{"id":19482,"date":"2023-07-26T10:53:14","date_gmt":"2023-07-26T14:53:14","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?p=19482"},"modified":"2023-07-26T10:53:14","modified_gmt":"2023-07-26T14:53:14","slug":"the-winning-recipe-for-restaurant-accounting","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/the-winning-recipe-for-restaurant-accounting\/","title":{"rendered":"The winning recipe for restaurant accounting"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-us\/blog\/category\/growth-customers\/\" class=\"entry-header__link\">Growth &amp; Customers<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tThe winning recipe for restaurant accounting\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2023-07-26T10:53:14-04:00\">July 26, 2023<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"The winning recipe for restaurant accounting\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-us\/blog\/the-winning-recipe-for-restaurant-accounting\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n<div class=\"wp-block-post-author\">\n\t\t\t<div class=\"co-authors\">\n\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-us\/blog\/author\/bill-fuesz\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/08\/BillFueszHeadshot-350x350.jpg\" class=\"entry-author__image\" alt=\"Bill Fuesz\" \/>\t\t\t\t<span class=\"entry-author__name\">Bill Fuesz<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t<\/div>\n\t\t<\/div>\n\n\n\n<p class=\"\">Running a restaurant is hard work. Staffing, quality control, making sure you have the right supplies, health and safety regulations, customers\u2014and their changing preferences are all part of the job.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"\">In addition to the unique demands of the restaurant business, there\u2019s the business part that must be addressed to be successful. That includes detailed and accurate bookkeeping and accounting, allowing you to better control prime costs, comply with tax requirements, and make <a href=\"https:\/\/www.sage.com\/en-us\/blog\/visualize-your-data-to-empower-business-growth\/\" target=\"_blank\" rel=\"noreferrer noopener\">data-driven decisions<\/a> to ensure the health of the business.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">A restaurant\u2019s unique accounting challenges&nbsp;<\/h2>\n\n\n\n<p class=\"\">Restaurants face many distinctive accounting challenges that will affect profitability and margins, including:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Calculating the cost of goods sold<\/strong>\u2014all the ingredients used in preparing dishes must be tracked. Variances in prices and portion size can affect the calculation, as well as consistency in following the recipe.&nbsp;&nbsp;<\/li>\n\n\n\n<li><strong>Inventory management<\/strong>\u2014perishable and non-perishable inventory must be tracked carefully to avoid waste, spoilage, and theft.&nbsp;&nbsp;<\/li>\n\n\n\n<li><strong>Menu engineering<\/strong>\u2014this involves determining the profitability of each menu item and identifying best-sellers. It requires detailed analysis of ingredient costs, preparation time, and selling prices. For some restaurants, such as quick-serve franchises, this is less of an ongoing issue as the franchisor is dictating the menu, but for many others menu engineering is a steady challenge.&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Payroll<\/strong>\u2014managing employee wages and overtime pay can be complicated, especially in restaurants with a large and diverse workforce. In addition, restaurants must accurately report and distribute tips and gratuities.&nbsp;<\/li>\n\n\n\n<li><strong>Tax<\/strong>\u2014complying with tax requirements can be challenging, especially for restaurants with multiple locations that might be in different taxing jurisdictions. These tax laws and regulations relate to sales tax, payroll tax, and income tax.&nbsp;&nbsp;<\/li>\n\n\n\n<li><strong>Credit card or mobile payment processing fees<\/strong>\u2014credit card transactions and mobile payments generally incur processing fees. These fees need to be factored into the overall accounting and pricing strategy.&nbsp;<\/li>\n\n\n\n<li><strong>Split checks and group payments<\/strong>\u2014handling split checks and payments in group settings can be challenging, and errors can lead to discrepancies in the accounting records, as well as affecting tip and gratuity distribution.&nbsp;<\/li>\n\n\n\n<li><strong>Third-party delivery services<\/strong>\u2014accounting for the commissions, fees, and settlements from these off-premises services can be complex.