Nobody said that starting a restaurant franchise business would be easy, especially amid a pandemic where operating procedures and standard practices are constantly changing. Many small business owners are having difficulty keeping up with their company’s ever-evolving demands. So let’s look at some common challenges with restaurant accounting.
Common Challenges with Restaurant Accounting
With franchisees focusing on day-to-day operations and front-facing needs, accounting demands tend to fall by the wayside. This can cause irreversible damage to the company’s financial health over time.
Too many restaurants just can’t keep up with bookkeeping needs.
And to make matters worse, a lot of restaurant owners can’t find customized accounting services that offer bookkeeping for restaurants or franchises specifically. Already hard-pressed and playing catch-up with the books, financial employees find it increasingly impossible to discover the right ways to address the restaurant’s monetary needs. This makes it all the more likely that they will be faced with one of these common challenges with restaurant accounting listed below.
Not Knowing the Prime Cost Percentage
Restaurants are uniquely different from other businesses as they have to factor in several different types of production costs. The prime cost calculates the total of all of the store’s costs of production, including labor and raw materials. It is important to correctly calculate the prime cost in order to make sure that the restaurant is turning a profit at the end of the day.
Most restaurants aim to have a prime cost percentage of under 60%, and it should never be higher than 76%. You can divide the prime cost by your total sales to determine the company’s profit margin.
Incorrectly Managing Payroll
Payroll is never a fun or effortless part of running a business, but it is a necessary one. Excellent staff members will boost your business, so you should make sure that you are doing the right thing by paying them on a regular schedule. Payroll can get out of hand very fast, especially as different employees earn different types of salaries.
Restaurant managers aren’t always equipped to manage payroll on their own, and the busier (and more popular) the restaurant gets, the less time they’ll have to learn the ins and outs of bookkeeping systems. That’s why a lot of franchisers are getting more excited about the benefits of automated payroll systems. Without giving payroll a dedicated role and undivided attention, these accounting actions could lead to a growing number of manual errors.

Generating Inaccurate Reports (Or Not Generating them at All)
Reports are useful for all industries, but restaurant owners can especially benefit from financial metrics that can help them make better decisions for the future. Generating the right kinds of reports will even help franchisees increase their sales early on in the accounting period, which makes room for even more growth down the line. Some accountants know how to generate reports but might not focus on the most helpful details.
This issue often turns into an opportunity for restaurants to learn more about automated accounting solutions. Many services can be personalized to the exact needs and specifications of your business, generating reports that offer key insights into all financial operations.
Improperly Pricing Food Items
According to the National Restaurant Association, the food and beverage service industry experienced a sales increase of almost 20% from 2020 to 2021. These sales are projected to go up even more, which just means that the price of food items may need an adjustment. Fluctuating prices can be frustrating, but it is important to work with your accountants to determine whether price increases or decreases would have a better impact on your sales. As daily operations get busier and busier, it becomes all the more imperative to have a dedicated accounting team by your side.
Mismanaging Inventory
Fresh ingredients are a constant need in any type of restaurant. Without high-quality food, your franchise is destined to fall in popularity and receive a growing number of negative reviews. You can avoid the downfall of your shop by managing your inventory more consistently.
Know exactly what you are paying for your ingredients each week and measure that against your profits. Does it make sense to increase or decrease inventory costs for that accounting period? The cost of goods sold will directly influence the prices on your menu, so it’s important to hire an accountant that can keep up with the scaling prices all the time.
Get Started with Automated Accounting
One of the many perks of automated bookkeeping services is that you can completely control your company’s finances – and make the best decisions for it – in a completely hands-off way. An investment in Indevia accounting solutions is an investment in tailor-made digital accounting options to ensure the financial security and success of your franchise moving forward. Contact us today to learn more about unique accounting solutions for your restaurant franchise.