How to Use And Optimize QuickBooks for Restaurant Accounting
by Jacob Statler
Over 29 million businesses in the US use QuickBooks to manage their accounting.
In the restaurant industry, QuickBooks is the overwhelmingly preferred choice of accounting software, with roughly an 80% market share.
Restaurateurs like QuickBooks because, as we say in tech, it “just works.” The solution is user-friendly, affordable, and enough of an industry standard that almost any solution in the space ought to plug into it, no questions asked. Intuit, the maker of QuickBooks, also offers quality support, which allows operators to focus on other aspects of their restaurant business.
If you’re a restaurateur thinking of adopting QuickBooks for your business, this guide will help you decide which products and features will be most advantageous for your restaurant accounting.
- Available products for restaurant accounting with QuickBooks
- Key benefits of QuickBooks for restaurant accounting
- How to use QuickBooks for restaurant accounting
- Restaurant accounting KPIs in QuickBooks
- How to strengthen QuickBooks by integrating Plate IQ
“Plate IQ’s integration with QuickBooks actually works. It syncs instantly… The workflow for clients who needed to approve their invoices got much easier.”
— Jessica Glenn, Bookkeeper, Books To Go
Click here to read more about how this restaurant accounting firm uses Plate IQ and QuickBooks together.
Available products for restaurant accounting with QuickBooks
All versions of QuickBooks offer fundamental accounting features, but there are differences to consider based on your restaurant’s size and needs.
QuickBooks Online (QBO) is beneficial for businesses in varying industries — but it’s especially useful for the fast pace of restaurants.
QBO key features include:
- Operators can access their accounts anytime, anywhere thanks to QBO being hosted on the cloud.
- There’s less risk of losing data because it’s stored online.
- Additional applications can be plugged in to QBO to assist with tasks like tracking inventory, timecards, and payment acceptance.
- Applications then sync with QBO connecting your tech stack and enabling you to run your business on the go.
- Superior invoicing feature (compared to Desktop). QBO invoices are easier to customize and can be sent right from your mobile device.
The flexibility of QuickBooks Online is great for big, small, or growing restaurants.
Unlike QuickBooks Online, the desktop version (QBD) is locally installed on your computer’s operating system.
QuickBooks Desktop includes QuickBooks Pro, Premier, or Enterprise and is available in 2 versions: Quickbooks for PC and QuickBooks for Mac.
QBD’s key features include:
- Added security and more in-depth accounting features — particularly in the area of reporting.
- Excellent capabilities for inventory tracking, cost of goods, sold inventory, and other inventory adjustments.
- A yearly subscription cost as opposed to a monthly one.
One of the downsides of QBD is that it is less flexible for upgrading compared to QBO.
QuickBooks Pro and Premier are geared toward small to medium companies. So, once a restaurant grows, they often outgrow QBD.
QuickBooks Enterprise (QBE) is the Lamborghini of QuickBooks versions.
QBE key features include:
- Holds up to 1 million customers, 100,000 categories, 45 customer fields, and 40 users.
- Manages inventory, reporting, sales, time tracking, and payroll.
- Advanced reporting allows for the creation of specialized reports, enabling you to view key restaurant information.
- Information is stored in the cloud, making it secure and accessible.
- 40 users can work simultaneously. Each user can be set up with a custom permission, so different users can access different information.
- Inventory can also be tracked intricately enough to show which shelf a specific food item is located on.
QBE is the best QuickBooks option for large corporations, because there are no account limitations.
Key benefits of QuickBooks for restaurant accounting
QuickBooks’ various automation features help make restaurant accounting faster and more accessible.
When you first set up QuickBooks, you can tailor it specifically to the needs of your restaurant. Knowing its core benefits can help you decide how QB can help your restaurant’s finances run successfully.
According to an industry report, 35% of restaurateurs ranked optimizing speed and efficiency as one of their top 3 priorities.
The following key benefits help you achieve just that.
1. Ordering & inventory management
QuickBooks allows you to automate and oversee inventory and order management.
It can show you everything — from customer orders to what food appears on customers’ plates — allowing you to predictively run your restaurant more smoothly.
52% of restaurant owners say that high operating and food costs are some of their biggest challenges. And when that precious inventory has a limited shelf life, efficient inventory management is essential to maintaining profitability.
QuickBooks keeps you organized by alerting you when it’s time to restock and provide sales data that you can use to accurately order more inventory.
Also, QuickBooks allows you to set up a purchase order and will send it to the vendor, so required items are reordered on time.
After a purchase order is created and sent — and once the inventory is received — you can turn the purchase order into an invoice through the “Statement of Cash Flow” function, so the items don’t require re-entry.
Note: Although QuickBooks Online (QBO) and QuickBooks Desktop (QBD) have inventory functions, they require manual entry and maintenance due to a lack of barcodes.
2. Sales & custom reporting
QuickBooks has a feature that allows you to customize various reports with just a few clicks.
You can generate standard reports, including:
- Profit and loss. QuickBooks’s P&L report can be run monthly, quarterly, or annually to get a snapshot of your restaurant’s overall net income, expenses, and profitability.
- Balance sheet. The balance sheet report can be used to determine your restaurant’s net worth by calculating its assets and liabilities.
- Cash flow. This document keeps track of the cash coming in and going out of your restaurant.
You can also create reports that are more specialized. QuickBooks allows you to select customized reports, modify the report window, click on the relevant tabs, and choose which categories you want to be included in the report.
These financial documents are fit to be shared with CPAs, operators, stakeholders, or other partners to help make calculated management decisions.
