What is Restaurant Accounting?
Restaurant accounting is the practice of documenting and working out a restaurant’s financial data. It gives insights into the business, improves cash flow, and helps compete with market prices.
Restaurant accounting includes the following:
- Creating a master document for all transactions
- Preparing a bank reconciliation statement
- Analysing journal and ledger entries
- Categorising transactions, mainly expenses
- Managing accounts payable
- Managing and completing tax returns
- Checking financial records and balance sheets
To make things easier for you, we have provided some crucial restaurant accounting tips to keep in mind.
Things to Keep in Mind for Restaurant Accounting
Here is a list of tips to keep in mind for better restaurant accounting:
Understanding the language of finance
Most of those who start a restaurant business are not trained accountants. As an owner, to successfully master the skill of restaurant accounting or to understand the insights given by restaurant accounting solutions, you have to be familiar with financial terms like balance sheet, debit and credit, records, cash flow, etc. Also, learning the basic rules and terms can help you understand how the accountant or the bookkeeper is working on your restaurant’s financial records.
Leveraging a restaurant accounting software
A restaurant accounting software that can integrate and handle multiple financial operations has long-term benefits for your business. With digitisation, you can automate many tasks and be notified to pay taxes. Before choosing your restaurant accounting software, ensure that it performs all the required functions.
A robust restaurant accounting service can help you improve visibility in the market and set competitive prices. As per the Mordor Intelligence expectation, the accounting service and software market will grow from USD 12.01 billion in 2020 to USD 19.6 billion by 2026. With this demand, we can witness a compound annual growth rate of 8.5% between 2022 and 2027 in this industry.
Maintaining accuracy
Often, we try to round off our spending and turnover to make the calculation smooth. Rounding off some figures here and there can mess up the analytics and your understanding of financial insights. Underestimating accuracy can lead to a severe financial crisis.
To get a clear picture of the expenses and profits, entering every detail of the prices and expenses is a must. It will help in gauging the precise ins and outs of the cash flow. This will further help yield better results in the next month or even quarter.
Creating a habit of daily bookkeeping
To effectively run their businesses, restaurant owners must make a habit of bookkeeping. This means recording sales and expenses as a daily practice. Eventually, they can get a sound idea of how the various financial operations (tax payments, penalties, cash flow management, etc.) are run. Business owners can accurately track variable expenses, also known as running expenses (like the cost of spilt food, electricity bills, water bill, etc.). Outsourcing tax preparation can also relieve some burden of bookkeeping from the restaurant owners and managers.