Restaurant success starts with the fundamentals: bookkeeping. Getting ahead of your bookkeeping and its processes before they become a problem is best. The longer you wait to get the books done, the more the transactions accumulate and the harder it is to get things right. Our comprehensive bookkeeping guide for restaurants gives you the building blocks to set your growing restaurant business up for success. Our second installment in this series looks at cash flow management for restaurants, how to hire the right bookkeeper for your restaurant, and why outsourcing your restaurant's bookkeeping may be right for your business.
1. Use the right accounting software and POS to streamline your restaurant accounting
One of the most important things you can do to keep your bookkeeping process as simple and straightforward as possible is to use the right accounting software.
Cloud-based software will allow you to integrate all of your systems, creating an easy data flow between every program you use. It also provides the advantage of accessing your essential data from anywhere, even while you're on the go.
QuickBooks Online is one of the most highly recommended cloud-based software programs. It easily integrates with many different restaurant POS systems, plus it is easy and efficient to use.
2. Stay up to date on your bookkeeping
Bookkeeping may be a tedious task, but it is vital to the success of your business. Bookkeeping allows you to track all of your income and expenses, providing you with detailed reports about the current status of your business and projections about your operations in the future. Keeping accurate records allows you to track your restaurant's revenue, food, labour, and operating expenses. It will also keep things organized when you must pay sales or liquor excise taxes.
Bookkeeping tasks for your restaurant will typically include:
- Tracking expenses
- Tracking daily sales and cash deposits
- Paying vendors
- Payroll and tips management
- Monthly bank and credit card reconciliations
- Generating financial statements such as profit and loss, balance sheets, and cash flow statements.
3. Track your prime cost
There are two main types of restaurant expenses: fixed and prime costs. Fixed costs include things like rent, equipment leases, insurance, business licenses, and permits. These are the costs you have little control over and make up the smallest percentage of your overall expenses.
On the other hand, prime costs comprise most of a restaurant's expenses and consist of food costs, beverage costs, salaries, payroll taxes, and benefits. Tracking prime costs is important because they are the best indicator of a restaurant's profitability and show how well the business is being managed daily. If a company runs well, prime costs should stay within 60%-65% of sales.
It is vital to monitor your prime costs on a weekly basis to track any fluctuations in expenses and identify areas where you may be able to cut unnecessary costs. For example, if your labour costs are high, you may want to consider hiring more part-time contract staff to avoid having to pay extra payroll taxes and benefits.
Tracking your business’s prime costs is key to determining how much revenue you need to break even or make a profit.
4. Manage your food costs
Food costs are a component of a restaurant's prime costs, and keeping a close eye on these expenses is essential to ensure profitability. A restaurant's food costs can fluctuate based on many factors, including seasonality, poor weather, or natural disasters.
A restaurant must regularly monitor food costs and keep them to a pre-specified percentage of its cost structure. This allows the restaurant to review these costs and decide whether to change its ordering quantities, raise menu prices, or change its overall menu to include only those ingredients with fewer price fluctuations. The restaurant must also evaluate each menu item to ensure that every dish is profitable.
5. Review your finances regularly
A thorough review of your finances regularly will give you a good insight into your restaurant's performance. The profit and loss statement is an important financial report to review regularly to understand your profitability and the financial health of your business. Concentrating on your prime, food, and labour costs and finding innovative solutions to manage these expenses is also important.
By analyzing different revenue sources, you can determine profitability and decide which areas of the business are most successful. For example, take a detailed look at how much you earn from food sales, alcohol sales, merchandise purchases, and catering and look for methods to grow the most profitable areas and improve on those that are lacking.
Since the restaurant industry has exceptionally tight margins, it's crucial that you gain visibility into your business performance. Bookkeeping is a vital part of your restaurant business, and it will help keep your numbers organized and visible. If you have questions about the best ways to manage your restaurant's books or if you need professional assistance with your bookkeeping needs, Enkel is here to help.
6. Consider outsourcing your bookkeeping and payroll
Unfortunately, many restaurant owners take on their bookkeeping as a means to save costs, but too often, these accounting tasks fall to the very bottom of the priority list. This leads to chaos, confusion, and inaccurate records that can be difficult to rectify.
Building Blocks to Set Your Business Up for Success
Comparable and consistent data
Bookkeeping is the source of your financial data. The key to success is to work with a bookkeeper who understands your vision and has the ability to set up a system that scales with you.
When the books are set up and tracked to support your growth plans, you can pull the ongoing insights you need and know what’s happening across your business, whether you have a single location or several.
For example, if you have several locations set up as separate companies, you will need to track the books separately, as each company will need to file its own tax return at year-end. In this case, your bookkeeper can standardize the chart of accounts across your companies so financials can be easily compiled and continuously compared across companies. Your bookkeeper can set up location or class tracking in QuickBooks Online (QBO), providing you with a clear picture of revenue and expenses (by location, if applicable) and a consolidated view.