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Accounting for discounts and promotions<\/strong>\u2014tracking and accounting for discounts, coupons, and promotional offers accurately is crucial to understand their impact on revenue and profitability.&nbsp;<\/li>\n\n\n\n<li><strong>Lease and rental expenses<\/strong>\u2014as many restaurants lease or rent their operating spaces, properly accounting for lease expenses and rental agreements is essential.&nbsp;<\/li>\n\n\n\n<li><strong>Asset depreciation<\/strong>\u2014investments in equipment and furnishings depreciate over time. Calculating and accounting for depreciation accurately is necessary for financial reporting.&nbsp;<\/li>\n\n\n\n<li><strong>Cash flow management<\/strong>\u2014restaurants often face fluctuations in cash flow, especially during seasonal variations. Ensuring sufficient funds for daily operations, payroll, and supplier payments is crucial.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Restaurants outgrow bookkeeping software&nbsp;<\/h2>\n\n\n\n<p class=\"\">Faced with these challenges, it\u2019s no surprise that many restauranteurs quickly outgrow the limitations of simple bookkeeping software, <a href=\"https:\/\/www.sage.com\/en-us\/blog\/using-quickbooks-to-managed-multiple-entities-dont\/\" target=\"_blank\" rel=\"noreferrer noopener\">including QuickBooks<\/a>. There are too many moving parts, especially for operators with multiple locations.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"\">Many choose to replace these bookkeeping packages with best-of-breed solutions. These solutions combine cloud-native accounting with inventory management, point-of-sale, tax, and payroll offering more advanced and comprehensive features for specialized tasks. Whereas bookkeeping software or alternative single solutions can lack functionality and specific features found in specialized software.&nbsp;<\/p>\n\n\n\n<p class=\"\">Integrating <a href=\"https:\/\/www.sage.com\/en-us\/sage-business-cloud\/intacct\/\" target=\"_blank\" rel=\"noreferrer noopener\">best-of-breed solutions<\/a> gives your business a customizable technology stack, choosing the best fit for each individual requirement. This approach provides more flexibility and scalability. With <a href=\"https:\/\/www.sage.com\/en-us\/blog\/how-data-transparency-puts-restaurant-operators-in-control\/\" target=\"_blank\" rel=\"noreferrer noopener\">reporting and metrics<\/a> based on the standards set by the National Restaurant Association, it becomes dramatically easier to track key performance indicators that include:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Prime cost ratio&nbsp;<\/li>\n\n\n\n<li>Cost of goods sold ratio&nbsp;<\/li>\n\n\n\n<li>Food cost ratio&nbsp;<\/li>\n\n\n\n<li>Revenue per available seating hour&nbsp;<\/li>\n\n\n\n<li>Revenue per diner&nbsp;<\/li>\n\n\n\n<li>Average check size&nbsp;<\/li>\n\n\n\n<li>Staff labor cost ratio&nbsp;<\/li>\n\n\n\n<li>Management labor cost ratio&nbsp;<\/li>\n\n\n\n<li>Inventory loss ratio&nbsp;<\/li>\n<\/ul>\n\n\n\n<p class=\"\">In addition to the metrics that matter for data-drive decision making, best-of-breed technology stacks enable automation for areas that include:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Daily sales reports&nbsp;<\/li>\n\n\n\n<li>Accounts payable&nbsp;<\/li>\n\n\n\n<li>Payroll processing&nbsp;<\/li>\n\n\n\n<li>Consolidations&nbsp;<\/li>\n\n\n\n<li>Reconciliation&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">What restaurants need in their tech stack&nbsp;<\/h2>\n\n\n\n<p class=\"\">When selecting a best-of-breed technology stack, you should consider several key characteristics to ensure the chosen solutions meet specific needs and requirements. Here are 8 important characteristics to look at:&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\" start=\"1\">\n<li><strong>Functionality and features<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"\">Assess the functionality and features offered by each technology solution. Make sure they align with the restaurant&#8217;s specific needs, from online ordering to POS integrations.&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\" start=\"2\">\n<li><strong>Integration<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"\">Check how well the different technology solutions can integrate with each other. Seamless integration is vital to ensure data flows smoothly between systems, reducing manual work, and potential errors. Application Programming Interfaces (APIs) simplify integration between different software applications and systems, allowing them to communicate and interact with each other to exchange data and improve functionality. Look for tech solutions using open APIs.