The restaurant business is highly competitive. In fact, around 60% of new restaurants fail within the first year, and nearly 80% of restaurants fail within five years. Many factors can contribute to the success or failure of a restaurant. However, the most important factor is the restaurant’s finances. The financial health of a restaurant is the difference between success or bankruptcy. Managing your restaurant’s finances is one of the most difficult aspects of the business. Below you will find the top six tips and best practices for restaurant bookkeeping.
Tips and Best Practices for Restaurant Bookkeeping
Restaurants are a uniquely challenging type of business due to a variety of factors involved in running it. The taste and quality of the food, service, location, cleanliness, and cost all prove integral to the success of your restaurant. Despite the large number of moving parts in the restaurant business, bookkeeping is the factor that can truly make or break your business. Consider the following tips and best practices for your restaurant. For additional help, contact Indevia accounting for unique and automated bookkeeping solutions.
Hire an Accounting Firm:
Restaurant bookkeeping is complicated due to the nature of the business. Bookkeeping mistakes can be costly, which is why hiring an accounting firm is a smart investment. Hiring a professional who specializes in restaurant bookkeeping can help reduce costly accounting errors, provide you with more free time for other tasks, and help you create long-term strategic plans from the accounting firm’s reporting and data on your restaurant.
Payroll is not as straightforward in a restaurant as compared to other types of businesses. Properly classifying employees can be complicated as restaurants often have both full and part-time employees (with fluctuating hours). In addition, service staff have both their hourly income and tips. Restaurant payroll can be complicated and can result in over and underpaying your employees, both of which you do not want to have to deal with. An accounting firm can help you choose a pay period, determine how payments will be made to employees, classify your employees, and withhold the correct amount of taxes.
Understand and Pay Quarterly Taxes:
Taxes often concern even the most prudent business owners. Despite the concern, it’s crucial to pay quarterly employment taxes. Quarterly employment taxes involve reporting what amounts you have withheld from your employee’s paychecks and then paying the IRS the required amount. Additionally, your locality may have additional taxes that need to be paid to the state. Due to the complexity of taxes, having a trusted accounting professional advise you can help streamline the process.
Choosing a Quality POS System:
The point-of-sale (“POS”) system can often be overlooked when considering the restaurant’s bookkeeping practices. This is because it may be seen as more of a “front of the house” system versus the “back of the house” accounting system. However, the POS system and your overall bookkeeping practices are inextricably linked. If they are linked, you can track a variety of financial factors in your restaurant, including methods of payment, inventory, and labor costs.
Regular Financial Reports:
Professional accounting firms often provide clients with regular financial reports. These prove integral to the success of your restaurant. Why? They can capture snapshots of what happens behind the scenes. Data involving sales versus expenses and profit and loss statements can help inform you on how to navigate your restaurant’s next steps. Weekly, monthly, quarterly, and yearly reports can help you see trends and make more accurate projections when it comes to your short and long-term business goals.
Keeping track of your inventory and how it impacts your day-to-day business can make or break your business. Restaurants have three main expenses, which include the food and beverage inventory, labor costs, and rent. The complicated factor about your inventory is that it is perishable. Financial experts recommend keeping restaurant food costs to 30% or less. The basic formula for determining your food cost percentage is: (Beginning Inventory + Food Purchases – Ending Inventory) divided by Food Sales. This equation leaves you with the percentage of your budget going to food costs.
Indevia Accounting Firm
If you are just opening a restaurant or need a skilled accountant for your up-and-running restaurant, contact the team at Indevia. They provide the best business bookkeeping services and are skilled in the unique nature of the restaurant business. They can take bookkeeping off of your hands so you can focus on your restaurant. They offer a variety of services and can provide you with timely reports with helpful data that can help inform your business decision. Contact Indevia for accounting solutions today for support and get your restaurant finances on the right track!