Usually, about a third of a restaurant’s gross revenue goes towards paying for COGS. It’s an important number for your business, so check out our complete guide to learn more about COGS and grab a formula to help you calculate it. Rick is a highly accomplished finance and accounting professional with over a decade of experience. Specializing in delivering exceptional value to businesses, Rick navigates the complexities of the financial realm easily.
You can choose between cash and accrual accounting if your restaurant has less than $1 million in revenue. The most common accounting method of restaurants is cash accounting or cash basis. This method allows businesses to record their generated income when cash is received from services rendered or paid for expenses and costs.
A Beginner’s Guide to Restaurant Bookkeeping and Accounting
Influential at both board level and delivering hands-on operational support, I have an instinctive understanding of restaurants and how to build a compelling retail offer. Understanding these differences is vital for effective restaurant financial management. Whether you’re not the best with numbers or want to focus on the food, you might be wondering if you should do restaurant accounting in-house or outsource it. The last step is analyzing your financial data to budget and plan for the future.
Running a restaurant involves balancing fluctuating cash flow with inventory and staffing costs. Then there is managing food price volatility, seasonal demand, tax compliance and regulatory requirements while striving to maintain healthy profit margins. At Xeinadin, our accountants for restaurants understand the industry’s complexities and provide expert solutions.
Streamline your accounting and save time
You can set different levels of access and permissions for other users so sensitive financial info is secure. To ensure your restaurant stays within budget, meets deadlines and obligations, and achieves your goals, it’s crucial to monitor and manage your finances. This responsibility gives you the control and insight to steer your restaurant toward success. Aside from providing a structure to keep track of your finances, the benefits of utilising a chart of accounts are wide-reaching.
Use Restaurant Accounting Software
Restaurant accounting is the process of tracking, analyzing, and managing a restaurant’s financial transactions and performance. It’s crucial because it ensures accurate financial reporting, helps in budgeting, controls costs, and improves profitability. Choose an accounting software to streamline your data entry tasks, create customized invoices, track your revenue, create regular profit and loss statements, and review your cash flow. The ideal restaurant accounting software for restaurants should offer robust reporting features, be easy to use and allow you to access data anytime, anywhere.
- For example, if your restaurant has $3,000 worth of inventory on hand at the beginning of the week and purchases another $2,000 of food products, you have $5,000 worth of inventory.
- An effective inventory management system enables the monitoring of inventory levels and alerts management to any discrepancies that may indicate theft or excessive wastage.
- The best accounting software for restaurants includes tools for snapping photos of bills, receipts and other payments to upload them as expenses.
For restaurants seeking an all-in-one system, Tock might fall short, as it requires additional integrations to handle these operational needs. I appreciate Tock’s dynamic pricing functionality, which allows restaurants to adjust prices based on demand, special events, or peak times. This flexibility has been invaluable during high-demand holidays or weekends, allowing teams to optimize revenue by charging more.
To ensure seamless integration between your Point-of-Sale (POS) system and accounting software, it’s beneficial to restaurant bookkeeping align the structure of your chart of accounts with that used in your POS system. This enables easy reconciliation between sales data recorded at the front end and financial data captured in your accounting system. The need for efficient inventory management, waste tracking, and tip reporting sets restaurant accounting apart as a highly specialized field within the broader spectrum of accounting services. Lacking direct experience in the restaurant industry, I turned to those who know it best—restaurant owners. I spent months diving into restaurant management tools, setting up staff schedules, managing orders, exploring their features, and using them to track inventory. To complement this hands-on testing, I engaged with restaurant owners to understand the real-world challenges they face and how these tools perform in high-pressure environments.
By keeping detailed records of costs and revenue, you can build a strong foundation for making informed business decisions. Paying your employees is likely to be one of your business’s most complex and important tasks. Employee payroll is subject to regulations on tip reporting, payroll taxes, Medicare taxes, Social Security, and state unemployment.