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Restaurant Accounting

Restaurant Accounting

Basics of Restaurant Accounting and How to Avoid Common Mistakes

Most restaurant owners and managers don’t want to be accountants. Fortunately, you don’t need to become one to effectively run your restaurant, but learning the fundamentals of restaurant accounting improves your ability to manage the finances and communicate this information with others.

Key Restaurant Accounting Concepts

You probably aren’t hands-on with all the day-to-day accounting duties, but you need an understanding of the primary concepts.Accounting involves recording and summarizing your business’ financial transactions. Most businesses have similar core accounting needs: recording all expenditures, sending in tax payments, paying all invoices, and tracking revenue. Restaurant accounting adds a few industry-specific processes and functions.

Inventory Management

A restaurant’s inventory covers all of the ingredients that you use to create your menu items. A typical food service business allocates one-third of expenses on its inventory. Effective inventory management is crucial for daily operations and long-term profitability. This process prevents shortages, cuts down on waste, identifies theft and controls your costs.Best practices in inventory management include the following:

  • Organize your inventory: Go through your stock areas and throw out spoiled and expired food. Put similar ingredients together so employees can easily find what they’re looking for. The first in, first out principle is particularly useful in food service. You put the older goods at the front of the shelves. New inventory goes behind your current goods.
  • Count your inventory weekly: Pick a day and a time to check your inventory each week. When you go through this process on a consistent schedule, you end up with better data for direct comparisons. The ideal timing takes place before you open your restaurant or after close. Make inventory counting easier on yourself by planning it before regular deliveries. You have less to count and you can move older goods to the front. If possible, assign inventory counting duties to the same staff members for improved accuracy and efficiency.
  • Use the shelf-to-sheet method: Some restaurants use an inventory list to go through their goods. However, this method leads to inaccuracies. Some items may be on the shelves but not on the list. Other ingredients end up in multiple locations. You count every item on the shelf with the shelf-to-sheet approach, eliminating these problem areas.
  • Run reports on costs and usage: Identify areas of waste or opportunities for cost-saving by running frequent reports. Look for discrepancies between sales and usage numbers. A difference between your chefs’ number of plates sold and the amount of ingredients used to make those plates might indicate your staff may need additional training on portion sizes or ingredient measurements in recipes.

Payroll and Tipping

Restaurant payroll is more complicated than a typical business’ due to the tax rules and credits surrounding tipped employees. Federal, state, and local regulations apply to these employees’ wages and have implications for reporting and documentation requirements.

Under Internal Revenue Service regulations employers must keep employees’ reports of tip income. Employers must withhold employee income taxes, as well as withhold the employee share and pay the employer share of social security and Medicare taxes for both wages and tip income received.

Under the Federal Labor Standards Act, employers may reduce their liability for paying the minimum hourly wage to tipped employees through use of a “tip credit.” Employers can pay tipped employees a reduced wage as long as tip income and that wage equal at least the minimum hourly wage. The federal guidelines as of April 2019 allow a tip credit maximum of $5.12. State and local guidelines do not necessarily follow the federal guidelines, though. Some states do not allow tip credits, and others have different minimum wage requirements.

If your state allows tip credits and you choose to use them, then you must notify your employees in advance and you must calculate the correct tip credit every payroll.

Review These Reports

With more complete information and accurate data you can make better business decisions. At minimum, you should familiarize yourself with the following financial reports and review them regularly for a better understanding of your restaurant’s financial health.

Income Statement

The income statement, also known as a profit and loss statement or P&L, shows whether your restaurant’s operations achieve a profit or suffer a loss. The basic formula is:

Total Sales – Cost of Goods Sold (COGS) – Expenses = Profit (or Loss)

Cash Flow Statement

The cash flow statement shows you how much cash your restaurant receives, where the cash comes from, and where the cash goes during a period of time. This report is important to review to make sure your restaurant has enough incoming cash to pay for all necessary expenses.

