This number directly impacts how much profit you make on each dish sold. For small business owners and employers in the restaurant industry, financial literacy is not just an option; it's a necessity for sustainable success. Even the most seasoned restaurant owners can stumble over common accounting pitfalls. Awareness and strategic actions can keep your financial ship smoothly sailing. The cost-to-sales ratio is a key metric in understanding the financial health of your restaurant. It measures the relationship between your costs (like COGS) and sales.

It offers a comprehensive platform to meet the needs of restaurants of all sizes, as well as owners ranging from beginners to experienced bookkeepers. EBITDAEBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It provides a snapshot of your restaurant’s restaurant bookkeeping operational profitability by ignoring non-operating costs. It’s calculated by adding back interest, taxes, depreciation, and amortization to your net income. Balance sheetBalance sheets give a snapshot of your restaurant’s financial health at a specific point in time.

Best Accounting Software for Restaurants of April 2024

To find the right accountant, talk to other managers, owners, or chefs to see who they use. Look for someone with knowledge of your local laws and experience in the restaurant accounting niche. Hiring an accountant to help you with your finances is a good idea for any and every restaurant. If the whole thing is just too confusing for you, or bookkeeping is too complex to manage, an accountant can handle it for you. Even if you’ve got a good grasp on the entire bookkeeping process, a professional accountant can help you interpret the information that your accounting produces. Contact us today to get started with your customized restaurant accounting services.

Prime costPrime Cost is a simple concept in accounting for restaurants – it’s the sum of your Cost of Goods Sold (COGS) and labor costs. In other words, it’s the total cost of your raw materials and the wages you pay your team to turn those materials into products. The CoA plays a crucial role in creating financial statements, helping you understand where your business currently stands. So, maintaining an accurate and efficient CoA is vital for managing your business’s financial health. COGS is a vital metric in restaurant accounting, representing the direct costs of producing the food and beverages you sell – essentially, the cost of your inventory after it becomes a sold product.

Want to Learn What Outsourced Restaurant Accounting Could Look Like for Your Business?

If you’re unsure, consult an accountant or financial professional to determine the best method for your business needs. While the accrual method can be more complex and time-consuming, it gives a more accurate picture of a restaurant’s financial health as it considers current and future obligations and revenue. The restaurant chart of accounts documents all financial transactions in your restaurant, including revenue, assets, and liabilities.

• While no defined average food cost percentage is defined, this range has been a well-known standard for US-based food operators.
• But knowing the basics of restaurant accounting can pay dividends in helping you understand your accountant better and manage your money.
• Choosing a comprehensive software like Restaurant365 can help with this, as there’s a central repository for data – this is an improvement over using different platforms for different functions.
• By connecting seamlessly with your POS, accounting software automates the collection and organization of financial data and transactions.
• This includes doing bookkeeping, creating financial statements, and recording transactions.
• It’s a niche product designed to seamlessly calculate and pay your sales tax on time and in full while taking advantage of applicable discounts.

These KPIs are controllable, but they can also easily get out of hand if not monitored. If you’re monitoring these figures on a weekly basis, you can patch any cost leaks without incurring too many damages. Cost of goods sold is a KPI that indicates how well you’re pricing your products and controlling your inventory. CoGS represents the actual cost of food and beverage used to produce your food and beverage sales. By keeping tabs on your CoGS ratio, you can take action to reduce and contain your inventory costs.

The Importance of Accurate Restaurant Accounting

The cashier’s summary keeps track of all the transactions entered at a single cash register. If you have more than one cash register, you need more than one summary sheet. The summary should include starting cash on hand as well as all dollar amounts run through that register.