraud. This includes segregating duties, conducting regular audits, and implementing security measures for financial transactions. By establishing strong internal controls, restaurant owners can mitigate the risk of financial losses due to theft or fraud.

4 Key Practices for Restaurant Bookkeeping

Restaurant bookkeeping involves several crucial steps to ensure accurate financial records and facilitate informed decision-making. Let's explore four key practices that are essential for effective restaurant bookkeeping.

Recording Restaurant Sales

Recording restaurant sales involves tracking and documenting all revenue generated by your establishment daily. This includes sales from food, beverages, merchandise, catering services, and any other sources of income. 

Setting up Accounts Payable

Reconciling Accounts

Reconciling accounts involves comparing your business bank statements, credit card statements, and other financial accounts against your records. By comparing the transactions on your books with those on your bank statements, you can identify any missing or mismatched entries, errors, or fraudulent activities. 

Analyzing Financial Reports

Financial reports such as profit and loss statements, balance sheets, and cash flow statements offer a comprehensive view of your revenues, expenses, assets, liabilities, and cash flow. By reviewing these financial reports regularly, you can assess your profitability, identify areas for cost control or improvement, track key performance indicators, make informed decisions about pricing and staffing, and even decide if you should take out a loan to finance your equipment. When you have up-to-date financial reports on hand, you can make well-informed decisions that best suit your business.

Factors Unique to Restaurant Bookkeeping  

Effective restaurant bookkeeping practices are fundamental to the financial health and success of any dining establishment. Let's explore the key factors that are essential for efficient restaurant bookkeeping processes.

Inventory Management for Perishable Goods

Restaurants navigate the challenge of handling perishable inventory like fresh produce and seafood, requiring meticulous inventory management. This involves tracking turnover rates, minimizing waste, and optimizing ordering quantities to balance freshness with cost control. 

Tip Reporting and Gratuity Management

Tips constitute a significant portion of income for restaurant staff, necessitating precise tracking and reporting to ensure compliance and fair compensation. Restaurant accounting systems must incorporate features to record and report tip income accurately while adhering to legal requirements. This includes meticulous documentation and adherence to tax regulations governing tip reporting.

Sales Tax Collection and Reporting

Restaurants shoulder the responsibility of collecting and remitting sales tax on taxable items sold to patrons. Managing varying tax rates, exemptions, and reporting mandates across different jurisdictions demands meticulous attention to detail. Restaurant accounting software should integrate capabilities to calculate and track sales tax accurately, streamlining reporting processes and ensuring compliance with tax authorities.

Menu Engineering and Cost Analysis

Menu engineering is critical in analyzing the profitability of each menu item based on its ingredients cost, preparation time, and popularity. Regular cost analysis enables restaurant accountants to identify high-margin items, adjust pricing strategies, and eliminate underperforming dishes. This process enhances overall profitability and guides menu development to align with financial objectives.

Variable Labor Costs and Scheduling

Labor costs in restaurants fluctuate based on factors such as peak hours, seasonality, and special events, necessitating flexible scheduling practices. Effective labor management entails accurate tracking of employee hours and seamless integration with payroll processing. Restaurant accounting systems should synchronize with scheduling software to optimize labor utilization, minimize costs, and maintain service quality.

Regulatory Compliance and Licensing

Restaurants must adhere to diverse regulatory requirements encompassing health and safety standards, liquor licensing, and labor laws. Compliance entails ongoing monitoring, staff training, and meticulous documentation to meet regulatory mandates. Restaurant accountants play a pivotal role in ensuring adherence to regulations, staying informed about updates, and implementing necessary measures to maintain compliance and mitigate risks.

The Best Way to Record Restaurant Sales

Recording restaurant sales accurately is essential for maintaining transparent financial records and tracking your business's performance. Adhering to a budget is much easier when you can easily access financial statements. In addition, it will help guide you to identify sound financial forecasts for future purchases and costs.

Keep Up With Sales Daily

Develop a habit of diligently tracking and documenting sales transactions as they occur. This can be done manually by using a sales journal or logbook, or electronically through a point-of-sale (POS) system. 

