It’s been a difficult year for restaurants around the country. With in-person dining either restricted or prohibited in many states and demand at lower levels than we’ve ever witnessed before, restaurant owners are working harder than ever to keep their business afloat. One way they’re addressing it is through an increased focus on restaurant accounting practices.
Before the Covid-19 pandemic, restaurants were already a low margin business. When you consider the numerous costs associated with running a successful restaurant, the challenges of creating a highly profitable dining establishment becomes immediately apparent.
But with a comprehensive restaurant accounting system, your management team can identify overlooked areas of savings and avoid revenue loss associated with shortages. Building this type of system starts with understanding the fundamentals of restaurant accounting and developing your business systems around it.
Here are a few tips to help get you off the ground.
- Invest in a Point of Sale System
There’s no better way to judge how well your business is performing than by looking at the amount customers are spending for your services. A point of sale system accomplishes just that—and much more.
When integrated with your restaurant accounting software, a point of sale system can give you insight into metrics such as your restaurant’s inventory levels and labor costs. Beyond that, it can give you a better feel for who your customers are, answering questions such as what forms of payment are the most used and what items on the menu are the most popular.
Over time, this data can help your management team spot inefficiencies and redesign systems accordingly. If you’re looking for a simple way to gain full visibility into your business, a point of sale system is a great start.
- Create a Cash-Flow Projection
This may sound self-explanatory, but if you don’t have a realistic idea of how much money is going to flow into and out of your organization in any given period, you’re probably going to struggle mightily if your business begins to grow.
Creating a realistic projection begins with understanding two basic accounting concepts: Your business’ accounts payable and its accounts receivable. Your accounts payable tracks all of the money that flows out of your organization to entities such as the government and vendors. Similarly, the accounts receivable tracks all funds flowing into the organization.
For a new restaurant, it’s certainly easier to start with accounts payable. You likely have at least some understanding of the expenses your business will incur over a given period. Accounts receivable, on the other hand, can be tricky since you don’t have any historic data. It’s therefore best to be conservative in your sales estimates and as transparent as possible about other forms of income such as loans.
If you need any additional help in creating a cash-flow projection for your restaurant, here’s a good place to start.
- Focus on Reducing Your Restaurant’s Variable Costs
The difference between fixed and variable costs is pretty simple. If you can control the cost of something, it’s a variable cost. If you can’t, it’s a fixed cost.
In the context of a restaurant, there are two primary variable costs worth focusing on: Cost of Goods Sold (COGS) and total labor costs. COGS represents the monetary value of everything your restaurant sells, while the labor costs indicates the amount you spend on your restaurant workforce.
Gaining control over your restaurant’s variable costs starts with implementing a quality restaurant accounting software system. Once you have a system in place, you can then better understand the difference between the amount your restaurant currently spends on food and the amount it actually needs to spend. Likewise, it can help you improve staff scheduling to make your spending on labor costs more efficient.
If you’re looking for an accounting software system designed for busy restaurant owners, Sage Intacct should be your first stop. And Timac Business Systems can help.
Contact us today for a free Sage Intacct software consultation!