A Step-by-Step Guide to Bookkeeping for Restaurants

You need a parent account for both Costs of Goods sold as well as Payroll costs. Then you want subaccounts under each of those with the level of detail you desire. Any account that gets a statement with a beginning and ending balance can be reconciled. Account reconciliation ensures that you are looking at accurate financial reports. You can upload your invoices to these services and they will code them by item to your various COGS and expense accounts. Additionally, they allow you to approve invoices that you want to be paid.

• Just like your cleaning process and ongoing training programs, it’s all about repetition and making recording the financials a part of your regular routine as a business owner.
• This allows you to manage your accounts payable completely in the cloud and the ability to pay your bills from anywhere.
• Not only will it give you a clearer picture of where your business is heading, but it may be able to help you identify some potential red flags, such as employee theft or major food waste.
• To run a successful business, you should be insured that your finances are properly managed.
• Regardless of whether your restaurant is big or small, new, or has been in operation for years now, outsourcing your bookkeeping can help your business grow.
• Overhead rates, Cost of Goods Sold (COG), Prime Costs, Food Costs, and Gross Profits, to name a few.

For DIY bookkeepers, this means careful record-keeping and keeping a close eye on your tax obligations. That’s why we want to take you through some of the common terms, reports and processes for understanding bookkeeping and accounting for restaurants. Whether you’re curious about how to do bookkeeping, or working with a bookkeeper and accountant, this guide is here to help.

What financial statements should be included in restaurant bookkeeping?

You can attach your statement to the reconciliation in QBO to make it easy to reference. The only drawback to Toast payroll is that right now they do not have a QuickBooks integration. While we have been inquiring about it for over a year they have yet to add this functionality. Both XtraChef and MarginEdge allow you deeper COGS and financial insights and controls directly in your POS system. You should see the information for your QBO account and can change any information through settings.

You will need to analyze how funds are hitting your bank and set up your bookkeeping system to mirror that activity. Cost of goods sold (COGS) refers to the actual cost of food and Bookkeeper360 Review 2023: Pricing, Features & More beverage you buy that is used to produce your food and beverage sales. And in the restaurant business, it’s no secret that in order to make food you’ll need to buy ingredients.

Gross Profit

It takes data from your POS and can automate your sales tax in as little as five minutes. It doesn’t include payroll services or some of the features available in other accounting software, so you may want to use it in addition to one of the other software options. Accounting software is used by businesses to track income and expenses. Restaurants use it to do many of the same things, but it can also help track inventory, create invoices, calculate sales tax, price recipes and menus, and integrate with point of sales (POS) systems. Account for all transactions, reconcile all accounts, and generate monthly reports so that you can track and analyze the key elements that indicate how well the restaurant is performing financially. Make sure you have a point-of-sale system that easily integrates with that software.

Put simply, prime costs is the sum of your restaurant’s costs to sell its food, drinks and products—your COGS as mentioned above—plus the labor costs of your salaried and casual staff. Industry averages suggest your prime costs should be between 55% and 60%. As a business owner, you are at major risk by doing your own payroll.

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One thing you don’t want to do is to run out of ingredients for an item that is listed on your menu. So, it’s extremely important that you keep track of your inventory at all times and to place the order in a timely manner so that you don’t run out while waiting to receive the restocking order. If the restaurant is going to make a go of it, the first thing a restaurant accountant should do is work with the owner https://accounting-services.net/small-business-accounting-101-12-steps-for-basics/ to have a business strategy and budget in place. WebstaurantStore is the largest online restaurant supply store servicing professionals and individual customers worldwide. With hundreds of thousands of products available and millions of orders shipped, we have everything your business needs to function at its best. If you do decide to manage your restaurant’s finances, still consider outsourcing payroll.

Outsourcing your payroll process to a professional payroll provider, like CJCPA, not only ensures that you are in compliance with requirements, but also saves you hours of work each paid month. Restaurant accounting is the organization of financial records so that the owner has a better understanding of the restaurant’s financial position at any given time. These financial transactions range from the cost of inventory, equipment, and utilities to the prices on the menu.

Prime Cost Calculation in QuickBooks

In fact, depending on how old your current system is, this might be a good time to upgrade your POS system too. Though paying employees may seem like a straightforward task, it’s more complex than you might think. Your income statement is concerned only with money coming into your restaurant. You may have operating income, which comes from your regular business activities such as dine-in meals and catering, and non-operating income, which comes from sources such as investments.

• Track your consumables and supplies to calculate the value of the food you have in stock and determine the average daily inventory costs.
• Prime cost is determined by adding labor costs to the cost of goods sold.
• Bank reconciliation is essential to ensure your bookkeeping records match your bank accounts, payroll liabilities, lines of credit, loans, and credit cards.
• Restaurant accounting is unique because of the language of hospitality finance.
• Once you find the right policy for your small business, you can begin coverage in less than 24 hours.

It takes more than a passion for food to run a successful restaurant. Being a great bookkeeper takes an efficient bookkeeping system to keep track of your restaurant’s financial health. It’s important to understand the principles behind the food and beverage industry so that you know which bookkeeping method is most tailored to this particular industry. One of the first places to start when handling your restaurant’s accounting is to ask other chefs how they handle their own accounting records. Knowing how a colleague or other industry professionals approach restaurant bookkeeping may provide insight as to how you should address your own books and records. You can choose between cash basis accounting and accrual accounting depending on your profit amounts.