“The food is normally purchased on a weekly basis and many times more than once per week depending on the types of food being sold in the restaurant. Most restaurants would have an inventory turnover of times for food and times for beverages,” he said. If you have a bookkeeper and accountant, they will be able to provide you with a detailed report on each of these. If you don’t, it may help you to understand what the financials in the headings below mean—and why they can help you understand how your business is performing.

What Is The Cost of Goods Sold in a Restaurant?

It’s also important to know the total cash sales and the total sales by credit cards. Just remember that even if you separate out specific types of sales, your total daily sales including all your categories should always be the same. The first step is to record and keep track of your restaurant’s financial transactions, including expenses, sales, and payments.

Controllable Costs Report

• Here’s why accounting software is highly advantageous — or outright necessary — for restaurants.
• When it comes to restaurant accounting, the chart of accounts categorizes the money you spend and receive.
• Most restaurant bookkeeping software has an inventory management system to help you track your inventory and avoid food shortages and surpluses.
• The platform also notifies you as your vendor payment due dates approach, and we like that this minimizes the potential for late payment fees.
• Keeping tabs on your food costs will help you set menu prices and maximize profits.
• While the accrual method can be more complex and time-consuming, it gives a more accurate picture of a restaurant’s financial health as it considers current and future obligations and revenue.

See how Restaurant365 partners with outside accounting firms to help automate your processes, reduce headcount, and grow your business from our 40,000 + current restaurant customers. Multiple users can access Shoeboxed, so collaboration on bookkeeping tasks is a breeze. You can set different levels of access and permissions for other users so sensitive financial info is secure. Once uploaded, Shoeboxed categorizes and organizes your scanned receipts into tax or custom categories so you can see where your money is going and claim deductions during tax time. Receipts are also converted into a searchable database so you can find any receipt when needed. One thing you don’t want to do is run out of ingredients for an item on your menu.

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By integrating A/P software, you’ll be able to link your business account with the application. You can add a vendor, input the payment date and amount, and enter the category for each transaction. Your software will alert you when a payment is due, and in many cases, you’ll be prompted to authorize the payment and deposit the amount directly into the vendor’s account. Rather than trying to handle the books yourself or hiring someone to work internally, we recommend getting an outside bookkeeper.

If you are not using financial reporting for your restaurant, then you are running your business blind. With such tight profit margins in the restaurant industry, it is important to analyze your financial reports on a regular basis. Restaurants should how to do bookkeeping for a restaurant be looking at sales vs. cost of goods sold ratios as well as labor ratios. Another ratio many restaurants should consider is the prime cost, which aims to keep the cost of food + beverage + labor at roughly 60% to 65% of your total sales.

• Cash accounting is easier to manage but can give restaurant owners a misleading view of the health of their operation, as income can be recorded before expenses are actually paid.
• Make it a practice to write any notes on the paper receipt about the expense, including what it’s for.
• A week-to-week view gives insight to your sales and cost trends, making it easier to control your cash flow and know where your finances stand at all times.
• There are some financial analysis tools you’ll want to use when reviewing your financial reports.
• Plus, we were pleased that Sage made it so easy to pinpoint bestselling items, set up out-of-stock alerts, and determine minimum reorder levels.
• Industry averages suggest your prime costs should be between 55% and 60%.

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• When doing restaurant accounting also compare your performance over time.
• Accountants use the financial statements bookkeepers produce to prepare tax returns, create budgets, and provide financial advice.
• It would also help to utilize the accrual basis of accounting, which means recording revenue when it’s earned and expenses when they’re incurred.
• You’ll also need to keep constant track of inventory, food and pour costs, prepaid accounts, short pays and vendor credits, and tips.
• In order to record the daily sales you will need to generate a report that summarizes your sales.
• Payroll in the restaurant industry can be challenging as tracking employee hours is complex.
• At the same time, purchases refer to the supplies you purchase in food and beverage orders.

Additionally, third-party meal ordering tools such as GrubHub can give restaurant owners valuable customer insights and information. So too can the use of email marketing to target, communicate with and convert current and prospective customers. Look into multiple accounting software vendors to find options that check most or all of your boxes. Vendors’ pricing pages are especially likely to be goldmines when it comes to this research. You’ll likely see several pricing tiers and the tools they include compared side by side.

The results were extraordinary—after gaining live access to their labor and sales numbers, they were able to schedule employee shifts smarter. Within four months, they were able to reduce their labor costs from 37% to 24%. Your aim is to keep your labor + food + beverage expenses at approximately 60% to 65% of the total sales.

Be mindful of your accounts payable

• The best ones must have strong general A/P features, such as purchase order (PO) tracking and vendor payment tracking.
• In this guide, we’ll break down everything you need to know to start restaurant accounting today.
• Just as there is a right way to do restaurant accounting, there is definitely a wrong way.
• This allows you to manage your accounts payable completely in the cloud and the ability to pay your bills from anywhere.
• By connecting seamlessly with your POS, accounting software automates the collection and organization of financial data and transactions.

At any given moment, you peek at your sales-to-labor ratio or determine if sales are meeting historical averages. These financial snapshots give you the power to take action, in real-time with minimal effort. While long-term trend analysis is important, you should also log revenue reports on the daily and weekly.