If your restaurant follows the accounting period, which is recommended, you’ll have 13 accounting periods in a year. Whether you’re not the best with numbers or want to focus on the food, you might be wondering if you should do restaurant accounting in-house or outsource it. We know this is a lot to track, but once you make it a habit or have someone in charge of your restaurant accounting system, it will be like cooking your favorite recipe. Restaurant accounting software can automatically record these journal entries. When you’re sitting at a table waiting for your appetizer to arrive, it’s easy to think restaurants are businesses just like any other.

• It’s like choreographing a dance, making sure money comes in and goes out at the right time.
• A mere $5000 can mean the difference between just breaking even and actually making a profit.
• Accrual accounting records financial transactions as they happen, whether you have received payment or not.
• If you’re a smaller restaurant or just starting, outsourcing might be more cost-effective and less stressful.
• That said, it’s also critical, and if your accounting is in disarray, it can be surprisingly hard to measure accurately over certain periods of time.

Eliminate 100% of your paper invoices and put your restaurant food cost management on autopilot with Orderly. Instead of just seeing scary-high prime costs or deceiving sales numbers on their own. The Chart of Accounts is the source of a business’s financial statements. Because it’s so important, we put together this downloadable cheat sheet to master restaurant accounting principles.

Restaurant accounting vocabulary

While they are often used interchangeably, there are actually differences between accounting and bookkeeping. They are related because bookkeeping lays the groundwork for accounting, but these processes serve different functions. Your first month with DAVO is free, and then it’s $49.99 per month per location. If you live in one of the states that offer on-time sales tax discounts, DAVO will pass that on to you.

Now, why is this important – keeping an eye on your Prime Cost can help you identify opportunities to cut costs and maximize profits. If your Prime Cost is high, you might need to find cheaper suppliers or streamline your labor processes. Operating expensesThese are the day-to-day costs of running your business. Think office supplies, marketing costs, travel expenses, and any fees or licenses your business needs to operate. To calculate it, you need to add up the cost of all your food and beverage inventory.

Xero: Best for low price and rich features

Internal resources are dedicated to the business and immersed in the environment, but tend to be more costly and less efficient. Outsourced solutions tend to be more efficient, but some businesses are wary of communication concerns or feel obligated restaurant bookkeeping to retain current employees. In doing so, you can tighten up operating costs, which is essential to make a business profitable. And the more you excel at accurate bookkeeping, the easier it will be for you to adjust your controllable expenses.

A restaurant profit and loss statement, also called a P&L, is a financial document detailing the total revenue and expenses over a predetermined period of time. P&Ls provide an overview of your restaurant’s revenue, costs, and expenses. Choosing accounting systems for restaurants can help you eliminate the difficulty with restaurant accounting and help you manage your food costs easily. These systems include financial software and point of sale (POS) systems to help you quickly organize inventory counts and execute transactions. Restaurant accounting is unique because of the language of hospitality finance. It’s crucial to have an effective accounting system in place for your restaurant to see the success you’re after.

The Importance of Accurate Restaurant Accounting

So here are the essentials of restaurant accounting and bookkeeping when it comes to reports, processes, and KPIs. While you won’t leave this article a chartered accountant, we’ll give you the language you need to work with accountants and with restaurant accounting software. In other words, we’ll help you talk the talk, but you’ll still need someone to walk with. As with any business decision, weighing up the pros and cons is crucial, as outsourcing can be costly.