Is your restaurant bookkeeper no longer enough?

By: Nick Gardner

Almost always running on razor-thin profit margins (often under 5%), owners and managers must find an even balance between quality and profit. To do so successfully, they need easy access to critical business metrics such as prime cost, food cost as a percentage of sales, or kitchen labor as a percentage of food sales, to help them manage budgets and respond to changes in demand.


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All this data is scattered across multiple software systems making it hard to track down and accurately record. The essential data sources include staff salaries and payroll, vendor invoices and payments, third-party sales, merchant fees and deposits, bank and credit card statements.

Even the simplest eateries are underpinned by complex financial structures that can make or break them at the end of each month. But there’s a cost-effective solution available, a reporting platform paired with specialized restaurant bookkeepers who aggregate data from these various systems efficiently and accurately. No more sleepless nights wondering if you missed something that will affect taxes, deliveries, or, most importantly, the bottom line!

Perched uncomfortably between a productive kitchen and an enthusiastic dining room, the accounting section of a restaurant is an invisible – but vital – link in its dynamics. Lacking the bustle of one and the buzz of the other, bookkeeping sometimes feels like the dry toast of the eatery world: dull but necessary support for more exciting ingredients


Monthly Reconciliations Are Not Enough

All businesses must turn a profit to survive. Without accurate records and up-to-date reports, even the most successful restaurants are fated to fail, despite tables being booked out every night of the week. Even the tastiest food might still lose money on every plate if pricing isn’t aligned with food costs, labor costs, and operating expenses.

However minor they may be, overruns (particularly on food and labor) let money trickle out faster than it flows in during the month, and that’s why it’s critical to have operations-focused bookkeepers provide weekly reports on significant metrics. This helps ensure that your bottom line is always in the black, with a system that enables you to set forecasts, manage budgets and make adjustments when supply chain or nature throws you a curveball.

Juggling Countless Demands

Running a successful restaurant means keeping at least half a dozen plates spinning in the air – and every one of them is vital for success. This is why a well-designed data dashboard is a restaurant manager’s best friend. Your metrics should always be available – if you have to massage raw data or jump between software systems, you are wasting and losing valuable cycles.

Once a specialized restaurant bookkeeper breaks down all the operating costs into easily-accessed categories and sub-categories, managers find it easier to keep a finger on the financial pulse of the business. For example, food costs as a percentage of food sales should hover around 30%, with beverage costs following suit. You should be able to see these numbers without reaching for a calculator or spreadsheet.

When pricing their menus, successful restaurants aim for just over 25%, leaving a little wiggle room for price fluctuations, trim waste, and other issues that might factor into the final figures.    

Here are some of the primary metrics monitored by modern restaurant accounting systems:

  • Sales: split into at least food, beverage & catering, and then ideally broken out into more detailed sub-categories;
  • Labor: ideally, payroll should absorb no more than a third of your sales revenues, with extras (like vacations, sick leave, and overtime) all included;
  • CoGS: the Cost of Goods Sold should be reported as a percentage of the relevant sales categories. An example would be Liquor CoGs as a % of Liquor Sales.
  • Products: when ordering daily, weekly, or even monthly, managers must weigh factors such as seasonal demands, quantity discounts, delivery timeframes, and storage costs;
  • Food Inventory: in principle, no more than a week’s supply should be kept on hand, as extensive inventories step up the risks of spoilage, spillage, and pilfering while demanding more storage space and tying up capital for little benefit;
  • Beverage Inventory:  periodic counts (ideally once a week) must be reconciled to sales as a critical tool for controlling theft and other unexpected losses. There’s an unexpected bonus here: when staff is aware that inventories are checked frequently, some of these issues tend to drop significantly;
  • Fixed Costs: consisting mainly of utilities and leasing charges, these outlays should never exceed 10% of sales, mainly composed of utilities and leasing charges.
  • Taxes: notoriously complex, restaurants pay state and city sales taxes and federal income tax. Clean books will help you track tax liability for sales taxes, and a good bookkeeper can essentially eliminate end-of-the-year income tax surprises.

Too Little, Too Late

Among the most unpredictable of businesses, customer demand and thus sale volume is subject to many unpredictable variables: good or bad weather, menu changes, social media posts. Added to these are logistics glitches, online ordering outages, turbulent staff turnover, and even public health constraints.  

All this means that efficient restaurant managers must be fast on their feet, as once the damage is in the rearview mirror, it’s often too late to fix the problem. Here’s an example:

The norm is to provide monthly P&L statements a couple of weeks into the following month.  But if meat prices jump because of a clogged supply chain,  it’s vital to spot that spike within a day or so and take action immediately.  Left unchecked, a month of higher prices could cause preventable losses topping many thousands of dollars – which is why decisions driven by fresh data are a crucial factor for success. 

All these factors demand swift reactions and adjustments, driven by data. When accounting is run separate from the restaurant’s operations, you miss critical opportunities to manage losses or even increase profits. This is where a system that tightly connects operations and accounting, enabling operators to make decisions at the same time the books are being maintained, isn’t just a nice to have but a necessity!

Restaurant Operations-Focused Bookkeepers Or Generalists?

