It’s important to research and choose the one that best fits your restaurant’s needs and budget. Prime costPrime cost is another important one – it combines your COGS with your labor costs, which includes things like restaurant payroll services. To calculate it, just add up your COGS and labor costs – This KPI is crucial because these are the two largest cost areas for most restaurants. Cost-to-salesOn the other hand, the Cost-to-Sales Ratio gives you a bird’s-eye view of your business’s financial health. It’s calculated by dividing your total costs (including COGS, labor, and other expenses) by your total sales.

The franchisee is the entity that purchases the rights to operate a business under the franchisor’s brand. In other words, they’re the business that owns and operates 100 Taco Bells in the Midwest. It’s important to note that when we refer to “franchise accounting,” we’re typically talking about accounting for franchisees’ businesses. They all tie in with one another to make your profit and loss statement succinct and accurate.

Beverage sales:

While accounting for restaurants can be arduous, it doesn’t have to be a daily struggle if you choose the right approaches. Good accounting software helps you process, gather, and analyze data effortlessly and accurately. POS system integration is a crucial aspect of any restaurant accounting software you use for your restaurant. Once integrated, the software can automate the collection and categorization of your financial transactions. It allows real-time tracking of your financial performance and mitigates errors that occur with manual restaurant accounting. New and experienced restaurant owners can use it, whether they’re beginners or experts at accounting and bookkeeping.

The Chart of Accounts includes assets, liabilities, revenue, expenses, and equity. Chart of Accounts is the term your accountant uses to describe the buckets used to categorize the money that flows in and out of your business. Not everyone speaks fluent restaurant bookkeeping accounting… especially not busy restaurant managers. Now that you have a better understanding of the special requirements for how to maintain restaurant accounts, you may be wondering if all the extra work of making sure you get it right is necessary.

What is the difference between bookkeeping and accounting?

It’s your go-to report to check if you’re making a profit or running at a loss. Both P&L analysis and cash flow management are vital services provided by accountants for restaurants or through restaurant consulting services. They help keep your financial health in check and your business running smoothly. A balance sheet lists your assets, liabilities (debt) and equities at a given time, providing an overarching view of your restaurant’s financial health.

• This involves services like accounts payable processing, accounts receivable processing, bank reconciliation, tax processing, the production of financial statements, and more.
• On top of that, if mistakes are made in withholding or payment, penalties and interest can be substantial.
• For every dollar that comes in, your prime cost is the amount of that dollar that goes to people (your staff) and product (your menu items).
• We believe everyone should be able to make financial decisions with confidence.
• Be sure to record all sales—all money that came in—on a daily basis to make the reporting easier in the future.

It’s essential to regularly track and update your P&L every month, quarter and year. This will help to highlight how your restaurant is performing and to see if any new initiatives have positively or negatively impacted your finances. It’s estimated that the average profit margin for a full-service restaurant sits around 3-5%. Restaurant accounting is an essential part of running a business and has several benefits.