Top Bookkeeping for Restaurants

What is Restaurant Bookkeeping?

Restaurant bookkeeping is the process of recording, monitoring, and tracking your restaurant’s monetary transactions, such as equipment, inventory, utilities, and menu prices.

You should also know the term isn’t interchangeable with “restaurant accounting.” Both are important for any successful restaurant, but you need to be aware of the differences.

Imagine you’re putting together a new menu item for your restaurant. You have to procure the right ingredients, and then turn them into an actual dish. Restaurant bookkeeping is like making a list and then picking out the right ingredients.

Accounting, on the other hand, is what you do with those ingredients. Payroll is part of bookkeeping, for example, but you also need those payroll reports to do your year-end taxes.

Why is Bookkeeping Important for a Restaurant?

Bookkeeping is important for a restaurant because, without it, you have no way of knowing if you’re actually bringing in any kind of profit. And if a business isn’t turning a profit, it’s not really a business—it’s more of an expensive hobby.

The specific ways restaurant bookkeeping can improve your financial outlook include:

• Manage your cash flow without stress
• Always in compliance with tax regulations
• Your financial records are always accurate
• Easy collaboration between managers and stakeholders
• Identify financial risks before they become a real issue
• Get a clear understanding of your expenses and revenue
• Budgeting so you can forecast future sales and expenses
• Your financial records are always secure and confidential
• Save time with modern bookkeeping software and technology

At the end of the day, restaurant finances tend to be far more complex than other industries. Dealing with tips, high operating costs, cash flow problems, and seasonal variations are just a few examples that many other businesses simply don’t face.

But as far as the IRS is concerned, you’re held to the same standard as everyone else. This might be the biggest reason why restaurant bookkeeping is so crucial to your success.

How can good bookkeeping practices help with tax deductions?

Good bookkeeping practices help with tax deductions in many ways, like:

• Clear financial records make an audit (and reversal of deductions) less likely
• All transactions have a clear label, so it’s a breeze to identify tax deductions
• You’ll always have a clear report of taxable vs. non-taxable income
• Smaller deductions, like using your car for business, won’t fall through the cracks

Basically, following good restaurant bookkeeping practices means that tax season won’t be a chaotic mess. It’ll be refreshingly straightforward to look at your restaurant’s finances and identify deductions—potentially some you never knew you qualified for.

What are the best practices for handling tips and gratuities in bookkeeping?

The best practices for handling tips and gratuities in bookkeeping are:

• Having a separate revenue account for tips
• Taking time daily or weekly to note the tips
• Reporting the tips/gratuities as income in your P&L statement
• Collecting monthly or weekly reports from all your tipped employees
• Withholding income and FICA taxes appropriately for tip income

When you follow these steps, accurately reporting tips in your restaurant bookkeeping will cease to be a source of stress.

Can bookkeeping software help with inventory management?

Yes, bookkeeping software can absolutely help with inventory management for your restaurant. Utilizing modern technology like this gives you an accurate, real-time look into your restaurant’s inventory at any moment.

These tools can also automate mundane or tedious tasks that are normally plagued by human error, which makes your inventory reports incredibly accurate.

Once your new software is up and running, you’ll likely notice you can reduce inventory carrying costs and better forecast your needs. The end result is that you waste less inventory, order more efficiently, and save on your inventory labor costs.

Can I do my restaurant’s bookkeeping myself, or should I hire a professional?

Legally you can do your restaurant’s bookkeeping yourself, but you’d almost certainly see major benefits from hiring a professional. A bookkeeper knows exactly what types of reports are needed for tax compliance, whereas you’d need years of education to know what they know.

Keep in mind, though, that you don’t necessarily have to hire a full-time employee for this role. At CloudCPA, we have 15+ years of experience providing custom restaurant bookkeeping services to restaurants across the US.

If you’re a passionate business owner who’s feeling burnt out from doing everything for everyone, we encourage you to book a call with us! Once we have an understanding of your unique needs, we’ll explain in-depth how our restaurant accounting and bookkeeping services can benefit your bottom line.