Amid the current hustle and bustle of life known to man today, preparing and having homemade meals, from scratch, at home have become a rarity. Restaurants have sprouted across the globe over the years to fill that gap and your tummies. There are many kinds of restaurants, from the big, multi-branched fast-food chains, to the local restaurant chain, down to the small, family-owned stores. Others work around an ethos of offering convenience, while others wish to serve you the homey feel of slow, easy, and delectable. Despite these differences, all restaurant businesses fall back on the same accounting principles.
Though it may be easy to get swept up in the glamour and whimsy that often accompany being a restaurant owner dealing with the creative aspects of food and aesthetics, one cannot forget the nitty-gritty accounting and organizational work. Apart from falling back on the same financial and accounting principles, restaurants must also consider accounting controls to improve the bookkeeping, recording, and analysis of their daily transactions. This will help automate and improve the way you manage your restaurant business’ finances. To get you to jump-start on the kinds of financial controls to consider in accounting for restaurants, read on.
1. Prioritize food cost planing
Restaurants must properly calculate food costs to price items accordingly and maximize profit margins across their product range. Changes in the cost of raw materials must be accounted for.
Though it may be tricky to do, as prices change weekly or even every day, it is essential to do this kind of check and audit regularly to improve the profitability of your business. Moreover, you should not only be looking at what profits you stand to make, but the losses as well, so you can cut them off early on.
2. Utilize a reliable point-of-sale system (POS)
Apart from direct costs manufacturing companies also need to account for overhead costs. These must be accounted for to aid you in proper pricing. Failure to include overhead costs might result pricing your products at a loss.
Manufacturing costs include utility costs, wages for personnel not directly involved in the production, like facility guards, office supply costs not related to production, storage costs of inventory, etc.
Regardless of whether you operate a big chain, a bar, an established food group, or a small family-owned restaurant, a point-of-sale system is a great tool to improve your daily business operations. Not only does it record transactions more quickly than you would manually, but it is also systematized. Today, POS software is capable of generating data on key metrics for business improvement. It can help you identify your best-selling items, provide daily sales reports, and generate stock level warnings and employee performance.
POS systems also, often, come with a cash register, which requires a key to open, or opens on its own when it is time for the customer to pay. The system is also great for keeping employees accountable, as the one assigned, often and in the case of certain POS software, has to be logged on to the system.
3. Implement a three-way matching system
Restaurants’ financial transactions are not only limited to selling items but to recording, and purchases too. Point-of-sale systems only monitor the sales that are coming in. It is equally important to check just how much you are spending on the raw materials needed for your product offerings.
A three-way-matching system generates a paper trail for every purchase and reduces error and fraud. It is important to incorporate this system into your practices to avoid wastage, cash flow issues, inaccurate stock levels, and erroneous balance sheets.
This system allows you to control your food and beverage costs as well as the purchasing processes. It is given its name as 3 documents are used to validate and confirm the transaction. This includes the purchase order, the delivery receipt, and the vendor’s invoice. Note that the delivery receipt is different from the invoice, as it is merely proof that the item has been delivered, while the invoice is the bill or actual payable.
4. Conduct diligent inventory management
One big downfall of many restaurants is poor inventory management. This may lead to wastage, spoilage, surplus, or even shortages, which can cost you a lot of money, impact customer experience, and cause bankruptcy and business closure in extreme cases. It is important to have the right product, in the right amount, at the right time, and in the right place. Otherwise, you risk disrupting your business operations.
5. Payment reconciliation
Finally, your restaurant may cater to various payment options to accommodate customers, whether it be cash, credit and debit, Paypal, or other payment options, like allowing regulars to rack up a tab and pay at the end of the month. While providing such is great, it can be tricky to get a hand at. You need proper bookkeeping processes to reconcile all payments and customer transactions, making sure payments are received when they are supposed to.
Otherwise, overlooking such could mean you lose out on profits and incur a loss on the cost of raw materials that went into the food and beverage sold. If you need help monitoring the financial aspects of your restaurant, give us a call. Take advantage of our free 30-minute consultation.