A typical bookkeeping firm likely has a broad range of clients from various industries. This translates into overpriced, infrequent, generalized reports, often exported from Quickbooks. This means that critical metrics  –   such as Food Cost % or Prime Cost  –  must be manually calculated by the bookkeeper, often late at night while staring at a PDF of a P&L on a dusty basement computer.

This is where a bookkeeping platform specializing in the food industry, founded by experts with decades of experience running kitchens and finances, is a must-have. Easy-to-implement solutions allow managers to focus steadily on the front and the back of the house, highlighting cost-saving opportunities and raising red flags when the figures fail to make sense. All of this can be monitored on the phone, so you only ever need a few minutes to study performance or set goals for the upcoming week.


Left unchecked, a month of higher prices could cause preventable losses topping many thousands of dollars

Keeping the Tax Man Happy

Many managers often feel that the most extended menu in their restaurant is the list of taxes and fees they must pay, as well as a shorter – but very welcome – list of exemptions. Miscalculations, honest mistakes, and missed deadlines can have costly consequences, up to and including tax audits.

The bad news is that restaurateurs must carry the entire burden of paying their taxes correctly, with detailed and up-to-date records supporting their declarations.

The good news is that this complicated task of daily and monthly record keeping can be simplified by outsourcing the records to an experienced bookkeeping platform, thus ensuring your expensive CPA doesn’t have to charge you a premium to clean up your books.

Keeping Vendors Happy

Other innovative features of state-of-the-art restaurant accounting software are specifically designed to streamline vendor contact. Although invisible to the customers, an efficient supply chain is a significant factor behind the success of any foodservice business, as freshness is the critical ingredient in keeping quality and customer satisfaction high.

Modern AP (Invoices and BillPay) solutions enable operators to scan invoices, quickly set up payment schedules, and access the underlying data from those invoices. The data and reporting from an AP solution can help you track changes in prices so you can react when the price of avocados shoots up. A good restaurant bookkeeper will help you manage an AP solution such that bills get paid on time, and the data from your expenses get correctly categorized and recorded into your books.

Planning on opening a restaurant?

An exciting time for any entrepreneur, opening a restaurant is a very personal venture, a dream come true. However, finding the time needed to track cash flow, control expenses, and reconcile accounts, is extremely difficult and time-consuming.

The smartest and most sensible step here is, of course, becoming a Hone client. We can help you with every aspect of the foodservice industry, from tip-sharing to managing merchant fees, to food costing and planning location expansions. Once you are confident that all the financials are in competent hands, you can focus on launch, marketing, hiring, wine lists and menus, uniforms, and décor.

Be Data-Driven and Profits Will Come

Statistics show that some 25% of restaurants close within the first year. The reason is rarely the quality of the food or the servers’ friendliness. Sadly, the odds are high that financial aspects shuttered the business and shattered dreams. 

Being a brilliant cook or hearty host doesn’t always leave enough time for handling financial matters efficiently. So here are three hot tips for keeping your restaurant running smoothly:

  1.       Draw Up a Business Plan

Designing the dining room, menu and logo may be fun, but stringent cost control is what keeps a restaurant in the black. An effective business plan is a framework that underpins every element of restaurant management and operations, steering dreams towards reality. 

Mapping out how to turn a profit and pinpointing where an operation fits into the market, a business plan is unique to each restaurant, taking into account factors like location, target market, and style. This is where you can set initial targets for food cost, labor, revenue, and budgets for operating expenses such as marketing and rent.

  1.   Keep Accurate Records

You drew up a plan, but now you need to stick to it! No matter how busy the restaurant is if costs are too high, tight margins mean you can fail. This means designing a profitable menu, scheduling staff to match demand, tracking waste, checking inventories, and establishing an ordering system that avoids spoilage.

With all that in place, it’s time to look at other operating outlays, such as marketing, utilities, kitchen supplies, glassware, linens, etc. You need to track and understand these expenses concerning your sales. A couple of percentage points up or down in any of these categories can make the difference between survival and flailing through a sea of debt.

  1.   Let the numbers drive you!

Regular review of critical metrics, at least weekly, will enable you to prioritize precious cycles, so you don’t spend time on what is not working. Put another way, profitability and peace of mind come not from perfection but a deliberate focus on the most significant pain points and focus on the biggest levers.

A weekly income statement or profit & loss statement (P&L) is a powerful tool because it gives you a complete view of performance. When managed alongside cash flow, it ensures that your fundamentals are strong. An operations-focused P&L with percentages of sales categories, costs displayed with percentages of the relevant sales categories, and operational expenses shown as a percentage of sales enables you to quickly triage the fundamental problems and opportunities. 

Does it all sound overwhelming?

Outsourcing routine tasks – keeping records, managing payroll, paying vendors, and calculating taxes – to an experienced restaurant bookkeeping service and reporting platform like Hone leaves managers and owners free to focus on core competencies. In turn, this means tastier meals and happier staff, with glowing customer reviews and higher profits.

Many owners and managers find that running the front and back sides of a foodservice operation is more than a full-time job. So if you’d like a free demo of how to make your data work harder so you work less, talk to our restaurant bookkeeping consultant today for expert advice.


By: Nick Gardner

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