Review These Restaurant Key Performance Indicators

Key performance indicators, or KPIs, are the most important metrics that relate to your business objectives and your measurement of success.Look for KPIs that meet these criteria:

  • Relevant to your restaurant category
  • Created from your actual data
  • Available in a timely manner
  • Well-defined
  • Tied to your vision of restaurant success
  • Monitored on a regular basis

A regular review of your KPIs allows you to track profitability as well as to identify performance changes and areas that need improvement. KPIs work well as a basis for comparison. Look at your historical performance and see how that changed through your current data. Compare your reports with benchmark data that’s available for your restaurant’s market.

KPIs are only useful if based on accurate information. If you’re running reports based on poor quality data, you don’t get a true understanding of your restaurant operations. Many food service businesses use restaurant accounting software or point-of-sale systems to collect and organize their data.

Human error is another issue when generating KPIs. Restaurant accountants can enter data accurately and check calculations when the numbers don’t seem right.

You have many KPIs to choose from at your restaurant. Get started with this list of significant KPIs.

Cost of Goods Sold

The cost of goods sold, also called the cost of sales, is the cost of food and beverages at your restaurant. You calculate this number through this basic formula:Beginning Inventory + Purchases – Final Inventory = Cost of Goods SoldYour beginning inventory covers the value of your products in the kitchen and storage areas when the accounting period begins. The purchases include the value of additional purchases during the reported time period. Your final inventory number is the value of your products at the very end of this timeframe.Here’s an example of calculating a restaurant’s COGS on a weekly basis.The restaurant has an inventory valued at $3,000 on Monday. A delivery comes in during this week with a value of $1,500. At the end of business on Sunday, the food and drink inventory totals $2,000.Using the formula above, this is the COGS calculation for that week:$3,000 + $1,500 – $2,000 = $2,500The final number shows how much money it took to create the dishes during that week.COGS gives you visibility into one of your restaurant’s biggest expenses. Controlling these costs is a key factor in improving your company’s profitability. Familiarizing yourself with your restaurant’s COGS will help you:

  • Find opportunities to minimize your costs. You can negotiate your rates with your food distributor or choose to go with a less expensive supplier.
  • Adjust your menu prices or portion sizes based on the actual ingredient cost.
  • Provide accurate information on your restaurant’s financial statements.
  • Have precise numbers for your tax filings. COGS reduces your restaurant’s gross income, which brings down your tax liability. You don’t want to pay more taxes than necessary.

Prime Cost

Your direct costs for making menu items is called the prime cost. This KPI totals your COGS with your labor costs. When you look at labor costs, you must include staff salaries and wages, taxes, insurance and other benefits that you pay for your employees.The formula for this KPI is straightforward:Cost of Goods Sold (COGS) + Total Labor Costs = Prime CostYour restaurant’s prime costs are the biggest expenses you have. They’re also dynamic, as ingredient and labor costs fluctuate over time. You have to monitor it closely to ensure that these expenses don’t get out of hand. A weekly prime cost check-in is a good frequency.You get more insight into your profitability and a better control over your costs when you know your exact prime costs. For example, this calculation may show that your food inventory expenses changed from $2,500 to $4,000 month-to-month. You can investigate why this is the case. Your restaurant may have sold more dishes or customers may choose more expensive menu options. On the other hand, your ingredients may cost more or staff scheduling could account for the increase.Take action once you know the root cause of this change. If you let prime costs go up without looking into the reason behind it, you could cut into your profitability and make it difficult to keep the restaurant going.The prime cost influences your menu prices, inventory orders, staff hiring and scheduling, and how much you spend on indirect expenses.

Cost-to-Sales Ratio

The cost-to-sales ratio presents your expenses as a percentage of your restaurant’s overall sales, or sales for that specific category.Use this formula to calculate the food cost-to-sales:

Food Cost / Food Sales = Food Cost-to-Sales Ratio

The typical food cost-to-sales ratio for restaurants falls between 28 and 32 percent of their total food sales. This number does vary based on the type of restaurant that you operate and the ingredient costs for your location.

