Starting a prominent restaurant is the dream of many. But being a good chef and serving delicious dishes is not enough in today’s competitive restaurant business. To survive in this business, you must have a great chef and advertising, managing, and accounting skills. Having a restaurant accounting solution can help you understand the number game.
What is Restaurant Accounting?
Restaurant accounting is the practice of documenting and working out a restaurant’s financial data. It gives insights into the business, improves cash flow, and helps compete with market prices.
Restaurant accounting includes the following:
- Creating a master document for all transactions
- Preparing a bank reconciliation statement
- Analyzing journal and ledger entries
- Categorizing transactions, mainly expenses
- Managing accounts payable
- Managing and completing tax returns
- Checking financial records and balance sheets
To make things easier for you, we have provided some crucial restaurant accounting tips to keep in mind.
Things to Keep in Mind for Restaurant Accounting
Here is a list of tips to keep in mind for better restaurant accounting:
Understanding the language of finance
Most of those who start a restaurant business are not trained accountants. As an owner, to successfully master the skill of restaurant accounting or to understand the insights given by restaurant accounting solutions, you have to be familiar with financial terms like balance sheet, debit, credit, records, cash flow, etc.
Also, learning the basic rules and terms can help you understand how the accountant or the bookkeeper is working on your restaurant’s financial records.
Leveraging a restaurant accounting software
A restaurant accounting software that can integrate and handle multiple financial operations has long-term benefits for your business. With digitization, you can automate many tasks and be notified to pay taxes.
Before choosing your restaurant accounting software, ensure that it performs all the required functions.
A robust restaurant accounting service can help you improve visibility in the market and set competitive prices. As per the Mordor Intelligence expectation, the accounting service and software market will grow from USD 12.01 billion in 2020 to USD 19.6 billion by 2026.
With this demand, we can witness a compound annual growth rate of 8.5% between 2022 and 2027 in this industry.
Often, we try to round off our spending and turnover to make the calculation smooth. Rounding off some figures here and there can mess up the analytics and your understanding of financial insights. Underestimating accuracy can lead to a severe financial crisis.
To get a clear picture of the expenses and profits, entering every detail of the prices and expenses is a must. It will help in gauging the precise ins and outs of the cash flow. This will further help yield better results in the next month or even quarter.
Creating a habit of daily bookkeeping
To effectively run their businesses, restaurant owners must make a habit of bookkeeping. This means recording sales and expenses as a daily practice. Eventually, they can get a sound idea of how the various financial operations (tax payments, penalties, cash flow management, etc.) are run.
Business owners can accurately track variable expenses, also known as running expenses (like the cost of spilled food, electricity bills, water bill, etc.).
Outsourcing tax preparation can also relieve some burden of bookkeeping from the restaurant owners and managers.
Regularly generating analytical reports
Visualizing data helps us understand the figures better than simply reading textual reports. Analytical reports aid in preparing periodic financial statements. These reports help the owner understand the restaurant’s profitability.
Generating these reports after a fixed period (usually every one to two days) assists the owner in getting a detailed insight into the behind-the-scene aspects of finance. Collecting this granular accounting data every one or two days should be made into a habit.
These reports can also guide the owners in planning how to take the restaurant business to the next level.
Benefits of Restaurant Accounting Solutions
Often restaurant owners and managers find it tough to manage the accounting with the core business goal, i.e. to serve great food. With a restaurant accounting solution in place, the restaurant owner can save time by delegating accounting and administrative work can eliminate data-entry redundancy and can dodge fines through active tax planning.
Restaurant accounting services also give them a reality check on their financial state.
Managing the accounting functions of a restaurant can either make or break the business. Thus, owners must heed the key points to fix an efficient restaurant accounting system.
We hope this article has given you a precise idea of the essential things to keep in mind when leveraging restaurant accounting. If you want to manage and automate restaurant accounting operations efficiently, opt for a virtual accounting service.
ABOUT THE AUTHOR: Audrey Phillip