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Restaurant Accounting Guide

ByBusiness.com Editorial Staff, Last Modified
Mar 18, 2017
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> Finance

There are so many aspects to manage when it comes to successfully running a restaurant. Here are our recommendations.

Accounting may be the least glamorous part of running a restaurant, but as some would argue, it is one of the most important. Even if you hire the best accountant in town, you still have to keep accurate, organized records. Fortunately, if you have good systems in place, you can automate many accounting tasks.

Accounting solutions perform similar tasks, but you'll want to keep your specific needs in mind as you research and find the best online accounting software for your eatery. If you are an experienced restaurateur, you'll likely have a long list of requirements based on past experience.

Since accounting, reporting and managing taxes are some of the most important parts of managing a restaurant, you'll benefit from taking the time to create a lengthy list of your needs and goals for the software.

Besides basic accounting features, you'll want to consider these factors:

  • Integrations. What other business applications will the bookkeeping software work with? And how well? You'll want it to work with your point-of-sale (POS) system and payment processor at minimum. You may also want it to integrate with your employee time-tracking and inventory management programs.
  • Cost. While performance is more important than saving a few bucks, cost does matter. Restaurant accounting solutions generally vary from $30 to $300 per month. You'll want to carefully compare and weigh features and costs, specifically the features you require versus the cost of those features.
  • Locations. Some accounting solutions are intended for one business or location. If you plan to expand or franchise, you'll want a solution that grows with your business.
  • Employees. If you have employees, consider functions such as payroll, time tracking, employment taxes and scheduling.
  • Inventory tracking. Most basic accounting applications do not have complex costing and inventory functions. You'll need to find one that supports your needs, either as a separate software application or as an integration.
  • Reporting. Advanced reporting features usually cost extra. If you need to create accurate financial statements and projected budgets for your own needs or for your investors, consider adding advanced reporting options.
  • Taxes. Many bookkeeping programs allow you to add updated tax information for sales and payroll. This function often costs more, but it could be worth adding.
  • Asset management. Most accounting programs come with basic inventory tools, but you may need to track physical assets such as computers, kitchen equipment and mobile POS units. If you need this, check whether the accounting software can manage these types of functions.
  • Point of sale. Many restaurant accounting solutions offer compatible POS systems. You'll need to decide whether you want to use a third-party POS system or one offered by your accounting service.
 

 

When you're shopping for the best accounting software for your restaurant, don't hold back on asking questions. It's your business. Ask as many questions as you need to make an informed buying decision, including how the software will manage a specific task for you. You'll have better success if you plan ahead and carefully map out your questions.

Restaurant Accounting Software

Today, most accounting software is online – or at least partially online. The disadvantage to cloud-based software is that you have a monthly bill. The advantages are that the software is always up to date, your data backup is managed, and you can access the dashboard from anywhere.

Most online accounting applications accept data from your POS solution directly or from a CSV file. In addition, most provide a free version of the program to your accountant. Most also offer payment processing agreements. Shop around to ensure you get the best rates and terms.

Many accounting solutions are available. Below are some of the most popular. We recommend contacting a few software providers. You'll also benefit from consulting with fellow restaurant owners and your accountant for additional advice.

QuickBooks Pro or Online Plus

These versions are more affordable than you might think. Even the Online Plus version is only $40 per month. While there are lower-priced versions, most restaurateurs will like the advanced features of the higher-priced versions, such as budgeting tools, advanced reporting and purchase order creation. Most POS systems are compatible with QuickBooks, and all accountants know QuickBooks.

Sage 50

Online and software versions of this accounting application are available. The advanced version includes payroll processing, tax updates, invoicing and inventory management. Sage 50 costs $43.75 per month; the payroll portion is another $150 per year, and additional users cost extra. Some POS systems work with Sage, and it integrates with its own payment processor and time-tracking software.

Restaurant Solutions

This company provides complete solutions specifically for restaurants. It can integrate everything from the POS to weekly reports. Accounting is just one aspect of what it offers restaurant owners. This company does not offer flat-rate pricing. You'll need to contact the company and request a custom quote.

Xero Standard

Xero is compatible with hundreds of other business solutions and costs $30 per month. It does not offer a software-only version. This version supports up to five employees for payroll, but you can add more for a fee. Xero includes invoicing, bill pay, W-2 preparation, sales tracking, reporting and backup. It works with Square, Harvest Time Tracking, Stripe and more.

Restaurant365

 

This business solution, also tailored to restaurants, offers modules for food and recipe costing, labor scheduling, franchising, and catering. The accounting module includes general accounting features as well as budgeting and financial reporting. Monthly costs are higher than standard accounting systems, starting at $299 per month, but a subscription includes support. Other online bookkeeping programs, by contrast, charge extra for customer support. Restaurant365 also has solutions for managing multiple restaurant locations.

If you need an enterprise-level solution, look to Oracle's NetSuite, Microsoft Dynamics or Intacct.

Hiring an Accountant

Hire a good accountant before you even open your restaurant. They can help you map out your financial plans and set up your business entity and your books. That means you get help setting up the software with the needed accounts. They'll also advise you on the type of records you will need to keep and what you can expect in terms of taxes. Any accounting solution you choose will have a free version available for your accountant.

