The restaurant business isn’t just about serving tasty food to customers; you also have to handle the financial aspects. That happens when you implement impactful accounting strategies and set practices. Accounting, in general, differs from restaurant accounting, which is why it’s crucial to understand its importance for business growth and stability.

If you run a restaurant business and aren’t aware of the basics of its accounting methodologies, contact a skilled accountant or a CPA in Oakland, CA right away. This way, you will be able to focus on prioritized tasks like marketing, operations, and staff management.

What is Restaurant Accounting?

Restaurant accounting is used to cater to the restaurant industry specifically. It takes care of the restaurant’s finances, business transactions, bank statements, documentation, analysis, and market trends. This type of accounting takes place quarterly or annually using a 4-week time period. With the given data and variable insights from restaurant accounting, business owners can effectively manage their cash flow, budgeting, profit-and-loss, operations, profitability, and compliance.

Restaurant Accounting vs. Restaurant Bookkeeping

Both are used to create a financial framework for the restaurant business and help owners understand their finances better; however, both play distinct roles.

Bookkeeping:

Think of bookkeeping as the continuous and precise recording of all financial transactions that lay the groundwork for well-informed decisions in the restaurant business. Bookkeepers track daily transactions in your diner or restaurant for future purposes like taxes, budgeting, investment, and so on. It primarily includes:

1. Sales: Every dollar a restaurant business makes, whether by dine-in, offering products, takeout, or delivery, is meticulously recorded in the point-of-sale system.
2. Expense Management: Expenses like food resources, utilities, staff salaries, and rent are all documented and categorized.
3. Accounts Payable and Receivable: Sometimes businesses deal with invoices to streamline operations. Bookkeepers record the amount a consumer owes you and the costs you owe to an entity.
4. Payroll Processing: Accurate payment of employees and withholding deductions for taxes.
5. Bank Reconciliation: Match your bank statement with the transactions recorded in the books to identify discrepancies.

In a nutshell, restaurant bookkeeping amounts to documenting all routine and short-term financial activities, providing real-time access to data for informed decisions.

Restaurant Accounting:

Restaurant accounting builds upon the sheer foundation of bookkeeping, using its actionable raw insights for business decisions. Accountants use financial data to analyze, track, interpret, and translate the numbers into a story that drives your restaurant enterprise toward profitability and success. It comprises major components like:

1. Financial Statements: Accountants create cash flow statements, profit and loss statements, balance sheets, and income statements. These reports reveal your business’s economic worth and financial position.
2. Cost of Goods Sold (COGS) Analysis: COGS is a cornerstone metric of the restaurant business that represents the cost of ingredients as a share of revenue. Accountants help business owners with these ratio numbers and assist in determining areas for cost reduction, such as menu optimization, seat allocation, product placement and promotion, or inventory management.
3. Labor Cost Management: Accountants understand that labor cost is a crucial aspect of your revenue and, therefore, helps you get staffed efficiently.
4. Tax Planning and Compliance: Accountants know the importance of taxes and their compliance standards; therefore, they adhere to tax regulations and filing deadlines to ensure minimum tax liabilities.
5. Budgeting and Forecasting: Accountants make use of historical financial data, trends, and activities to create business budgets and economic forecasts. They also guide you on impactful strategies that can direct your business toward growth.

To sum up, restaurant accounting goes beyond the principles of bookkeeping and requires a unique approach when it comes to taxation, record-keeping, filing taxes, and managing business accounts.