Restaurant Bookkeeping Tips and Best Practices

“Earnings before interest, taxes, depreciation and amortization” is used by restaurateurs, investors, and financiers as a proxy for cash flow. EBITDA represents earnings that are a result of operations only, while stripping away the effects of financing, accounting, and capital spending on your restaurant’s earnings. You and your accountant will work on certain bookkeeping and accounting tasks together. You’ll also want to know enough about accounting to monitor financial KPIs that will help you make business decisions on the fly.

So here are the essentials of restaurant accounting and bookkeeping when it comes to reports, processes, and KPIs. Bookkeepers are more task-based and manage accounts payable, payroll, and posting journal entries. Cost of Good Sold (COGS) is a KPI that shows how accurately you’re pricing your food items and controlling your inventory. Keeping track of your COGS ration will help you reduce and maintain your inventory costs.

Use Restaurant Accounting Software

Restaurant bookkeeping plays a crucial role in effectively managing your restaurant’s finances. By keeping detailed records of costs and revenue, you can build a strong foundation for making informed business decisions. Prime costs are one of the most essential KPIs for restaurant owners.

• Now on the next screen simply mark off your deposits and payments that cleared your bank on the statement until you show a difference of $0.
• Even though restaurant accounting is daunting, understanding the basics is not impossible.
• When you’re comparing accounting periods, you want to accurately compare revenue based on times that should be equally as busy.
• While those are the basics of restaurant accounting, there are some things to take into consideration that are specific to the restaurant business.
• They ensure the accuracy of figures like revenue and expenses, track inventory and tax obligations, and make recommendations to maximize profit.

This statement enables you to analyze the financial progress of your restaurant. With this statement, you’ll be able to determine where you are making or losing money. The chart of accounts includes assets, liabilities, revenue, expenses, and owner’s equity. This chart can be broken down into subcategories that specifically tailor to your business.

Should I Outsource My Restaurant Bookkeeping?

Alternatively, overestimating your income could cause overspending because you weren’t working with an accurate budget. The best way to avoid either issue is to regularly record exact amounts of revenue. Fixed costs are the costs that either https://adprun.net/outsourced-bookkeeping-services-for-financial/ don’t change or you have no control over the change. This includes your rent or mortgage, equipment costs, insurances, permits, and other operational expenses. These fixed costs typically make up the minority of your restaurant expenses.

This method reports income as it’s earned and expenses as they appear. Under accrual accounting, CoGS is recorded as inventory is used, not when the suppliers are paid. At first blush, cash-based accounting might seem like the Small Business Bookkeeping Basics best kind for restaurants. It records income as it enters your bank account and records expenses when they’re paid. Restaurant accounting is also made up of essential bookkeeping processes that keep your business running.

How To Master Restaurant Bookkeeping in Five Steps

He owns Genuine Communications, which helps CMOs, founders, and marketing teams to build brands and attract customers. When you calculate break-even point in units, you’re learning how many pizzas, coffees, fixed price meals you’ll need to sell to achieve that same goal. Getting your financials right can actually help your business deliver on that very passion that motivates you in the first place.