Your prime costs should range between 60 and 65 percent of your restaurant’s total gross sales. You calculate this number with the following formula:

Prime Costs / Total Sales = Prime Costs-to-Sales Ratio

Your KPIs don’t tell you a lot of information on their own. Your prime cost doesn’t tell you whether your restaurant is making a profit, and you can’t compare this number to other restaurants. The larger a restaurant is, the higher its prime costs tend to be. However, the sales volume probably is bigger at that restaurant.

When you use ratios, you add context to your calculations. The cost-to-sales ratio shows your expenses and how they relate to the financial health of your restaurant. When you have high costs and low sales, then you have to improve your performance. If you have high costs and high sales, then you’re in a much better position.

Watch Out for These Pitfalls

Several pitfalls get in the way of accurately managing your restaurant’s finances.

Doing Restaurant Accounting Monthly

Too much changes in a month for accounting to work on this schedule for a restaurant. Ingredient costs can go up or down on a daily basis, the number of dishes that you sell may change, and your labor costs are impacted by many factors. You need to schedule time to do at least weekly accounting.

Not Paying Attention to Labor Costs

Your labor costs are typically your biggest expenses behind your ingredients. This number is more than how much you directly pay your employees. You also have to account for staff turnover, the changes in employee schedules based on seasonal demand, payroll taxes, insurance, benefits and bonuses offered. If your labor costs become too high, you may need to adjust your hiring practices or determine wages that reduce rapid turnover.

Forgetting to Reconcile Bank and Credit Card Accounts

Small errors in your accounting can lead to many problems over time. Inaccurate numbers can lead to massive wastage or increased costs across the board. You could pay more in taxes or end up falling short and getting in trouble with the Internal Revenue Service. When you reconcile your bank and credit card accounts against the restaurant’s accounting, you can pick up mistakes before they pile up.

Viewing Your Costs Through Total Sales

Total sales only tells one part of your restaurant’s accounting story. You need a granular look at the categories that influence these sales to determine where your restaurant is performing well, and where you need to improve. When you break down your sales and costs, you gain more visibility into this area. These insights lead to better reporting and a deeper understanding of your operations.

Keeping Static Menu Pricing

Ingredients and labor costs change over time. If your menu price stays the same for decades, you can end up pricing yourself out of business. You need a menu pricing strategy that is tied to your actual costs, while not upsetting regular customers. A seasonal menu is one way to approach this, since you’re changing the full menu every few months. New prices are expected by the customers.

Making Accounting Mistakes

Without a comprehensive understanding of restaurant accounting concepts, you can make basic mistakes that spread throughout your business. Learning the calculations above are the first step in this process, but you can run into many situations that make it difficult to accurately account for your operations.

Simplify Processes With Software Solutions

Streamline your restaurant’s business processes through specialized software solutions. They automate repetitive tasks, reduce human error, and reduce the time spent on your workflows. Consider these software categories for your business:

Point-of-Sale System

A POS acts as a combined cash register and credit card terminal. It also has employee time clock functionality. You end up with an accurate and complete view of your labor costs and sales through this solution.

Accounts Payable Software

This software category automates many parts of accounts payable processes. You get digitized invoices with the line-item details extracted into your accounting system. This software, such as Sourcery, eliminates manual data entry and categorization for invoice expenses.

Inventory Management Software

You can get rid of your manual inventory lists and inefficient spreadsheets. Inventory management software simplifies this essential restaurant workflow and generates data for analysis and reporting.

How Hiring an Accountant Can Benefit Your Restaurant

An accountant brings their financial and tax knowledge to your business. Due to the specialized accounting requirements for the restaurant industry, hiring a specialist in this area is essential.An accounting firm with extensive experience working with restaurants, such as Founder’s CPA, provides guidance on industry-specific topics. This skill set becomes particularly important when it comes to taxes.Your accountant needs an in-depth understanding of the following tax areas:

  • The accounting and reporting requirements for tip credits
  • Restaurant-specific depreciation rules
  • Smallware tax treatment
  • Restaurant-specific startup cost amortization
  • Gift card tax treatment

Restaurant accountants help you create benchmarks and compare your performance with other businesses in your category. If you fall behind similar restaurants, the accountant provides insights on why this is the case and what to do to improve.You face a particularly challenging landscape when it comes to accessing capital. Your equipment has a lower resale value, which makes it a poor choice of collateral for some lenders. An accountant finds loan options and walks you through the process, whether you’re dealing with a private lender or the Small Business Administration.