With consistent data and reporting, other ratios and calculations like revenue per seat, sales per square foot, and inventory turnover should be clear and easy to compare.
Margin analysis
Generally speaking, if you are operating a few locations, you should see trends in your gross margin. Gross margin is calculated as your net sales revenue minus cost of goods sold (COGS). In a QSR business, the most significant part of COGS is typically food costs and non-management-related direct salary costs.
While you might see some differences between restaurants based on demographics and location, you are likely to see some consistency.
If gross margin is low, this could mean that there is more food waste at one location or that a location or team is performing better than another. Understanding the profitability of your different locations, in the long run, will allow you to find ways to improve the underperforming restaurants.
Payroll
Payments can be complicated in an industry often run by part-time staff and high turnover. Tipping jars give way to tips added through digital payments – like credit card, debit, app, or online – so distribution is often done through payroll. With a large portion of hourly staff, overtime considerations, and inevitably, someone always forgets to clock in or out.
Managing payroll bi-weekly or semi-monthly can be a significant time commitment for QSR owners. It may be manageable With one location, but it can become overwhelming with many locations.
Some owners will try to eliminate the burden by finding a partner to manage their payroll, as it’s a business function that’s often outsourced. Big market players like Ceridian and ADP have great platforms and a strong reputation, but they only help with part of the problem.
Often, it’s better to go with a provider with whom you can have a closer relationship. One that will work as your extended payroll team, keep your business compliant with payroll legislation, and ensure that payroll is processed correctly in time for every payday.
Going Digital
Customer Experience Begins Online
Your customers’ experience of your restaurant begins online. Positive reviews on sites like Yelp can help shape your customers’ perceptions before they even set foot in your restaurant. Higher-end restaurants and busy chains are learning the importance of offering digital reservations through their own website or programs like Open Table.
RetailMeNot, a deal-seeking service, recently reported that more than 1 in 3 diners are researching restaurants online before they visit in person.
OpenTable's bot integration with FaceBook Messenger allows guests to reserve tables via chatbot from their chat feed. It won't be long before food delivery services follow suit.
Online Ordering
Online sales and ordering are becoming more important,, too, particularly in casual dining and fast food establishments. Services like DoorDash, Foodora, JustEat (and countless others!) are making quick and easy ordering available at the tip of your fingers.
These services not only offer easy, hassle-free online ordering, but many have built-in analytics that can help you understand your most popular items and busiest times. Use this information to strategize your inventory and staffing decisions, saving you money. Just like your POS system, you can integrate your online ordering with cloud-based accounting software like Xero.
If you’re in the hospitality industry, it’s time to look at your digital presence. Survival in hospitality is a numbers game, and managing your bookkeeping is the first place to start. Online ordering services available are simple and streamlined and don’t need to complicate your current operations.
Automate Your Restaurant’s Bookkeeping
By automating your accounting, you free up valuable time to focus on more important tasks and ensure heightened accuracy when managing expenses, payment schedules, ordering processes, scheduling your staff, and overseeing payroll.
1. Integrate your POS system with a cloud-based accounting software
Many restaurants now have multiple channels for selling food to their customers. There are opportunities to sell in-store, through the restaurant’s online ordering system, or through delivery services such as Uber Eats and Skip the Dishes. While this is excellent for increasing revenue, it also leaves significant room for error when it comes to tracking sales, especially if you utilize a manual tracking system.
By integrating a POS system that tracks sales from all of these different channels, such as Revel or Touch Bistro, you can merge your POS system with cloud-based accounting software like QuickBooks Online, eliminating manual, daily sales data entry.
2. Capture your expenses using Expense Management Software
Dealing with supplier invoices and utility bills goes hand-in-hand with running your restaurant. When you receive these invoices, many restaurant owners spend significant time on manual data entry, recording this information into their accounting software by hand.
Fortunately, technological advancements have created apps like DextPrepare and Hubdoc that can help you extract all of the key information from physical or digital documents.
All you need to do is scan an image of the document, take a photo, or forward the digital invoice to a designated email address. These programs will handle all of the data extraction, saving you both time and the hassle of doing it yourself. You can then review the record to ensure everything is accurate before exporting it to your accounting software.
As an added bonus, your invoices are then stored in the cloud. This means that you don’t have to store the physical invoices, and you can access this information from anywhere at any time, streamlining your expense management process.
3. Set up electronic payment for vendors
Now that you have imported your invoices into your accounting software, you are able to track when your payments are due and how much you will owe. You can fully automate your account payables process by using an online payment platform like Plooto.