Maintain a Spreadsheet With Daily Sales

You can use popular spreadsheet software like Microsoft Excel or Google Sheets for this purpose. This method provides a centralized and organized record of sales, allowing you to calculate daily, weekly, and monthly totals easily. 

How to Reconcile Your Restaurant Accounts

Reconciling your accounts is an important step in ensuring the accuracy and integrity of your financial records. It involves comparing your internal records, such as your general ledger or bank statements, with external sources, such as bank statements or credit card statements, to identify and resolve any discrepancies. 

Here are two common approaches to reconciling accounts:

• Use a Spreadsheet: If you prefer to keep track of your accounts yourself, we recommend you keep a spreadsheet up to date with your daily financial information. This way, you can ensure that your account balances are correct at all times.  
• Work with a restaurant CPA: Since keeping track of your finances is a time-consuming task, and one that can easily fall through the cracks as you juggle various other tasks, it may be in your best interest to work with a CPA. Working with a CPA allows you to take a more hands-off approach to accounting, but you’ll have access to your financials at any given time. Plus, you can relax knowing that your accounts are updated regularly and accurately. 

How to Generate Financial Reports

Generating financial reports for your restaurant is essential for understanding your business's financial health, identifying trends, and making informed decisions. A CPA for restaurant bookkeeping and accounting can assist in generating financial reports, there are also key ratios you can calculate on your own. 

What Financial Reports Do You Need?

With restaurant accounting, you’ll want to have several types of financial records on hand to have a better idea of your financial health. They include:

• Balance Sheet
• Profit & Loss Statement

When you have all of these reports, it makes it easier to predict future sales, create budgets, track transactions, identify financial problems, and monitor changing costs.

Calculate Key Ratios on Your Own

While working with a CPA is recommended for comprehensive financial reporting in the restaurant industry, you can also evaluate your restaurant's financial health by calculating key ratios yourself if you're in a pinch.

Some important ratios to consider include:

• Sales vs. Cost of Goods Sold (COGS) Ratio
• Labor Ratios
• Gross Profit Margin

How to Handle Accounts Payable

Here are the important aspects of handling accounts payable efficiently:

• Organize and track invoices
• Review and verify invoices
• Establish a clear payment schedule
• Maintain clear communication with vendors 
• Leverage technology and automation by using accounting software solutions
• Periodically reconcile your accounts payable ledger 
• Take advantage of discounts offered by vendors 

Working with a Restaurant CPA 

Working with a CPA to generate financial reports for your restaurant offers the advantage of professional experience and knowledge and ensures accurate and comprehensive reporting. 

Here's how a restaurant and hospitality CPA can help:

• Gathering financial data
• The preparation of financial statements
• The analysis and interpretation of financial records
• Ensuring you are tax-compliant

Should I Outsource Restaurant Bookkeeping?

Here are some considerations to help you make the best decision about outsourcing restaurant bookkeeping and small business accounting solutions to a CPA. A restaurant bookkeeping professional can offer the following benefits:  

• Their experience and knowledge of accounting principles and tax regulations guide financial reports. 
• A CPA is cost-effective when compared to hiring an in-house bookkeeper. 
• You will have more flexibility to make high-level decisions as your restaurant grows. 
• Working with a CPA allows you to focus on core competencies related to your daily business. 
• A CPA has access to technology and reporting that offers real-time insights, customizable reports, and analysis.
• A CPA can offer increased confidentiality and security

Outsource Your Restaurant Bookkeeping to Our Raleigh Accountants 

Outsource your restaurant bookkeeping needs to C.E. Thorn, CPA, PLLC, and experience the benefits of streamlined financial management. 

Our team of CPAs can provide accurate and reliable accounting and bookkeeping services tailored to your business’s unique needs. Say goodbye to the complexities of bookkeeping, and let us handle your financial records with precision and efficiency. 

To learn more, contact us by calling  919-420-0092 or filling out the contact form below.