A Guide to Restaurant Bookkeeping

Stay updated with current accounting standards, business compliance, tax preparation tips, and latest news.

    06 Feb 2023
    A restaurant can be a hectic place. Running tirelessly between the front and the back of the house focusing on crowds of hungry patrons, planning menus and specials, continuous efforts to provide the perfect taste, ambiance, and an unforgettable experience to the customers, managing high overhead, wasted ingredients, etc, are some of the everyday challenges of restaurant owners. With so much going on, bookkeeping is often overlooked or deferred for a later date. Unfortunately, when bookkeeping is left behind, catching up becomes both tough and expensive. Restaurant profit margins are too tight to let bookkeeping lapse. Deferring bookkeeping leads to chaos and confusion and inaccurate records that can be difficult to rectify. On the other hand, missing a declaration of correct revenue can lead to tax penalties and more. Bookkeeping can help restaurateurs create a strong foundation for effective business decisions and keep overhead costs in check which means more funds for new dishes, better decor, marketing initiatives, etc. Here are a few useful tips to keep your restaurant bookkeeping organized.
    • Record Restaurant Sales Daily
    Record the daily sales helps in effective bookkeeping for your restaurant. Reviewing daily sales each day helps in matching the cash and credit card sales proceeds credited into your bank account.  Modern POS systems can now automatically track daily sales and offer a daily sales report. It is suggested to check this report every day to ensure the figures are correct and fix any errors that arise. Incorporating a fully-integrated POS system with your back office and accounting allows you to link sales to your general ledger and accounts payable.  While tracking your sales, it is advised to create different heads for tracking sales:
    • Beverages
    • Food
    • Merchandise
    • Catering Job
    It is also advised to track the cash sales and credit card sales separately. This would help in both reconciling your restaurant inventory and the funds flow with your bank account. 
    • Track Restaurant Expenses 
    Understanding and tracking restaurant expenses help ensure that all the expenses related to the business are recorded, tracked, and paid in a timely manner.  The expenses can largely be categorized as fixed and prime. Prime costs include expenses such as beverages, ingredients, payroll, taxes, benefits, and more. The fixed expenses comprise rent, equipment costs, insurance, permits, etc.  Tracking and paying these expenses helps the restaurant remain financially solvent and compliant with applicable laws and regulations. Additionally, having accurate records of expenses can help restaurants create accurate budgets, identify waste areas, and examine opportunities for cost savings.
    • Streamline Restaurant Payroll Processing 
    As a restaurant owner, paying your staff on time and correctly is one of your key responsibilities. Paying employees may appear to be a straightforward operation, but it is rather complex. Every employee will have different pay and hours of work, depending on their experience and role - whether they are at front of the house, back of the house, or managing operations. Also, you may have some employees who get paid an hourly wage while others get a salary. Plus, you’ll have to account for tips as well.  Employee payroll is subject to regulations on tip reporting, state unemployment, payroll taxes, social security, and medicare taxes. Restaurant operators that manage their own payroll face a high amount of exposure since submitting payroll taxes erroneously or late can result in severe fines and create significant liability issues. Outsourcing the payroll is a surprisingly low-cost way to assure consistency and dependability in bookkeeping. Outsourcing your payroll process to a professional payroll provider, like CJCPA, not only ensures that you are in compliance with requirements, but also saves you hours of work each paid month.
    • Reconcile Restaurant Accounts 
    Restaurant operations have a large volume of transactions and reconciling is a time taking and complex process. However, reconciling your accounts is the only way to ensure that you have recorded all your financial transactions. As part of the reconciling exercise, you should reconcile your records with bank statements, credit cards, loans, lines of credit, payroll liabilities, etc. The exercise helps track erroneous deposits, missing invoices, or sales anomalies.
    • Analyze Restaurant Financial Reports 
    The restaurant sector is known for its tight profit margins. With proper financial reports, restaurant owners can have a clear picture of whether they are in red or black.  As a restaurant owner, you should be looking at the Sales versus Cost of Goods Sold ratio, and labor costs and try to keep the prime cost under 65% of the total sales.  There are a few critical reports that should be evaluated on a regular basis to understand the restaurant's finances.
    • Profit & Loss statement (P&L) — A P&L provides an overview of all expenses and revenues. This report provides details of revenue, labor cost, food and beverage, and other operational expenses.
    • Cash Flow Statement — With a cash flow statement restaurateurs are enabled to view the amount of cash that comes into their restaurant vs the amount that goes out. This report will inform you of the amount of cash you have on hand.
    • Balance Sheet — A balance sheet lists your assets and liabilities to show your business's worth or total equity. Assets include everything you own, including equipment, cash, and inventory while liabilities are any debts you owe money on such as outstanding vendor invoices or unpaid loans. Total equity is the difference between assets and liabilities. Ideally, you want more assets than liabilities on your books.
    Hire CJCPA Professionals Restaurant bookkeeping can be difficult, but grasping the fundamentals is easy. Tracking your expenses, inventory, and income through restaurant bookkeeping services will help you better understand the business's health and remain profitable through the years. If you still feel overwhelmed by the complexity of restaurant bookkeeping in Canada and would rather focus on your passion for hospitality and talent for cooking, consider outsourcing your restaurant bookkeeping and accounting. Regardless of whether your restaurant is big or small, new, or has been in operation for years now, outsourcing your bookkeeping can help your business grow. At CJCPA, we understand the complexity of the food and beverage industry, its operations, and management aspects. Our experienced team helps restaurants with all their unique financial needs through our end-to-end bar and restaurant accounting and bookkeeping services. Contact us today.  
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