Staying calm during the dinner rush, creating the perfect plate, and keeping guests happy—the restaurant business is hard, but challenges like those are what fuel your drive.
Even if you’d rather focus on the dining room than the bottom line, keeping a close eye on the numbers is essential for restaurateurs looking to turn a profit. Stay on top of your finances by avoiding these five accounting mistakes that are all too common in restaurants:
1. Letting invoices pile up
It’s tempting to push all those vendor invoices to the side, promising yourself, “I’ll get to it later this week.” But when later never comes, the stack of invoices to enter becomes even more daunting…and your reporting becomes ever more outdated, vendor payments are more likely to go out late, and your payment terms suffer.
We can’t quite call keeping up with paperwork fun, but there is something oddly satisfying about checking off everything on your to-do list. If you’re behind on entries, reconciliation, or period-end reporting, now’s the time to handle it. Pour yourself a massive mug of coffee, tune everything out, and tear through it.
Once you’re on top of things, stay that way by setting aside time regularly — we recommend every other day — to take care of invoices. That will keep your COGS reporting up to date, make it easier to balance the books every month, and let you address problems as they arise rather than days or weeks after the fact.
Typos are the bane of any bookkeeper’s existence. When you’re manually entering row upon row of data, it’s easy for errors to creep in, but finding them isn’t nearly so simple. If you’ve ever scoured Excel or QuickBooks looking for a 4 that should have been a 7, we feel your pain.
Throw in the fact that restaurant invoices are privy to some interesting mishaps and bookkeeping becomes a more interpretive task than any accountant would like (that fourth price…it might be $49.50? Or maybe $19.80? Sigh).
But striving for bulletproof bookkeeping is a must. Invoices may seem like a minor matter, but they house essential data. If you’re relying on that information to calculate food cost percentage or your prime costs, it’s all the more important to get it right.
Creating clear protocols around invoice handling can help. We recommend having vendors email your invoices so they don’t end up quite so tattered and torn. If paper invoices are a must, have separate folders for new invoices and processed invoices awaiting reconciliation. Training your staff to put paper copies in the right place immediately upon receipt will go a long way toward readability.
3. Forgetting to balance the books every month
When it comes to reconciliation, it’s easy to let things slide. After all, if there’s a problem, it’ll come up…right? But if you’re serious about getting your financials in order, balancing the books is the next logical step. Taking the time to reconcile your bank and credit card balances will help you catch any problems related to mistakes #1 and #2.
Reconciliation isn’t just about creating tidy debit and credit columns, it’s about getting a snapshot of the previous period’s financial activity and understanding how that fits into the larger picture. Regular reconciliation ensures that your restaurant isn’t racking up unexpected costs and tips you off to all sorts of other issues, such as:
- Bills that haven’t been paid or checks that haven’t cleared.
- How you’re progressing against your quarterly (or annual) budget.
- Excessive expenditures in specific areas, such as food, labor, supplies, or maintenance.
- Trends in revenue and costs that could impact your profit.
To make reconciliation easier, we recommend keeping unreconciled invoices, vendor statements, and credit card charges together. File them only after you’ve checked them against your records, and you won’t have to dig through individual folders to find them all. And if you’re really into organization, clipping invoices to the statements they appear on will save time when you need to locate past paperwork.
4. Not understanding your accounting software
Let’s be honest: even the most user-friendly restaurant accounting software can be overwhelming. But learning how it works is essential if you really want to understand your cash flow. It may not be the most thrilling way to spend a few hours, but taking the time to explore your accounting software could reveal ready-made reports you didn’t even know existed or drill downs that provide a more detailed view of your expenses.
Ideally, your restaurant’s accounting software won’t just track revenue and costs, it will integrate with your POS and inventory management platforms to provide even more granular data about your business.
5. Using cash-based accounting
What’s the difference? When expenses and revenue are recorded. With cash reporting, income is recorded when the money hits the bank and expenses are recorded when they’re paid. With accrual-based reporting, however, income is reported during the period it’s earned (regardless of when it’s received) and expenses are deducted as they come up, not when you cut the check.
In most cases, restaurants receive money for meals when they’re served, so cost-based accounting seems like a viable option. But accrual-based reporting is a best practice for restaurants (not to mention, required by the IRS for some operators). That means restaurants should record COGS at the same time meals are served, not when vendors are finally paid.
What’s the big deal? Recording income days—or even weeks or months—ahead of expenses can create a false sense of security because it looks like money is rolling in with no cash going out. Your profits appear inflated, and if you’re not careful, you’ll find yourself relying on float to keep your restaurant afloat.
Fixing those mistakes
If you’re guilty of any of the above errors, don’t feel bad, and don’t go it alone. If piles of paperwork, bookkeeping errors, or reluctant reconciliation are your downfalls, an accounts payable automation solution like Plate IQ could be just the thing to get your paperwork in order.
Make invoice processing painless
Invoices pile up because processing them is a chore. Plate IQ makes that easy, which in turn makes staying on top of things more likely. If vendors email you invoices, forward them to your Plate IQ account’s secure email address and you’re all set. For paper copies, snap a picture with your smartphone. If you’re on desktop, drag, drop, and you’re done. And mobile app users can cut out a step by having the pictures they take automatically routed to their accounts.
Improve the quality of your data
Once you’ve uploaded them, Plate IQ automatically extracts the information from your invoices, cutting down on typos that creep in during hours of manual data entry. And if you’ve settled for general ledger data because entering line items is just too time-consuming, Plate IQ offers the best of both worlds: we grab line item data while also coding those items to the right expense account to provide both high-level COGS reporting and item-level insights.
Reconcile statements in record time
When your invoices are already in Plate IQ’s system, reconciling them with your vendor statements is a snap. We cross-check the invoice numbers and totals for you and bring any problems to your attention. That way, your time is spent solving problems, not just checking items off a list. Plus, Plate IQ automatically files digital copies of invoices and statements by vendor, so digging up old invoices is no problem.
Get expert accounting help
If the intricacies of accounting eludes you, don’t fear. Work with an accountant! They can manage your accounting software for you and provide pointers on which reports are the most important (and what they really mean). Plus, when used in combination with a solution like Plate IQ, you’ll be paying them for their expertise, not hours of data entry.
Not sure how to find the right person for the job? Just drop us a line and we’ll be happy to refer you to one of our accounting partners. They specialize in restaurant accounting, which means they understand the unique challenges that come with the territory. Best of all, they have the knowledge you need to get your books balanced and your budget back on track.