Accounting for Restaurants and Bars Every Business Owner Must Know

Accounting for restaurants and bars is very much needed, especially because financial management isn’t easy and tends to be complex. Cash flow management must be balanced with accurate financial records so that the business runs smoothly. Accounting for both types of businesses also enables you as a tax-compliant owner with this following guide.

Major Considerations of Accounting for Restaurants and Bars

1. Cost Management

Cost management is a key aspect of bar and restaurant accounting because it’s about managing all of your business expenses. To stay profitable, know the cost of producing your products and how much your employees are paid per month. Cost management is also about knowing how much money you have to spend on rent, water, and electricity.

2. Cash Flow Management

If cost management is how to organize expenses for business needs, then cash flow regulates the inflow/outflow of cash. The purpose of this management is to ensure that you always have cash ready to pay obligations. With cash flow management, you can also keep your business running healthily even though sales are unstable.

This key aspect needs to be considered and implemented so that expenses are not greater than your income. In addition to being able to pay bills on time, you also need to consider sudden expenses in business. To keep your finances safe, try creating a simple cash flow template that is suitable for restaurants/bars.

Read More: Understanding Accounting for New Business Start Up Costs

3. Payroll Management

Restaurant and bar accounting guide includes payroll management which is financial management related to employee salaries. You need to calculate basic salary and soft money as well as tips/bonuses for employees, including deductions. The deductions you need to consider can be salary deductions because they’re late or also because of taxes.

4. Inventory Management

In restaurants and bars accounting, inventory management is about organizing all the goods or raw materials that you have. This is related to food and beverage ingredients as well as various consumables such as straws and tissues. In this case, you also need to take into account the cutlery and drinking utensils.

You should know all the amount of stock and when to buy more so you don’t run out when needed. The purpose of this type of management is to ensure that the risk of wasted materials is minimized. This management also functions to ensure that stock is always available, financial reports are accurate, and operations run smoothly.

5. Key Performance Indicators

Accounting basics for restaurants and bars has another critical component, it’s key performance indicators (KPIs). These numbers are a measure of how well and healthy your business is performing and what improvements are needed. This is a kind of report card for school children that will help you understand the business financial condition.

This element is useful in understanding financial conditions because it helps check whether the food ingredients are too expensive. It also helps you evaluate whether employee salaries are greater than income. Aside from those things, you will also know the amount of net profit from your business so far through KPIs.

6. Budgets and Forecasts

Budget is a plan of your income and expenses in a certain period, whether in a month or a year. Forecast is an estimate/prediction of income and expenses that will occur based on previous data. Both help you not to be wasteful and at the same time prepare a financial strategy for the next period.

7. Accounting Software

Accounting for restaurants and bars guide includes accounting software that helps you record, organize, and manage all your business finances. Your business condition is easier to monitor through practical and fast financial recording like this. In addition to being efficient, storing financial data is also safer and can be accessed whenever needed.

8. Tax Compliance and Financial Analysis

As a good entrepreneur, you must pay taxes correctly, in the right amount, and on time. If you do it right, it’s guaranteed to be legal and safe, not being fined and more trusted. Analyze your business finances as well to check whether the business is healthy and what needs to be improved.

Accounting for restaurants and bars is essential to control costs and margins, and assess the performance of your own business. The audit and funding process also becomes easier, especially when you want to find investors or bank loans. Accurate and complete financial reports make you more relaxed in running your business.