Best Accounting Practices for Restaurants
While a big focus for restaurants revolves around the food, service and atmosphere, owning and operating a successful restaurant really starts with good accounting. Countless restaurants close their doors every year because the numbers were ignored or not given the attention that they deserve. While the accounting function is not the most exciting part of owning a restaurant, it is certainly one of the most important aspects that should be taken seriously. The following are a handful of best accounting practices for owners and managers of restaurants of any size:
- Knowing Your Numbers
Owners and management should have an in-depth knowledge of their sales and expenses. They should also know what items are selling, how much they cost and if there is any room for menu price adjustments. Using a point of sale (POS) system is critical and can run reports that provide a lot of this information.
- Controlling Costs
Being able to keep costs down can be critical in such a competitive industry. For example, it has long been known that the prime costs (food and labor) have to be in the 60-65% range in order to be profitable. Other costs, including supplies, repairs, utilities and smallwares should also be continuously monitored in order to maintain a profit.
- Monitoring Weekly Reports and Monthly Financials
A large part of the items aforementioned will come down to reviewing weekly reports as well as monthly financial statements. Reviewing weekly reports will assist with knowing what items are in demand and how much they cost, as well as where the rest of your money is being spent. Weekly figures can also be compared to historical data and used to develop trends which assist in forecasting the future. Monthly financials should also be prepared and reviewed in order to verify that margins and other percentages are where they should be.
- Know and Follow Industry Trends
Monitoring industry trends can be quite helpful for a number of different reasons. Industry trends can be used to set a benchmark for your restaurant. This can help you to determine if your numbers are where they should be and can also inform you if you are overspending in certain areas. They can also give you a heads up if a trend is expected to continue into the future which can be valuable information to know. For example, if food costs are expected to be on the rise for the foreseeable future, it can help you to anticipate the need for future menu price increases.
- Work with an Outside Accountant Who has Experience with Restaurants
This practice can be invaluable as the restaurant industry has its own set of quirks. Accountants can be very resourceful in a lot of different areas including tax compliance and savings, interpreting the numbers, properly setting up payroll, costing out a menu, etc. Be sure to find a financial expert that you trust and can learn from as they can be a great contributor to your success.
Getting to know the accounting side of a restaurant can be time-consuming but it is an integral part of properly managing a restaurant. Paying attention to the items mentioned above can help you to maintain a profitable business in one of the more competitive industries out there.
If you have any questions regarding the information above, please contact Tom Pierce at [email protected] or call him at 312.670.7444. Visit ORBA.com to learn more about our Restaurant Group.