Diligent bookkeeping and expert accounting will lay the foundation for wise business decisions for your restaurant. Every restaurant has overhead, or fixed costs of running your business, such as rent, insurance, and equipment rental. This ratio can be calculated on an hourly, daily, or monthly rate, and will give you insight into how much your restaurant costs to run. Food costs refer to the cost of preparing a menu item divided by the total revenue earned from the item. This formula is used to make sure that you’re making a profit from each item you sell. Therefore, when you collaborate with professional services or outsource your bookkeeping task, you can leverage the power of several tools and software at a fraction of their price.
Should restaurants use cash or accrual accounting?
However, it depends on the type of restaurant you run, as costs may be higher or lower. To calculate the costs, divide the staff into groups of back-of-house and front-of-house and figure out which group is costing you Accounting for Churches more. Determine your daily inventory costs and calculate the value of the food items you have in stock by tracking your consumables and supplies.
Gross profit and gross profit margin
“The food is normally purchased on a weekly basis and many times more than once per week depending on the types of how to do bookkeeping for a restaurant food being sold in the restaurant. Most restaurants would have an inventory turnover of times for food and times for beverages,” he said. Food cost is the ratio of a restaurant’s cost of ingredients (food inventory) and the revenue those ingredients create when you sell menu items.
Labor Costs
This will automate general ledger entries, ensure updated inventory tracking, and provide labor data, giving you insights into your business’s financial performance. As a restaurant owner or manager, you may be experiencing the common complaint about “thin margins.” And it’s likely to be a valid concern. According to most industry reports, the average restaurant profit margin typically ranges from 3-5% for full-service restaurants to 6-9% for fast-casual spots. That doesn’t leave a lot of room for rising food and labor costs or other fixed expenses.
Industry averages suggest your prime costs should be between 55% and 60%. For DIY bookkeepers, this means careful record-keeping and keeping a close eye on your tax obligations. The restaurant chart of accounts documents all financial transactions in your restaurant, including revenue, assets, and liabilities. However, in-house restaurant accounting has some drawbacks, including that they might not be an expert in the area, or you might have to look for someone who specializes in restaurants. This method has a shorter learning curve and works when you have fewer items to record since it’s easier to track revenue and expenses. However, it only provides a short-term vision of your financial situation since it doesn’t consider petty cash accounts receivable and accounts payable.
Use Professional Accounting Services for Restaurants
- Remote Books Online excels in providing specialized bookkeeping services for cafes and restaurants through a streamlined approach.
- While not required, it’s good practice to have your employees report their daily tips to you on Form 4070A.
- Leveraging cloud-based accounting software, they ensure secure access to financial data and real-time collaboration.
- Rather than trying to handle the books yourself or hiring someone to work internally, we recommend getting an outside bookkeeper.
Calculating prime costs help you find where you can cut costs, boost profits, and increase efficiency. Accounts that require reconciliation include loans, lines of credit, credit cards, bank accounts, and payroll liabilities. It’s a necessary process that ensures that nothing is left unaccounted for.
How to do Bookkeeping for a Restaurant
Choose an accounting software to streamline your data entry tasks, create customized invoices, track your revenue, create regular profit and loss statements, and review your cash flow. The ideal restaurant accounting software for restaurants should offer robust reporting features, be easy to use and allow you to access data anytime, anywhere. Modern accounting software tailored to the restaurant industry is essential for efficient financial management. These tools automate repetitive tasks such as payroll processing, expense tracking, invoicing, and tax calculations, reducing human errors and saving time. Reconciling your accounts is the only way to know that you have accounted for all transactions, and it makes you aware of incorrect deposits, lost checks, and cash variances. You should reconcile all bank and credit card accounts, loans, lines of credit, and payroll liabilities.