5 Accounting Errors Restaurant Owners Should Avoid
by Jillian Straw
Food enthusiasts and exemplary cooks are fairly easy to come by. What’s actually difficult to come by are those people who are so committed that they start their own restaurant business. However, the majority of those entrepreneurial initiatives tend to fail, but not as a result of their food not being first-rate. Most restaurateurs are just not experienced accounting specialists and don’t have relevant financial understanding necessary to run a thriving hospitality business.
This leads us to a case of “you don’t know what you don’t know.” Most culinary schools don’t teach accounting, oddly enough. Thankfully, these lessons are easy to learn- and to avoid. Implementing the right procedure is like following a recipe. We already know not to confuse baking powder and baking soda, for example, but when you’re first learning mistakes like that are understandable. This article is going to put emphasis on the 5 most typical mistakes made in restaurant accounting.
Flawed Accounting Systems
To put it simply, any time our company interacts with clients or prospective clients, we find that their restaurant accounting system is not fully standardized. Occasionally, it can be challenging for us to identify if such clients have an authentic system, apart from whether or not it is used or is working at highest-possible performance. An ideal restaurant accounting system will categorize as well as keep track of expenditures and revenue, while concurrently integrating your POS, payroll and inventory management platforms.
Errors in Bookkeeping
The hospitality sector is exclusive in the way that a huge part of its revenue is earned in cash. This should not be a justification for lousy bookkeeping! Should there be one aspect wherein your business simply cannot manage to be lenient with, it’s record keeping. US dollars, as well as cents, are going to mount up after some time therefore, precisely, accounting for every single penny is important. Your bulletproof bookkeeping records will allow you to determine how justified is your pricing, and whether any kind of modifications have to be done.
Accounts Payable Concerns
Not everybody assumes that running a prosperous restaurant business provides for lots of spare time. Spare time is pretty much non-existent to any business owner, taking care of the burdensome tasks like having to pay their vendors, cross-checking their invoices and preparing checks etc. Simultaneously, paying your vendors’ invoices by the due date is important to continue running your business since your vendors provide the bulk of the products required to operate your eatery. What your business needs in this situation is a powerful and automated restaurant accounting software, which ensures vendors are paid promptly in a seamless manner.
Forgetting to Reconcile Monthly Bank and Credit Card Accounts
Not carrying out a complete reconciliation of your bank account and credit card records will certainly result in complications. All things considered, errors in accounting are caught with the help of such reconciliations. And mistakes in accounting leave you with nothing but critical complications. Listed below are a few tangible reasons why you should always reconcile correctly:
• You can easily determine if all your bills as well as other expenditures have been paid
• You can take a look at the summary of your monthly and per-week earnings and expenditures; this would simplify year-to-year evaluations
• You can understand if you happen to be below, above or perhaps on the budget
• You can figure out where your money is going
• You will know and foresee where existing, past and potential losses have or may occur
• You can view the bigger picture of the financial well-being of your business
Making Use of the Cash Basis of Accounting
Being a restaurant business that submits tax returns and generates financial statements, you have got the option to opt for accrual accounting or cash-based accounting. Within the hospitality sector, an expenditure must be allocated to the time in which the expense was incurred- which is what accrual accounting provides. From an overall viewpoint, accrual accounting provides you with a much better depiction of your profit and loss.
If you happen to be guilt ridden of making any of the above errors, don’t feel stressed. Almost everything can be taken care of when you make use of the appropriate restaurant accounting software to manage your bookkeeping & accounting. You need to understand where your money goes, and what is being utilized in order to succeed in this field.
Plate IQ is a well-recognized accounting software, which has been designed with an aim of improving your restaurant accounting processes. It is being used by all the restaurant segments to achieve greater back-office productivity. The software is easy-to-use and helps in complete automation of your accounting procedures. In short, it is a perfect and a complete solution for all of your restaurant accounting needs.
Jillian Straw writes for Plate IQ, covering technology in the hospitality industry from a background in restaurants and operations management.
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