Your Role in Restaurant Accounting

Restaurant accounting is a complex, but critical component of your business’ success. To accelerate your restaurant’s profitability and help ensure its continued operation, you should take weekly inventory, monitor KPIs regularly, review financial reports monthly, calculate COGS at least weekly, and watch labor scheduling and costs. You also need to be aware of tax implications and requirements. Accomplishing all these tasks and more is much easier and more effective if you work with an accounting firm with restaurant-specific knowledge and if you implement the use of software solutions.

Restaurant Accounting

Restaurant Accounting Basics: Your Bottom Line for a Thriving Business

Managing a restaurant is a fast-paced and high-pressure endeavor. In addition to making great food, you have to keep a close eye on your restaurant accounting. Knowing how much those meals cost to produce, how often you replenish inventory, and your staff costs make the difference between profitability and insolvency. Here’s a step-by-step guide to the basics of restaurant accounting and how it’s different from other industries.

Restaurant accounting

Know Your Figures: Key Terms in Restaurant Accounting

Every business owner knows you have to charge enough to cover costs and make a profit. But restaurants work a bit differently than other businesses, because of the product that they sell. Their revenue is dependent on service and a high-turnover, perishable product. To gain insight into how your restaurant is performing, it’s key to gain an understanding of these key terms:
  • Cost of Goods Sold: This is how much it costs to make your menu items. It does not take into account overhead expenses like rent or staff. Instead, it is a simple calculation of the ingredient costs for each dish.
  • Labor Costs: Your labor costs are the people power that gets the job done in your restaurant. This includes everyone from the front of house to back of house. Include salaries, benefits, and payroll taxes in your labor costs.
  • Prime Costs: The majority of your business expenses are included in prime costs. Your prime costs are your cost of goods sold and your labor costs. Experts often recommend keeping your prime costs at 65 percent or lower of your overall budget.
  • Occupancy Expenses: This is what it costs for you to maintain your space. That’s your rent or lease costs, insurance, repairs, and utilities.
  • Operating Expenses: These are everything else that you have to pay for in order to run a successful restaurant. This is your website costs, marketing, napkins, and printed menus.
  • Cost-to-Sales Ratio: This is a measure of your prime costs (cost of goods sold plus labor costs) to your revenue. If you bring in $20,000 revenue on a weekly basis and your prime costs are $12,000, then your cost-to-sales is 60 percent.

For most restaurants, it’s easier to cut back on prime costs before occupancy and operating expenses. Having these figures clearly defined can help you to assess whether you are on the right track or have to make changes.

That’s one reason why you should review your prime costs on a weekly basis. You have an opportunity to cut back, especially with reference to how busy you are. If you aren’t filling tables, you may want to order less food or reduce the number of staff shifts. Conversely, if your revenue is high and you still have tables available, you may want to increase your capacity through more ordering and more people working.

Restaurant accounting

Know Your Accounting Method

There are two accounting options for all small businesses: cash and accrual. The main difference is that in a cash-based method, you record revenue when money actually changes hands. In the accrual method, you record revenue when you invoice for payment. Most restaurants use a cash-based method, although the IRS may require you to use the accrual method once your revenue becomes large.

Here’s an example of the difference. Perhaps you have a contract to cater an event off-site. The event takes place on February 26, but you give the client seven days to pay. Under the accrual method, the revenue occurs in February because that’s when you agreed to the job and the contract for payment is in place. Under the cash method, the revenue would occur in March — or whenever you receive payment — because that is when the money actually changed hands.

