9 Tips for Putting Your Establishment on a Firm Financial Foundation
Running a successful restaurant is no simple endeavor. Obviously, you need to have a strong concept, a superb executive chef, and the right staff to execute your culinary vision so people return to your establishment. It also helps to have someone around with restaurant accounting acumen, because, if your finances get out of whack, that’s the first sign you might not succeed.
The bookkeeping experts at Tabulate have spent decades helping restaurants, bars, and other food-related businesses grow, thrive, and prosper, and it’s all because they’ve encouraged their clients to follow these 9 best practices for accounting and bookkeeping in the food service industry.
#1 – Hire an Outside Accountant
Unless you are an actual licensed CPA who just happens to run a thriving food truck train on the side, you need to hire someone to take care of your annual financials. Not only will this person help with annual and quarterly taxes, but a good accountant will walk you through the day-to-day and big-picture bookkeeping reports so you know exactly what’s happening with your business.
#2 – Hire an Outside Payroll Company
It comes down to time, effort, and know-how. Sure, you could track the hours and cut the checks manually for your employees, but you also need to keep track of the various laws, regulations, and taxes pertaining to your workers – and do so at the local, state, and federal levels. So, just like you’re the expert of the food you create or the drink you mix, that payroll company is the expert you need to take care of your people and your business.
#3 – Pay Your Taxes
This might seem obvious to you, but we’ve seen our fair share of small businesses fail to complete this basic step. It happens for a variety of reasons – cash flow concerns, poor internal bookkeeping practices, you forgot, etc. – but it’s crucial to the health of your bottom line that you pay your taxes and pay them on time.
Not only does this apply to everything you sell (since food service sales are retail sales requiring that you pay sales tax), but you have to account for payroll taxes and any other applicable taxes assessed in your area. Simply put, you should follow Tips #1 & 2.
#4 – Choose the Right Point-of-Sale (POS) System
Not all point-of-sale systems are created equal, and not all of them are designed for use in the food service industry. Even more, there are some basic POS systems that don’t provide integration with any of your back-office functions, from inventory and timesheets to restaurant accounting and reporting. You need something that connects the numbers for your whole business into a unified whole.
#5 – Do Inventory Weekly
We cannot recommend this highly enough. Depending upon the size of your establishment, you probably could get away with a monthly inventory, but if you have more than a couple days of the week with high-volume sales, you need to check your stores every week. This gives you an idea of what you have, what you need, what you’ve sold, and how those data points speak to the demands of your customers and the health of your business.
And that’s just for your nonperishable goods. You definitely need to review your inventory on a regular basis to ensure the food you’re serving is fresh and then match that against what your POS system says you’ve sold.
#6 – Track Your Sales
This is not a call to simply look at what you sold on a given shift or at the end of the day. We’re suggesting that you dig into the details of what comprised those sales. Think of it as the inverse of Tip #5, as correctly tracked sales should be reflected in your inventory. And if it’s not, you have a theft problem on your hands, which also means you’re losing money – both of which are bad.
#7 – Watch Your Expenses
Specifically, you should keep tabs on your “prime costs” – total labor (payroll, benefits, insurance, etc.) + total costs of goods sold (food, booze, etc.). Industry experts hold us 60% as a good benchmark of financial health, as in you want to keep your prime costs around 60% of your total costs. And if those prime costs start to exceed 65%, you’re in trouble.
#8 – Review Your Reports Regularly
Remember that POS system from Tip #4 and that outsourced accountant from Tip #1? In a perfect world, they will be working in concert to deliver the reports, insights, and analysis you need to gain a truly holistic picture of your establishment.
Even more importantly, you need to check those numbers yourself, because if you don’t understand what’s happened, you certainly can’t set a fresh course forward. By connecting with your bookkeeper over your numbers on a regular basis, you can set monthly, quarterly, and annual goals to track against and for your staff to achieve.
#9 – Check the Industry
We’re not suggesting that you blindly follow current trends or that you copycat what your friends and competitors are doing across town. We are recommending that you occasionally chat with other restaurateurs, bar owners, food truck operators, and whoever sits in a similar niche as yours and compare notes.
Not only is networking an important skill to learn, but you can use the information you receive to set benchmarks for your own place. Besides – that friend of yours might have industry access you don’t have, and you can’t put a price on good intelligence from a trusted source.
Interested in putting these nine restaurant accounting best practices into action with one fell swoop? Talk to Tabulate today! With our all-in-one back-office solution and software, we’ll take care of all your bookkeeping and payroll needs, and you’ll have access to top-notch reporting and insights from industry experts who want to see you succeed.