Keeping track of accounts is a requisite in any business, and the restaurant business is no different. Doing this from the onset is critical, even though it may seem as an overwhelming task for restaurateurs who, in the initial years, tend to focus more on the day-to-day operations of the business and lose track of maintaining their accounting books in the process.
If you’re running a restaurant and have a limited understanding of how the accounting works, following are some useful restaurant accounting tips that will help in sustaining your restaurant in the long run:
1. Hire a professional accountant: Bringing an accountant or an accounting firm on board is one of the first matters of business you should attend to once your restaurant begins operations. Partnering with an accountant can ensure that your financial records are accurately maintained and are kept up-to-date.
2. Create a profit and loss statement: A Profit and Loss (P&L) statement is the only way of understanding your restaurant’s financial health. As such, it is critical to update and review these on a monthly basis with the help of qualified accounting personnel. The P&L statement provides a quick snapshot of the overall income and expenses of the business, which are crucial in making business decisions, including labour management, menu engineering, supply chain management and so on.
3. Review your expenses: It is easy to lose sight of the various types of expenses a restaurant incurs, as managers remain focused on growing revenues. However, managing expenses from the onset will help establish a path that has a higher chance of success. One of the major categories that one should focus on is inventory management; which, if ignored, typically results in high wastage and possibly theft, resulting in a high food cost and lowering the business’ gross profit margin. Furthermore, staffing should be reviewed to ensure the business is neither over nor understaffed. Other non-recurring large operational expenses should also be avoided to ensure the business does not witness high bottom line volatility month on month.
4. Monitor your revenue: Reviewing the restaurant’s sources of income are just as vital as reviewing the expenses. Understanding the different sources of income to see what’s working and what’s not will help restaurant managers and owners direct their efforts in growing the business and sales accordingly. Furthermore, this will help in defining a marketing strategy as well as launching promotions for specific products. Most importantly, understanding the business’s income potential will form the basis for setting the restaurant’s budget to ensure the business remains profitable.
5. Food Costing: It is imperative to be able to generate an accurate food cost for the business. To ensure this, we recommend having multiple check points for the costing process. Accurate inventory management combined with proper documentation (i.e. invoices, delivery notes, statements of accounts, etc.), will allow the accountant to calculate the monthly food cost for the business. Furthermore, the restaurant’s point of sale system will also provide this information, provided the database of ingredients, recipes, etc. is accurate and updated. Lastly, a manual process to track inventory can also be implemented by restaurant managers to calculate the food cost. This 3-way check will highlight any inconsistencies in the process, allowing the restaurant to improve their internal processes, in order to arrive at more accurate profitability figures.
All in all, an accurate and timely accounting statement can ease your worries with regards to managing your restaurant’s revenues and expenses. You will have a clear indication of where your income is being generated and how the money is being spent to manage the operation. Apart from accounting firms, you can also reach out to restaurant consultants who will offer personalized consulting services for the same.
At Ribbon, we ensure that your restaurant’s accounting requirements are catered to, as a part of our specialized restaurant consulting solutions. You can reach out to us at email@example.com or give us a call on (971) 4360 5758 and we’ll be happy to help!