Restaurant accounting

Key Statements

In addition to understanding important accounting terms, you should also know what you are looking at when your accountant gives you certain statements. Here are a few important documents you should be familiar with:
  • Cash flow: This measures the amount of cash (or cash equivalent) going through the business. You can think of it as a way of gauging how well you are managing the money that’s coming in and out of your doors.
  • Profit and loss: This is the overall picture of your restaurant finances. The P&L statement is a snapshot of how much you’re spending and how much you’re bringing in. The bottom line of this statement is, as the name suggests, either a profit or a loss.
  • Chart of accounts: This is the master sheet of all the financials to do with your business. Its main categories include your assets (like the equipment you own), liabilities (like business loans), revenue, expenses, and equity. These categories will get broken down into more detail, so you can analyze your full financial picture.
Working with your accountant, you can discern what areas of your financial well-being need attention. That insight allows you to keep going in the short term, and plan for a healthy business over the long term.
Restaurant accounting

Managing Inventory

Because inventory is the heart of your business — you serve freshly prepared food to patrons daily, after all — it’s essential to keep a close eye on your rate of turnover. You don’t want to order more ingredients than you use, but you also don’t want to disappoint customers by making menu items unavailable. Do your inventory on a weekly basis in order to calculate an accurate cost of goods sold and to ensure appropriate planning.

Partner With the Experts

Part of being a savvy business owner is knowing when it’s time to call in partners with more expertise. Honest Buck knows the ins and outs of restaurant and cafe accounting. To learn how we can help you gain visibility into your bottom line, contact us today.
Food Cost Management, Restaurant Accounting

Recipe Cost Calculator: How to Cost Out a Recipe (with Spreadsheet)

Do you want to save money, stop wasting food, and stick to your budget while still eating great?

Whether you’re trying to cook healthy meals for your family or are a restaurant owner trying to boost your profits, a recipe cost calculator can help you achieve your goals. Keep reading to learn how to track your food costs down to the portion and what you can do with that information.

Don’t forget to grab our sample recipe cost calculator spreadsheet and make a copy for yourself!

recipe costs

recipe costs vary dramatically by ingredient

Why Knowing Recipe Costs Helps at Home

What do you know about your grocery budget? How much you spend per month? How much you spend per week or trip to the grocery store? What about per meal?

You can cook a healthy, filling meal for around $2 per person if you focus on keeping costs low and about $4 if you’re a little more relaxed about what you spend. Multiply that by the number of meals (breakfast, lunch, and dinner) and days that you usually shop for. If you’re spending more each trip, is it because you’re:

  • Having food go bad before you cook it?
  • Buying ingredients in packages bigger than you need?
  • Absorbing cleaning supplies or other purchases into your grocery budget instead of tracking them separately?
  • Buying expensive snacks or processed foods?
  • Splurging on steak or lobster?

Knowing your cost per recipe or meal lets you know exactly where you can trim your budget, how much to buy when you go shopping, and when you can treat yourself if you want to.

know how to track per service food cost

Why Restaurant Owners Must Know Their Recipe Costs

If you’re cooking at home, it’s OK if you go over budget on some meals if that’s how you choose to spend your money. If you’re running a restaurant, not sticking to a budget could mean going out of business.

The average restaurant profit margin is only three to five percent. With up to half of your costs coming from food, maintaining tight control over your food costs is the key to success.

This doesn’t mean always trying to go lower, though. A good $20 dish might sell better than a bad $15 dish. What you don’t want to do is price something at $15 because you feel like that’s a good price without realizing you’re putting in $16 worth of ingredients.

Knowing your per-plate recipe costs helps you understand the minimum amount you must sell a dish for to cover your food, overhead, and profit. You then need to think about your customers’ preferences and how you want to position your restaurant in the market to decide if that’s a good price for your menu.

If it isn’t, you’ll need to adjust your recipe or skip that dish altogether.

chicken and waffles

how much does each item cost?