&nbsp;&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\" start=\"3\">\n<li><strong>Scalability<\/strong>&nbsp;&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"\">Consider the scalability of the technology stack. Will the solutions be able to accommodate your growth and changing needs over time? Scalability is important to avoid outgrowing the chosen software quickly.&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\" start=\"4\">\n<li><strong>Mobile compatibility<\/strong>&nbsp;&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"\">Given the increasing use of mobile devices, having mobile compatibility for both staff and customers can enhance efficiency and customer experience.&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\" start=\"5\">\n<li><strong>Security and compliance<\/strong>&nbsp;&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"\">Security is critical for handling sensitive customer data and financial transactions. Ensure that the technology stack meets industry security standards and compliance requirements, such as the Payment Card Industry Data Security Standard (PCI DSS).&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\" start=\"6\">\n<li><strong>Customer support and training<\/strong>&nbsp;&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"\">Look for technology providers that offer excellent customer support and training resources. A responsive support team and comprehensive training can help restaurant staff make the most of its technology.&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\" start=\"7\">\n<li><strong>Analytics and reporting<\/strong>&nbsp;&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"\">The technology stack should provide robust analytics and reporting capabilities. Access to data-driven insights can help optimize operations, track performance, and identify areas for improvement. Reports and metrics based on National Restaurant Association standards make it easier to measure business execution.&nbsp;&nbsp;<\/p>\n\n\n\n<ol class=\"wp-block-list\" start=\"8\">\n<li><strong>Vendor longevity and reputation<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"\">Consider the stability and longevity of the technology providers. Opting for well-established companies with a track record of success can reduce the risk of sudden discontinuation or lack of support.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Final thoughts<\/strong>&nbsp;<\/h2>\n\n\n\n<p class=\"\">Having the right tools in place makes it easier to navigate the complexity of the restaurant business.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"\"><a href=\"https:\/\/www.sage.com\/en-us\/sage-business-cloud\/intacct\/resources\/product-demos\/sage-intacct-for-restaurants\/\" target=\"_blank\" rel=\"noreferrer noopener\">Choosing the right software<\/a> that monitors key metrics will help you make better real-time decisions that improve your operations and profitability.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"\">Using these advanced tools and metrics combined will help you transition your business into a market leader, rather than just another competitor, in what\u2019s become a challenging time for the restaurant industry.&nbsp;&nbsp;<\/p>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to our Sage Advice Newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get our latest business advice delivered directly to your inbox.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-ab515c6e-7e90-4c2f-a67e-113872516e8b\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg\" class=\"single-cta__image\" alt=\"Working from home with tea in hand\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Advanced tools and metrics you can use to help you transition your business into a market leader. rather than just another competitor.<\/p>\n","protected":false},"author":1427,"featured_media":19483,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[46],"tags":[420,346,269],"business_type":[40,41],"lilypad":[],"context":[],"industry":[52,452],"persona":[],"imagine_tag":[444],"coauthors":[609],"class_list":["post-19482","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-growth-customers","tag-cloud-financial-management","tag-cloud-technology","tag-food-beverage","business_type-small-business","business_type-growing-business","industry-food-beverage","industry-hospitality"],"sage_meta":{"region":"en-us","author_name":"Bill Fuesz","featured_image":"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/07\/GettyImages-1214156032.jpg","imagine_tags":{"444":"Intacct Medium Business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice 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