What’s the secret key to know your restaurant is thriving?
When your tables are booked every night with guests in waiting list
Your business listings are filled with positive reviews and 5-star ratings.
Your staff wears a smile of job satisfaction…
Yes, these telltale signs signal that you’re running a healthy business. But what’s the catch over here? You’re right, improper handling of books! Now, that’s something alarming. It goes without saying that numbers are as essential as ingredients in a mouth-watering dish as restaurant profit margins are often thin.
Restaurants have a high volume of transactions, including supply orders, inventory, guest receipts, staff payouts, and more. Recording these transactions is time-consuming and prone to errors, especially when you lack accounting expertise or have a bookkeeper or accountant to handle. Eventually, this leaves little room to focus on business sustainability and growth.
That is why it’s imperative for you to overcome accounting challenges and other financial issues. We’ve put together six pressing restaurant accounting challenges you face and how to eliminate them.
From Crisis to Control: Tackling Top 6 Pressing Restaurant Accounting Challenges
Here is the winning recipe to eliminate pressing restaurant accounting challenges. Explore how an outsourced accounting partnership can be rewarding for you to streamline accounting operations and gain financial success.
“I don’t have enough resources to monitor and enforce depositing the cash in bank,” said Robert Smith, restaurant owner in San Diego.
There’s no way around it. Cash is crucial for your daily operations. This means every dollar you spend or earn has an impact on your bottom line.
Real-time cash and bank reconciliations are apparent to identify shortage of funds or hidden overheads. Your outsourced accounting partner reconciles cash deposit regularly to ensure cash is tracked effectively, and issues are resolved in a timely manner.
Third Party Delivery Partner Reconciliation
“I struggle to reconcile third party delivery partners, resulting in receivable discrepancies,” said Andy Clark, restaurant owner in Austin.
There would be millions of orders through different third-party delivery partners like DoorDash, Grubhub, Uber Eats, Postmates, and more. Third party delivery partner captures data on customer purchasing habits and details each sale. But you must integrate and reconcile the data from different channels for accurate reporting. Your outsourced accounting partner reconciles third party delivery partner account periodically and records fees or marketing expenses.
Sales and Merchant Reconciliation
“I often overlook sales and merchant reconciliation, resulting in discrepancies between sales and receipts,” said Mike Arthur, restaurant chain owner in Florida.
Reconciling is the only way to know if you have recorded and accounted for all cash and credit transactions associated with your restaurant. Your outsourced accounting partner reconciles sales and merchant accounts on a weekly basis and generates a report that summarizes all sales, ensuring accurate balances refunds.
Monthly Financial Close
“There is a lack of clearly defined processes to complete the month-end close,” said Jimmy Stokes, restaurant owner in Hawaii.
Hopefully, you want to gauge your restaurant’s performance, but monthly financials are not in place. Often, your monthly financial statement isn’t accessible until midway through the next month. You can’t make critical decisions just based on monthly income. Also, it’s challenging to adjust employee schedules, purchases, and inventory to control costs. Such decisions should be made quickly and thoughtfully to sustain in an industry which has one of the highest failure rates.
Delay in monthly financial close is often due to:
- Inaccurate data
- Lack of well-defined processes to complete the month-end close
- Discrepancies between sales, revenue, and bank statements
- Delayed reconciliations due to multiple adjustments and reclassifications
- Limited financial visibility
The good news is that it’s possible to fuse efficiency and streamline monthly financial close process, making manual tasks more manageable and less time-consuming. Your outsourced accounting partner prepares, reconciles, and reviews monthly financials according to the required format. Eliminate bottlenecks and improve closing workflows and ensure there are no more delays and discrepancies in financial data, empowering you with required insights for sustainable growth.
Cost of Goods Sold Analysis
“There is a lack of control to analyze Cost of Goods Sold (COGS) and Inventory, resulting in inaccurate gross margins,” said Joe Scott, restaurant owner in San Francisco.
In the restaurant industry, where ingredients and raw materials have a short shelf-life, inefficient inventory management can burn a hole in your pocket. Without accurate data on inventory management, location of goods, the expiration date of ingredients, businesses, receiving date, etc., tracking and analyzing become a challenge. This results in a lack of proper planning, ad hoc purchases, and significant kitchen wastage.
For instance, at the end of the month, you realize that you have over-ordered perishable ingredients. Unfortunately, you can’t return those items and place them on a weekly special, so they don’t go to waste. Result – hefty financial losses from material wastage.
This is why tracking COGS is imperative.
It provides insights into your food expenditure, identifies waste, and highlights neglected inventory. You can get a clear picture of what’s in demand and what’s not.
The bonus of tracking your COGS? You will reduce wastage by optimizing inventory. You can also avoid stock theft, which is very common in restaurants.
According to a survey by a restaurant association, internal employee theft is responsible for 75 percent of inventory shortages and about 4 percent of restaurant sales.
With COGS analysis, you’ll know exactly what’s moving through your kitchen. Your outsourced accounting partner shares the review notes for the COGS analysis and ensures the gross margins are in line with past trends.
“Due to resource constraints, I don’t have daily and weekly reporting for sales, cash in place.” said Adam Conrad, restaurant chain owner in Cleveland.
Operational data constantly flows into a business with every purchase you make or when you serve guests. This data needs to be calculated daily and weekly to assess key metrics like Sales, Expenditures, and Labor costs.
Reports should also include inventory figures. Daily and weekly reports allow you to make quick adjustments throughout the week or month and fine-tune strategies. Your outsourced accounting partner prepares daily or weekly management analysis reports that provide detailed insights into sales, revenue, cash flow, and more.
Restaurant accounting is unique, and that is why being proactive about challenges and taking preemptive steps can help you stay prepared. The winning recipe mentioned in this article will help you recalibrate strategies, transform accounting processes, and adapt to an ever-changing consumer landscape. And it will help you truly gauge the financial health of your business.