How to Calculate Your Recipe Costs

Calculating your recipe costs is a simple three-step process. (It may be easier to follow along if you download our free recipe cost calculator now.)

recipe cost calculator spreadsheet

use our free recipe cost calculator spreadsheet to maximize profit

1. Write Out Your Recipe

Write out your full recipe as you actually cook it. If you use a recipe book, don’t just copy it if that’s not exactly how you make it. For anything that isn’t a precise measurement, e.g., a sprinkle of seasoning or one potato, use a measuring cup or scale to get its volume or weight.

2. Figure Out Your Ingredient Costs

Next to each ingredient on your recipe, write down its cost per unit. For example, if you need two pounds of chicken and chicken is $5.99 per pound, write down $5.99 per pound. Next to that, multiply $5.99 times two for a total cost of $11.98. This makes it easy to update your recipe cost when food prices change.

Some items only come in packages bigger than you need. In these cases, you need to figure out if it’s something you can use again.

  • If it’s something that lasts a long time, like cooking oil, you can get out your calculator to figure out the cost per ounce or tablespoon. Use that number for your ingredient cost.
  • If it’s something you end up throwing away, like the other half of a container of broth, use the cost of the entire container as the total cost for that ingredient.

3. Add it Up

Once you have all of your ingredient costs, add them all up for your total recipe cost. Divide by the number of servings to get the per-serving cost.

Remember to use the number of servings you actually use. Don’t use the number from the original recipe if that’s not how much you serve.

Additional Steps for Restaurants

Restaurants need to add three more numbers to their per-serving cost to get their total costs and needed selling price.

Overhead

Overhead is all of your other expenses. This includes things like rent, wages, and utilities. There are two ways to figure out overhead.

  • If most of your items are priced similarly, you can divide your total monthly overhead by the total meals you serve each month. Add that flat amount to each serving’s cost.
  • Otherwise, you can use a ratio. Look at your profit-and-loss statements for the last year. If you spend an average of $5 on overhead for every $10 in food costs, your ratio is 0.5. For each serving, multiply your ingredient costs times 0.5 to get your overhead cost.

restaurant overhead

add in worker costs to overhead

Waste

Waste is typically unavoidable in a restaurant setting. Some things may need to be precooked and thrown away at the end of the night if not ordered. Other things may have random slowdowns in sales and go bad before you can sell them.

To calculate waste, you need to track exactly how much you throw away. If you only serve 90 percent of what you buy, you should add another ten percent of ingredient costs to account for waste.

There are three different ways you can calculate your waste.

  • Dividing the value of all the food you threw away by your total food purchasing costs. This is the simplest method.
  • Dividing the number of times you sold a specific dish by the number of times you made it. This method is good for restaurants that precook their meals and throw away unsold portions.
  • Dividing the number of times you sold a specific dish by the number you could have sold with the amount of ingredients you bought to make that dish. This is the most accurate method but gets complicated when you use the same ingredients for multiple dishes.

If you use the third method, make sure you’re only tracking ingredients that went into that dish or were thrown away. If you bought enough ingredients to make 100 of the dish, used some of the ingredients to make another dish, and only had enough ingredients left to make 80 of the original dish, divide by 80 not by 100.

Profit

Now that you have all of your food costs, overhead, and waste, you need to add a profit. To do so, multiply your total costs by your desired profit margin.

This might be the average five percent, or you can go higher if you think your customers will pay it. If you want, you can vary your margin by dish based on how popular it is or to round up to a number that looks good on your menu.

Extra Credit: Prime Costs

After calculating your recipe cost and profit you can take an additional step and calculate your restaurant’s prime cost.   Prime cost provides a helpful metric to the overall management of your restaurant.    Combine with recipe costs and profitability, prime cost can illuminate a profitable path forward for your restaurant.

Use Your Recipe Costs for Smart Buying

Once you have your recipe costs, buying food for home or your restaurant becomes a breeze.

