Trying to balance the myriad of complicated jobs involved in restaurant bookkeeping isn’t an easy task. Unfortunately, success in the restaurant world means knowing your way around the books — not just the kitchen — and there’s little time for that. If you’re looking for the ultimate guide to restaurant bookkeeping, you’re in the right place. This article will break down the best ways to approach restaurant bookkeeping and take you through the process.
1: First Up, Software
Can you get by with pen, paper, and a handheld calculator? Yes.
Should you? No.
Modern accounting software has come a long way since its inception decades ago. The days of overly complicated interfaces, hard-to-understand formats, and intricate tools are (mostly) over. You’ll find that modern accounting software is fairly decent at doing what you need.
There are a wide range of options out there. Try checking out the following software and see if any of them appeal to you:
- Restaurant 365
- QuickBooks and QuickBooks Online
- Restaurant Solutions
It’s important to note that some of these programs (QuickBooks in particular) will offer advanced levels of functionality. Of course, advanced tools might be unnecessary for your specific needs. In the end, the best software for you comes down to your unique needs.
As a general rule, something like QuickBooks Online is a great place to start. It’s reasonably priced, flexible, and doesn’t require in-depth accounting knowledge to set up.
If you’re struggling to decide on a software suite, Founder’s CPA is more than happy to offer advice via a free consultation. Don’t worry, we don’t charge for phone calls!
What Sort of Features Do I Need in Bookkeeping Software?
This is where things start to get a little more technical. You’ll need software that can perform the following functions at a minimum:
- Track sales and expenses (at multiple locations, if applicable)
- Integrate data from your point-of-sale (POS) system
- Handle the complexity that arises from tips
- Track payroll, especially with regards to tips, overtime, and changing shifts
- Produce detailed reports that cover revenue, expenses, and inventory
Look to Your POS System
A point-of-sale (POS) system is the place where your customer makes the actual purchase at your restaurant. In the days before computers, this meant manually tallying up each order at the end of the night. That’s not only tedious but it leaves your business open to human error (something best avoided).
A quality digital POS system greatly simplifies this process. Some modern systems (Square, as an example) send sales data directly to your reporting software and offer on-demand information. Regardless of the specific POS you opt for, there’s no denying that a modern POS system is a true game-changer.
2: Embrace Records
Using modern software and digital tablets in your restaurant may seem like the stuff of future, but some things never go out of style. Good records are one of them.
It’s vital that you take the time to organize your business’s financial records regularly. This goes beyond just using your accounting software from above. You can never go wrong with paper copies of important information.
The more records, the better. Embrace the functionality of your accounting software and see what tools are available. For example:
- Profit and loss statements
- Inventory level reports
- Food and labor cost analyses
The more time you spend making sure your retain every bit of important data, the better.
3: Mastering Payroll, Labor Costs, Tips, and Worker Classification
Labor costs comprise the single largest portion of your expenses. Thankfully, your accounting software will take care of the basics for you. However, you’ll want to take the time to become familiar with state and federal labor law with regards to worker classification and tips.
Pay Periods and Methods
Pay periods and payment methods are not glamorous.
But they are important.
For pay periods, decide on whether you want to follow weekly, bi-weekly, semi-monthly, or monthly pay periods. As a general rule, employees prefer weekly or bi-weekly pay periods (they get paid more often!). Weekly paychecks require more work on your end, so sticking with bi-weekly is usually a good choice. Bear in mind, bi-weekly checks (one paycheck every two weeks) can make for an accounting headache during the occasional 3-pay period month.
Payment methods? Direct deposit is a usual winner here, but some employees may prefer a paper check. You may even have employees request payment in cash! If you have any questions about the best way to pay employees, Founder’s CPA is happy to assist.
1099 vs. W2 Employees
A W2 employee is someone who receives a regular wage, employee benefits, and is legally considered to be an “employee.” If you have W2 employees, you’ll need to withhold income tax from their check. By law, all W2 employees must receive minimum wage or higher.
A 1099 contractor, however, is just that — a contractor — and does not enjoy the benefits of an employee. Remember, words matter: you don’t have 1099 employees, you have 1099 contractors.
If you’ve been treating your staff as contractors, you might want to put a call into Founder’s CPA. Founder’s CPA can help walk you through the process of determining what classification applies to your workers. The wrong classification is not something the IRS takes lightly: get in touch today!
As an employer, you need to collect daily records of your employee’s tips. And, yes, tips count as income for your employees. You’ll need to withhold additional employee income in order to cover the tax from the tips.
Please check this Founder’s CPA article for more information on tip reporting in the restaurant world.
As a small business owner, taxes are a fact of life. Depending your area, you may need to address some or all of the following:
- Federal income tax for sole proprietors, partnerships, S-corporations, or LLCs
- Employee income tax withholding
- Employee Social Security, Medicare, and Federal Unemployment Tax
- Any applicable state taxes, city fees, and other costs
- Quarterly taxes, estimated taxes, and numerous other fees and expenses
Calculating your own small business taxes is not easy. Even the best accounting software may fall short when it comes to figuring out the complexities of IRS tax code. Navigating the world of IRS tax compliance is best done with a professional by your side.
5: Hire a Professional
You’re a restaurant owner. You’re not an accountant.
That’s why Founder’s CPA exists. It’s far better to play to your strengths — running a successful restaurant — than to waste time and resources on something as complicated as accounting.
Founder’s CPA focuses on providing accounting solutions to restaurants and other small businesses. Let us take care of the numbers while you focus on building an even more successful business. Contact Founder’s CPA here to schedule a free consultation!