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Restaurant Accounting

Restaurant Accounting

How Does Paperless Accounts Payable Work?

As a restaurant owner, you can feel confident that things are going to continue to change and evolve. It is your job to adapt to these changes to ensure your restaurant can continue being successful.

For many years, owners and managers of restaurants didn’t use much technology. In fact, the typical desk in restaurant offices was full of notes, binders, invoices and piles and piles of other paperwork that needed to be reconciled. The only marketing outreach even considered was newspaper and radio ads in the local area. Technology was extremely expensive at this time and it required training, which was two items that most restaurant owners were short on.

Even today, you don’t have much time to sit around and contemplate growth. As a restaurant owner, you know things are always moving. As a result, it is best to eliminate those outdated manual processes and start using something more efficient and effective in your accounting processes – paperless AP automation.

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Restaurant Accounting

Accounts Payable Invoice Processing For Restaurants

As a restaurant manager, you are likely playing a seemingly never-ending game of catch-up. In addition to trying to provide a quality experience and ensuring guest satisfaction, you also have to deal with issues that usually occur at the worst possible times – such as missing a payment to a liquor or food vendor, inaccurate food costs, duplicate invoices, inventory problems and more.

If you are part of the management team (or you are the management team) at a restaurant, especially chains that have several locations, you may be searching for a simpler solution. After all, the process of handling all the accounts payable invoice processing can be tedious and daunting at the least.

Learn more about this process and why it may be time to think about automation solutions, like the ones offered by Sourcery, here.

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Restaurant Accounting

Accounting Tips For Restaurants

Restaurant accounting is a unique beast. You can be a huge success in the restaurant business with decades of experience in all the positions from head chef to general manager, however, you still may not be an expert when it comes to restaurant accounting processes. Where do you start? Do you know what a profit and loss statement looks?

Choose an Option for Keeping Your Records

You have to first figure out how you are going to keep your records. In most cases, this is based on your personal preferences and budget. There are several options to consider, including the following:

  • Paper ledger: If you have a lower volume of business, and you aren’t exactly comfortable with technology, working on paper is a straightforward option. You can utilize a basic ledger book; just make sure to carbon paper everything you do. The downside is that this method is extremely at risk of human error. This is one of the lowest cost options, however, when you provide these records to your accountant for taxes, they will likely charge more than if you used a restaurant-specific software.
  • Spreadsheet: Another fairly simple option is a spreadsheet. Once created, you can use this to export your information to your accountant.
  • Small-business accounting software: You can find many software options (discussed below) to help you keep your records.
  • Restaurant-specific programs: There are software programs specifically for restaurants that offer features such as point of sale and ordering and inventory management. This option is more expensive initially but makes your record keeping easier and less time-consuming.

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Restaurant Accounting

What Makes Up a Restaurant’s Profit and Loss Statement

Regardless of if you are running a five-star, elegant dining restaurant, or a smaller, mom and pop style eatery, a profit and loss statement is a necessary tool. More than just having a P&L, you must know what it shows, how the statement works, and how you can use the information it contains to determine the strengths and weaknesses of your business.

The Restaurant’s Profit and Loss Statement Defined

The profit and loss statement used by restaurants is also referred to as a statement of operations, statement of earnings, and income statement. It’s like the P. Diddy of restaurant accounting forms. A P&L is a management tool used for reviewing the total expenses and revenue of your restaurant during a certain time period.

At its most basic level, your P&L is going to reflect costs that are being subtracted from sales. The result of this provides a rough estimate of your restaurant’s overall financial health. For example:

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Food Cost Management, Restaurant Accounting

The Restaurant Portion Control Profit Triangle

If you’re like most restaurant owners, you’re not sure how much it costs to make any one dish in your commercial kitchen. That makes sense, given the unstable nature of restaurant commodities and the realities of invoice creep.

In the modern world, food costs are some of the most important factors in overall profitability, but most owners and managers aren’t sure how to get a grasp on them accordingly. After all, many recipes require a few dozen ingredients, and it’s hard to price those out accordingly. Add to this the stress of rushing to keep up with customer demand, and you’ve got a tough equation to solve.

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Restaurant Accounting

Where Does Your Profit Go? Understanding The Magic Nickel

Revenue from a restaurant is a great thing, but more important than a dollar of revenue is a few cents of profit. For many restaurateurs, a mere nickel in profit emerges from a dollar’s revenue after expenses and costs take their toll. How can this be, you wonder? You keep track of your expenses — don’t you? You know what you spend on food, beverages, and labor. What other profit goblins could there be?

Revenue

Let’s start with revenue. In a typical restaurant, the bulk of your revenue is from food and beverage sales. You may have other small sales, such as souvenirs, or surcharges for banquet room rentals and the like. No matter the source, you bring in a dollar of revenue, and then the costs start to nibble away.

So how do those costs typically breakdown?

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Restaurant Accounting

How to Save Money in the Restaurant Business Without Raising Prices

Profit is the name of the game for many a restaurant, whether it is an independent business or part of a chain.

When profits are high, you’re happy.

On the other hand, when they plateau or decrease, you could be scrambling for solutions. Often, an immediate answer is to raise your prices. Before you do that, though, you should first explore a few other possibilities to save money.

Redefining Labor Costs

Labor costs vary from restaurant to restaurant and from source to source, but consulting firm BDO put them at 30.5 percent of sales in 2016, an increase of 0.8 percent. Ideally, labor costs should be no more than 28 percent to 30 percent of sales, although that percentage excludes employee benefits, which could constitute up to 6 percent of sales.

So how do you make labor costs work for you?

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Restaurant Accounting

How to Calculate & Manage Your Restaurant’s Prime Costs

As a restaurant owner or manager, it’s important that you keep your costs low and your profits high. That’s often easier said than done, however.

For restaurant accounting purposes, your prime cost is the magic number. When this number is high, you may be in trouble. When it’s low, however, your profits will soar. Here’s how to calculate and manage this important figure.

What are prime costs?

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Restaurant Accounting

What Is My Net Profit Margin and How Do I Manage It?

Restaurant owners deal with a lot of numbers: total revenue, gross profit, expenses, net profit and net profit margin, to name just a few. Each category has its own set of numbers too. For example, food and labor costs factor into expenses and affect the bottom line in many other categories.

Net profit margin is one of the top numbers restaurant owners need to know. It gives an accurate insight into how profitable a restaurant is, especially when compared with competitors’ numbers. Here’s an overview of what exactly a net profit margin is, its importance and how restaurant owners can best manage it.

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