Hiring a good accountant will greatly help you keep your restaurant solvent and reduce your risk of tax troubles. You may find that your lawyer or fellow restaurateurs have good recommendations. If you have no idea where to start, the American Institute of Certified Public Accountants can help you find a qualified CPA in your area. You can even search by business type to find an accountant familiar with the specific needs of restaurants.

Once you find a few candidates, you'll want to meet with them personally and discuss your business to find the one you want to work with. While working with a large firm is beneficial in that it can provide a variety of services, it may not assign a specific CPA to your business. You'll want to ask how the firm plans to help you. If you work with an individual CPA for a more personalized relationship, ask them specific questions, including their fee structure. Also ask for references and contact them.

 

You'll need to budget a few hundred dollars per hour for accounting services, and you should speak with your CPA monthly to ensure you are on the same page. Your accountant should offer you sage business advice. Your fees will be less if you provide your accounting adviser with good information rather than a pile of receipts. Good use of business systems and due diligence on your part will greatly help your accountant.

Tracking Sales, Employees & Inventory

Besides accounting software, tracking sales, inventory, payroll and more is necessary for running your business and for providing your accountant with the information they need to help you. There are numerous business applications that can help you. You may work with a handful of separate systems or integrated systems. For example, some POS systems offer modules for tracking food inventory, vendors and food waste. They may also include time clocks, scheduling and payroll reports. Here's what to look for:

POS Systems

A capable POS system with payment processing is necessary for you to process sales efficiently. Owners who operate simple counter-serve restaurants are satisfied with products such as Square. Others require systems specifically intended for restaurants, such as Revel Systems, Lightspeed, Lavu, NCR and TouchBistro. These systems can export reports to QuickBooks or other accounting applications to help you track sales and more.

Food Inventory Trackers

Tracking food expenses is critical to running a profitable restaurant. Simply eyeballing inventory is not accurate and may lead to under- or over-purchasing. Some food trackers are integrated with POS systems, such as Revel Systems and Restaurant Manager. Others, like Orca Inventory and Ordering, Syrus, and Optimum Control, are separate programs. Often, stand-alone systems provide more features than those included with a POS system. These added features include printable count sheets, waste management features, batch recipe support, mobile count features and invoice creation.

Payroll & Time Tracking

Most POS systems include simple time tracking for employees. However, you may want more. Features available with payroll and time-tracking apps include SMS schedules, shift-trading features, online schedules, employee photo clock-ins, biometric clock-ins, optimal shift analyzers and more. Since restaurants tend to have a lot of short, varying shifts, it makes sense to acquire a good employee-scheduling tool such as ShiftPlanning, NimbleSchedule and Snap Schedule. These solutions can create reports for your payroll and accounting needs.

Restaurant Payment Processing

You'll need a payment processor to process debit and credit card payments. While cost and convenience are important, you shouldn't just sign up with the first offer. Shopping around can save you a lot of money and stress later if you need to terminate your contract. In many cases, your accounting software will offer payment processing as well as your bank, or you can contract with a third-party payment processor. Payment processing can be costly, so you'll want to carefully consider which processor you choose.

You'll usually acquire better terms if you have good personal and business credit, proven sales volume, and a steady number of transactions. Otherwise, your choices may be limited. Companies that offer flat rates – Square and PayPal – may charge more per transaction, but it might be the best option if you have marginal credit and or are a new business.

If you read payment processor reviews, you'll encounter comments by frustrated business owners. Carefully review the fine print before signing up with a service to avoid major problems down the road. You'll also benefit from having your accounting and/or legal counsel review the contracts as well.

Here's what to consider when choosing a processor:

  • Be wary of "free" POS hardware offers. Often these types of deals include a contract term of three years or more. If you should go out of business or change processors, you could experience a costly breakup. You may have to pay for the hardware in addition to paying through the end of your contract term.
  • Is the contract self-renewing? Some payment processing contracts automatically renew at the end of the term for another full term. So, if your contract term with your current processor lasts three years, you are stuck with it for another three years, regardless of whether you approved the renewal or not.
  • Does the processor hold funds? Many processors advertise quick deposit of funds to your business account. However, some processors withhold funds if they spot unusual activities, which could be fraudulent transactions, but it could just be a particularly busy week for your restaurant. Sometimes, though, funds are held for months. Ask the payment processor if it withholds funds, and set some money aside for operating costs just in case.
  • Does the process charge varied transaction rates? Find out exactly how cards are charged. Some processors advertise a low rate but then charge more for business or rewards cards. In addition, online payments for takeout orders may be charged differently.
  • Are there early termination fees? Some processors charge you if you quit your contract early. Make sure you understand the termination fees before you sign.

Finding the best restaurant accounting software is challenging but necessary. You'll reap the most success by consulting with an accountant and other restaurant owners. You'll also benefit from acquiring assistance from software providers when setting up the software and the integrations with your other business solutions. Training is often available, and you should take advantage of these resources. Look into extended support plans if you think you'll need it.

With the right accounting software, along with POS, inventory control and payroll management solutions, you'll automate many functions to make the day-to-day management of your restaurant much easier and more accurate.

Written by Pamela Stevens

Image from create jobs 51/Shutterstock

Business.com Editorial Staff
Business.com Editorial Staff
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