For many, opening a restaurant is a dream come true: the smell of fresh food, the smiles of satisfied customers, what more could you want from a job?
But running a restaurant isn’t all about smiles and pastries. At the end of the day, a restaurant is still a business, which means you need to be prepared to put a lot of time and energy into managing your finances if you want to be successful in the restaurant business.
If you don’t know how to get started, don’t be afraid. In this guide, we’ll cover the basics of what you need to know to get started with restaurant accounting and accelerate the financial growth of your business.
What is restaurant accounting?
Restaurant accounting is just accounting as it relates to restaurants. There is no secret sauce here: just plain old financial statements and calculators.
But what is accounting? Well, accounting is the process of keeping financial records for a business, such as information about your cash flows, sales, losses, etc. Essentially, you can think of it as collecting all your paychecks, receipts, bills- invoices and any other financial records. you have for safe keeping.
Once you have all this information, it can be used for a variety of purposes, such as providing information to help management identify areas that may need improvement. Of course, it can also be used for simpler purposes such as tax return preparation.
Fundamentals of Accounting in Restaurants
Accounting is a deep field that takes years of study to master, so there is no easy way to summarize even the basics. The shortest way to summarize the basics of accounting is this: Accounting is used to record the financial transactions that a business makes. By keeping a record of these transactions, business owners, managers, etc. can better understand the state of their business and make adjustments accordingly.
To do all this, they need to look at numbers such as restaurant expenses, revenue, liabilities, assets, and many other terms that could fill an entire book. If you want to learn more about restaurant accounting, you can start with these terms and more, which we will cover shortly.
What key financial reports do you need?
There are many different reports that you will need to keep track of your restaurant finances. Here are a few to get you started:
- Chart of accounts: The Chart of Accounts is the index for all the different account statements in your company. In short, this is the ledger for your business.
- Daily sales report: This report records sales data for a period of one day. He usually breaks down the numbers into different categories such as drinks, food, taxes, etc.
- Cash flow forecast: This is a report on how much money you expect to receive from your business over a given period of time.
- Instant Report: This shows key information about a restaurant’s finances at a given point in time, such as income, expenses, debt to equity ratio, etc.
- Monthly performance report: This provides information on how your restaurant is performing financially from month to month.
- Gains and losses report: This is a financial statement that contains a summary of income, expenses, and expenses for a specific period of time.
- About cash flow: on cash flow a financial document that summarizes cash in and out of a company over a specified period of time.
What key performance indicators should be tracked?
Again, there is no easy way to summarize all the indicators you should be tracking. However, here are a few to get you started:
- Sales: In most cases, this should be the first metric you look at. Your sales data will show you how much revenue you are making and that is the key to staying profitable.
- Cost of Goods Sold (COGS): This refers to how much it costs you to produce the goods you sell. In restaurant terms, this only means the cost of the ingredients, not the cost of labor and equipment.
- Cost price: Cost is similar to cost but also includes labor costs. This means that the cost price is equivalent to the cost of raw materials plus labor. The only thing it doesn’t include is fixed costs. The formula for calculating the cost: Cost = Direct raw materials + Direct labor.
- Turnover ratio: The turnover ratio measures how quickly goods enter and leave your business. As a rule, it is used when accessing inventory. It provides a quick look at how effectively your business is selling its products.
- Server tests: This includes several different markers that show how well the server is performing, such as average per person, server errors per guest, and number of guests served per person per hour.
Benefits of Restaurant Accounting
Accounting in restaurants is not just useful – it is absolutely necessary. In fact, without doing restaurant bookkeeping, you will not be able to file and pay taxes, which can lead to trouble.
Accounting is essential to make sure you have records of all important financial data. Not only does it make basic functions such as paying taxes easier, but it also provides important insights into how your business is doing.
For example, can you imagine a restaurant that had no idea how much money it was making each month? The restaurant would not be able to tell if it was profitable or not, and would probably go bust pretty quickly.
Restaurant accounting should not be seen as something useful, but an absolutely integral part of your restaurant, no less important than the preparation of the food itself.
Accounting in a restaurant is an integral part of the work of a catering establishment. While it may not be as exciting as other areas of the restaurant business, without it, you wouldn’t be able to own a restaurant at all.