  1. Figure out how much of each recipe you want to make.
  2. Add all of those ingredients to your shopping list or food order guide with the cost you’re expecting to pay (from your cost calculator).
  3. Sort your shopping list by the total cost (not unit cost) of each ingredient.
  4. Start at the top of your list and look for stores or vendors with specials on those items. As you move down your list towards items that make up a smaller portion of your costs, it may not be worth the extra time, gas, or shipping costs to keep looking for a better price.
  5. If you can’t find a price at or below your expected cost, do another cost calculation with the price that you found. If you’re shopping at home, does the new cost work for your budget, and is it worth it? If you’re shopping for your restaurant, is it time to raise prices or change your menu?
  6. Buy exactly what you need. Hopefully, you can order in units that match your shopping list. If you can’t, make sure you plan for how to use the extra amount or that you’ve included the cost of waste in your budget.

market

shop intelligently with recipe cost data

Get Started With Our Recipe Cost Calculator

Does recipe cost calculation sound like a smart idea but maybe a little complicated? Our recipe cost calculator makes it simple. All you need to do is fill in the blanks. Download it now to get started.

Are you a restaurant owner that wants to take even more control over your costs? Sourcery tracks your spending and price changes and sends alerts when they exceed your chosen limits. This lets you easily know when to update your recipe cost calculator and when you need to ask your vendors why prices have changed. All you need to do is email your invoices, and Sourcery automates the rest.

Restaurant Accounting

10-15 Ways to Improve Your Accounts Payable Process

If you are a restaurant manager or owner, you may find yourself playing an almost never-ending game of catch-up. While attending to the stress related to ensuring your guests have a positive experience and generating superior satisfaction, you also have to handle accounts payable issues. This includes all the problems that can occur at the backend of your restaurant, such as inventory issues, missing payments from your vendors, duplicate invoices and more.

The good news is, there are some ways you can improve your restaurant accounting processes. Use the tips here to make sure your accounts payable are handled and that they run on auto-pilot.

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Restaurant Accounting

5 Easy Invoice Processing Steps with AP Automation

Your accounts payable process is fundamental to the smooth functioning of your restaurant. After all, without it you can’t pay the bills or keep the supplies coming in. If your eatery is like most, you have regular food orders and must maintain positive relationships with your vendors. That isn’t always easy when your already-busy location has to ruffle through piles of paperwork to get the bills processed in a timely and accurate manner.

There’s a way to solve this issue: automation. With the right system in place, you can focus on what’s really important in your business while satisfying your accounting needs. Often, all it takes is a few tweaks to your existing procedures as well as the implementation of new software that will make things easier and give you more control over the financial health of your eatery. Here are the 5 easy invoice processing steps:

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Restaurant Accounting

Benefits of Moving From Paper Invoices to AP Automation

When you run a restaurant, you may get so caught up in the day-to-day tasks at the front. You neglect all the paperwork and other processes that have to be handled at the back office. This can lead to a wide array of issues, from inaccurate invoicing, improper supplies, late payments and more. If this is combined with a manual accounting process, you may find your entire restaurant in disarray after just a few months.

Today, thanks to innovative technology, there are few things that can’t be done online and automatically. Unfortunately, if you are one of the 58 percent of businesses still handling accounting and invoicing manually, you are likely wasting time and losing profits.

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Restaurant Accounting

How to Manage Accounts Payable Effectively

Running a restaurant involves quite a few moving parts. While the customer is often the focus for many restaurant owners, there are situations when it’s the back office that is holding you back from growing.

Having the best accounts payable management processes in place can help ensure that suppliers and creditors are always paid in a timely manner and that you don’t lose time trying to fix mistakes. Also, when you begin using the right accounts payment system in your restaurant, it will help free up the capital on your balance sheet, opening up an array of new opportunities. Another benefit of a quality accounts payable system for your restaurant is that you can avoid expensive mistakes. These take both resources and time to fix, which may divert your staff from other, more important tasks.

Additionally, if your payments are delayed to your suppliers, then it can result in missed food or drink shipments, delayed vendor payments for linens and cleaning, and more. All of this can negatively affect your restaurant business, but it can be avoided by utilizing the right accounts payable solution.

With the right accounts payable management system and procedures in place for your restaurant, you can even reach higher levels of success.

There are several ways that you can begin to improve your accounts payable management, such as:

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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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