Common problems in Restaurant Bookkeeping
One of the main reasons any individual would want to become a business owner is to achieve financial freedom. However, the restaurant industry is not known to be an industry with a high profit margin. The average profit margin for full service restaurants ranges from 3%-5% of sales. Seeing these numbers may be discouraging due to the amount of work it takes to run a restaurant. One way to ensure that your restaurant will yield a high profit margin is to have your processes in place, one of which is your bookkeeping.
Bookkeeping is one, if not the most integral part of the success of your restaurant. Due to the small profit range in the industry, any small issue can highly affect your profitability. Here are some common bookkeeping problems you need to avoid as a restaurant owner:
1. Not understanding how the POS system works
One of the main issues I see is how some business owners do not understand the proper workflow of the POS system. By not having a good process, a lot of issues may occur:
One is the piling up of unpaid orders. Without monitoring day to day activities, some open orders can be forgotten. This will result in loss of income, over or under reporting of sales and sales tax.
Interpreting and recording of sales data from the POS system into the accounting software can be challenging. Most of these POS systems have a lot of information in the reports available and making a decision on how to present the data should be taken into consideration. Even with the use of a 3rd party application to bring the sales summary from the POS system into your accounting software, you still need to have a full understanding of your POS system in order to ensure that the data being recorded is correct.
2. Inability to monitor Tips received and Tips paid
There are different ways to record the tips received and tips paid to the employees. Some may use the income and expense method, but my personal preference is to use the liability clearing account method since tips are only pass thru type of transactions and should not be recorded as income.
Whatever method you decide to use, the most important is to be able to reconcile the amount of tips received and paid to ensure all tips are fully disbursed to the employees and avoid overpayment.
3. Not recording Vendor Purchase Invoice
Some restaurants, who do not use the accrual basis for their bookkeeping, rely on the historical data when accepting the transactions from the bank feeds. There are several issues that can arise from this method of recording vendor purchases:
- Vendors may not be paid on time.
- Can also lead to over or under payment of bills.
- Inability to monitor cash flow.
- Inability to monitor costing and expenses due to incomplete data.
4. Inability to monitor cash activities
Cash management is a difficult task among retail business owners. However, ignoring cash activities can lead to possible theft. There are POS systems that can capture the cash activity on a daily basis, as long as the protocol set by the management is strictly followed.