Most restaurants fail due to financial mismanagement of any or all elements necessary to restaurant accounting. A good accounting system will categorize and track expenses and revenue, while simultaneously integrating your POS, payroll and inventory systems. A restaurant’s ultimate success is based on many moving pieces, in particular the costs which are determined by your vendors. The hospitality industry is unique in the sense that a large portion of revenue is garnered in cash. This is not an excuse for sloppy bookkeeping!
Restaurant accounting is based on a four-week accounting period. Each week in this four month period should begin on a Monday and end on a Sunday. It’s inaccurate to compare the profit & loss (P&L) of a particular month, in a particular year, to previous years. You can see if all your bills and expenses have been paid and you can see the overview of your monthly and weekly revenue and expenses. This will simplify year-to-year comparisons.
Accrual accounting is based on tracking your expenses and revenue. Cash accounting records an expense or profit when the actual physical cash goes out or in the door and is considered paid or earned. Lack of weekly inventory is the main mechanism by which you calculate your cost of goods sold (COGS) Your accountant needs to have specific experience in your industry so that he or she can give you the best advice possible. If you are using a CPA or accounting firm to handle your books, make sure that your selection has ample and solid knowledge of the restaurant industry.
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