U.A.E.
All you need to know about Accounting for Restaurants
As a Restaurant owner, you must be wondering why there are so many talks about separate accounting for restaurants. Restaurant accounting, however, is really unique and stands out from other types of accounting systems at a fundamental level.
The intrinsic factors responsible for dealing restaurant accounting in India separately are perishable and uncertain items instead of robust items for other industries. Three features that make restaurant accounting unique are
Daily inventory management
Cost to sales ratio
Weekly or bi-weekly financial statements
Restaurant accounting is the process of recording, analyzing, interpreting, and reporting financial data for a restaurant. Restaurant bookkeeping only records the transactions in the general ledger.
Activities of accounting for Restaurants
General activities of Accounting for restaurants include the following
- Recording transactions in the general ledger
- Analyzing ledger and journal entries
- Reconciliation of bank statements
- Calculation of Tax returns and providing assistance and advice on strategic tax planning
- Carrying out budgeting and monitoring, and reporting budgetary variances
- Monitoring vendors' performance
- Appropriate codification of all transactions, especially the expenses
- Receiving, processing and paying bills and invoices- Accounts Payable
- Providing financial insights and future strategies
- Calculations of COGS and prime cost and benchmarking based on restaurant type
- Generating financial statements including balance sheets, income statements, and cash flow statements
Common Problems with Accounting for Restaurants
The restaurant business is really competitive, and there are usually no hefty margins in this business. This warrants streamlining of value streams and application of timely, reliable, and efficient accounting and financial management systems. The most commonly faced accounting problems are:
- Ineffective Accounts Payable system.
- Improper costing of foods and beverages without considerations of all the cost aspects.
- No proper and systematic categorization of foods and beverages costs, posing difficulties in proper costing and analysis.
- Frequent bookkeeping mistakes.
- Delayed financial statements, e.g., monthly statements that fail to take timely corrective actions on a daily or weekly basis.
- Irregular physical inventory counts without timely adjustments leading to high volatility in f & b cost without any clue between purchases and usages.
- Improper accounting period, e.g., monthly accounting and financial statements with varying nos. of specific days like Fridays, Mondays, etc.
Selection and Use of Appropriate Tools to effectively Manage Accounting for Restaurants
Thanks to that, we are in a computer age and without the need of complicated and confusing sheets and ledgers containing numbers stacked in multiple rows and columns. Accounting software products are plenty, and we have lots of choices to select from according to our specific requirements.
QuickBooks is one of the most popular and widely used software that comes with specialized modules specifically designed for restaurant accounting.
Whether you opt for conventional manual systems or computerized software, there are these numbers that you need to record regularly
- Inventory Cost of Foods and Beverages is the main cost component in the restaurant business, and keeping track of inventory at hand, daily food sales and purchases are of utmost importance for restaurant accounting.
- Food sales data recording is vital as it shows your earnings during daily restaurant hours.
- Beverages sales are also important and can be entered in the same worksheet as food sales with appropriate categorization.
- Cashier's daily master sheet where all transactions are recorded.
- Sales and cash receipts register where all foods and beverage sales are recorded with sales tax collected for each item.
- Operating Expenses are important to have a feel on the bottom line of your business and include rent, maintenance, admin cost, depreciation, employee wages & benefits, insurance, etc.
- The Break-even analysis worksheet will show you where your business stands and how fast you can break even.
These data are huge and can’t really be managed manually, and using a software program is always a welcome move.
Choosing a good POS system is also important for complete accounting for Restaurants as these two are closely intertwined and, once linked, can capture methods of payments, inventory and labor costs, and lots of other variables.
QuickBooks Point of Sale can be well integrated with your cloud-based restaurant accounting software and deliver the complete accounting solution, in accordance with the likes of Zoho and Xero.
Why IMC becomes your perfect partner in your accounting for the restaurant
At IMC, we are well qualified and certified accounting professionals with a total focus on your complete satisfaction and delight. We deliver the highest quality of accounting and bookkeeping services with unmatched consistency and timeliness.
Apart from carrying out all the accounting activities already mentioned, we offer the following benefits
- Tracking your restaurant's business performance on a regular basis through detailed financial statements and constant monitoring of KPIs like sales, inventory, operating expenses, etc.
- Help you make informed decisions, e.g., if you need any promotional sale or need some line of credits, etc.
- Help you improve on budgeting and guiding you on future sales and expenses.
- Help you remain compliant with regulatory authorities to avoid disputes and other hassles