3. Tracking of accounts payable and expenses
QuickBooks’s lightweight AP function is a good entry-level solution for restaurants who just want to see which vendors they owe and which customers owe them.
The dashboard shows a quick overview of the company’s invoices, expenses, profit and loss, sales, and accounts receivable. In QBD, there’s an icon in the upper right corner that reminds you if an invoice needs to be paid.
These snapshots make it simple for you to keep track of how your company is doing without the need to dig further.
A notable drawback to relying on QuickBooks for your restaurant’s AP is that it lacks sophisticated automation. You’ll need to integrate an AP automation software like Plate IQ to enhance your AP.
4. Payroll processing
Payroll processing software is one of the most popular back-office technologies used in restaurants today, rising from 28% in 2018 to 50% in 2019.
QuickBooks also offers payroll processing at all package levels — but there’s an additional monthly charge for this service.
The fee is dependent on how many employees there are, and the fee increases with each additional employee.
Also, QuickBooks has different payroll processing packages, including:
- Payroll Enhanced. This offers tax calculations, free direct deposit, tracking and reporting workers’ compensation, and automatic W-2 electronic filing at year-end.
- Payroll Assisted. This comes at a higher price. It offers the same services as the Basic Payroll package with the addition of paying and filing taxes on behalf of the company. With this package, exact taxes are deducted with each payroll, and QuickBooks offers 24/7 live support.
Payroll Assisted also enters everything into the correct departments for wages, meaning there’s no need to input any third-party data.
5. Integrations with other key restaurant software
As previously mentioned, all versions of QuickBooks have an array of possible integrations, which are extremely beneficial.
The bigger your restaurant tech stack, the more important it is that it all works in conjunction. Because the easier your restaurant software shares data, the less manual care your data will need to operate between apps.
It’s highly beneficial for a restaurant to configure QuickBooks with other programs such as Square, Deputy, RestaurantOps, or Plate IQ.
QBO has many applications that can help you run your business. However, not everything is automated, and you’ll still need to put in some work.
Despite this, QuickBooks will help you manage your books easier.
How to use QuickBooks for restaurant accounting
Create a Chart of Accounts
One of QB’s best features saves valuable time during setup. When you select “restaurant” as your business type, QB automatically generates a chart of accounts commonly used in the restaurant industry.
An excellent chart of accounts for a restaurant would include the following:
- Bank accounts
- Credit cards
- Food inventory for different types of food (dairy produce, meat, etc.)
- Liquor inventory
- Beer inventory
- Wine inventory
- Fixed assets
- Sales tax payable
- Payroll liabilities
- Beverage sales
- Liquor sales
- Beer sales
- Wine sales
- Food sales
- Food costs for each of the food inventory categories
- Costs of all beverages/liquor/wine
- G&A expenses
- Depreciation expense
Create a taxable customer to represent daily sales
A restaurant owner can use QuickBooks to create their own daily sales template.
When creating this template, several accounts must be included for it to balance. These accounts include:
- Daily sales incomes
- Cards: Visa, Mastercard, AmEx, Discover
Unfortunately, each of these accounts must be typed into QuickBooks daily to keep track of everything in the day-to-day.
In other words, there’s less automation here.
After creating a template, you need to make it as “Collect Sales Tax,” so QuickBooks knows to calculate sales tax on daily sales.
Food, non-alcoholic beverages, and alcohol should be broken out separately to calculate the cost of sales.
These are the only categories bringing sales into the restaurant, so it’s good to stay around the 30% range for food and the cost of beverages.
Having a system to identify where sales are made can give the restaurant an insight into what area of their restaurant is most appealing to customers.
Restaurant accounting KPIs in QuickBooks
Thanks to QuickBooks’ crucial accounting features, the following KPIs can be easily calculated to ensure the reliability of your restaurant’s financial success.
Cost of Goods Sold (COGS)
The COGS for a restaurant is the total cost of every ingredient put into every item used to make any item for sale.
About 1/3 of the gross revenue of restaurants gross goes towards their COGS.
Prime cost is calculated in the following way:
Total COGS + Total Labor = Prime Cost.
Full-service restaurants try to keep their prime cost below the 60% range.
However, most try to aim for the 55% range because a lower prime cost allows for more profitability.
Earnings Before Interest, Tax, Debt, and Appreciation (EBITDA)
The ideal range for EBITDA in the restaurant industry is between 13% and 30% of sales.
The formula to calculate the restaurant EBITDA is as follows:
Net Income + Taxes + Interest + Amortization + Depreciation = EBITDA
The formula is essentially the subtraction of fixed costs from the restaurant’s gross profit.
The way to improve a restaurant’s EBITDA is by increasing sales — through high-margin items like desserts — and reducing costs by sourcing the highest-value ingredients.
Lastly, ensure that labor costs stay low and there is management and control over the inventory.
Strengthen QuickBooks by integrating Plate IQ
For many restaurants, QuickBooks is the restaurant accounting software of choice.
Setting up your restaurant accounting with QuickBooks is a great way to build the foundation of your accounting tech stack. But the software’s ease of use comes at the cost of sophistication, in many areas. When you need a sophisticated process to save manual processing, having another software integrate with QuickBooks is the way to go.
This is where integrating Plate IQ to your QuickBooks can help you automate your AP — while capturing invoice data down to the line item.
Plate IQ can be your drop-in solution for easily going from an invoice to bill pay.
The best part? No manual data entry is required.
Want to see how Plate IQ can complement your QuickBooks while saving you time and money?
Fill out the form below to request a demo today.
Jacob Statler writes about the unique challenges of hospitality AP automation for Plate IQ.
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