Plooto allows you to seamlessly integrate your accounting software, bank account, and your Plooto account. All your bills, including vendor name, due date, and payment amount, are imported into the Plooto program from accounting software.
When a bill is about to come due, Plooto will automatically email the designated approver to sign off on the payment, and Plooto will deliver the funds to your payee's bank account electronically. Once the payment is complete, they will reconcile it with your accounting software, marking the bill as paid. Automating your electronic payment process also allows you to make batch payments twice a month to manage your cash flow better.
The benefits of automating your payments include the following:
- Saving you the time usually required to follow-up on uncashed cheques.
- Eliminating late payments due to long processing times.
- Making you less reliant on using cheques and having to mail them out.
- Allowing you to perform international payments.
- Creating a digital audit trail.
4. Use digital timesheets and integrate them with your payroll software
When it comes to staffing, schedules can change on a weekly basis or depending on the season. You may have part-time or full-time employees, and keeping track of everyone’s shifts and payroll can be challenging. The key to tracking your staff’s working hours is by utilizing timesheets.
The time has finally come to move from physical timesheets to digital ones. Most restaurant management software now includes timesheets and scheduling functions so employees can clock in and out using the app and are given the convenience of being able to view their schedules online. Automate your payroll process by integrating your timesheet software with your payroll software, allowing you to easily populate the data for each employee and process their payroll.
Automating your accounting processes can save you a lot of time and money and can ensure that you have access to more accurate and timely financial data. Doing so will allow you to focus more of your energy on running your restaurant and pleasing your customers and less on tedious bookkeeping tasks.
Software and Tools You Need To Automate Your Restaurant Bookkeeping
1. Touch Bistro
Touch Bistro is an all-in-one POS system that is specifically designed with restaurants in mind. It allows you to manage your menu, inventory, staff, and reporting all in one simple-to-use platform.
It is perhaps best known for its kitchen and server features and works exceptionally well for independent restaurants that don't need enterprise-level functionality. Touch Bistro has a streamlined list of functions, making it easier to navigate on a daily basis. Plus, it is cheaper than many of the other systems available, starting at just $69 USD per month.
2. Revel
Revel is an innovative POS system with a wide range of different functionalities like menu, inventory, staff, loyalty management, and multiple reporting functionalities. This platform is best used in multi-location restaurants, such as quick-service restaurants with numerous chains.
Revel automatically integrates with QuickBooks online and syncs POS data, inventory adjustments, and employee hours with just the click of your mouse. While it is a bit more expensive than some other programs, Revel offers a flat fee for payment processing.
3. QuickBooks Online
QuickBooks Online is a top-rated, cloud-based accounting software program. It has everything a restaurant owner needs to track expenses, manage inventory, and create detailed financial reports. Plus, all of this is stored in the cloud, meaning you can access any pertinent information you need from anywhere at any time.
4. Payworks
Your employees are an essential part of your business, but unfortunately, dealing with the payroll issues that come along with your workforce can be a complicated hassle. Thankfully, Payworks has a solution. This program is extremely simple to use and allows you to manage all of your payroll and HR functions in one easy platform. It also allows you to manage employee schedules, benefits, absenteeism, and recruiting.
5. Dext Prepare
This popular software allows you to manage your restaurant's expenses easily.
It allows users the unique advantage of taking photos of their receipts using their smartphones. The program then reads the receipts and creates an appropriate transaction record. Once it has been categorized correctly, it can be uploaded directly and easily to your accounting software.
Dext Prepare can help organize your finances, assist with taxation issues, create expense reports and provide you with all the tools you need to create accurate and timely business reports.
This program can also help you keep track of your vendor invoices and day-to-day expenses. You can forward all of your vendor invoices to your Dext Prepare email or take a photo of the invoice, and the software will extract key information from it and upload the transaction to your accounting software. This makes it extremely easy to store invoices in the cloud in the event of an audit and reduces the need for manual data entry, simplifying your accounts payable process.
6. Plooto
Plooto is an online payment platform specifically designed to automate your account receivables and account payable processes. It quickly and easily imports bills from your accounting software, emails you for payment approval, and then makes the payment online to the vendor, saving you considerable time and hassle. Plooto then reconciles and records this transaction in your accounting software program.
As an added bonus, Plooto integrates with QuickBooks Online and streamlines your accounts payable process so you can maintain a good working relationship with your vendors.
Final Thoughts
While bookkeeping can be tedious and often confusing, there is an abundance of tools and software programs available for every restaurant owner to make these processes simpler and more manageable. If you are a restaurant owner and require bookkeeping support, the team of professionals at Enkel can help.
Outsourcing to an experienced bookkeeper ensures that your books are always up-to-date, giving you constant visibility on your finances. It also helps you stay current on changing payroll legislation, which can often be confusing. Contact us for more information on our services and how we can help you become a more successful restauranteur.
