If you own a restaurant, chances are you started your business out of love for creating quality food and sharing your passion with your guests. You probably did not start a restaurant because you love math, numbers and complex financial problems.
Unfortunately, the recipe for any stable restaurant includes a heavy mix of accounting blended throughout the entire operation. Leaving such an important aspect out of your restaurant can quickly kill profits and create costly problems which will jeopardize your success.
To get started making accounting a mindful part of your restaurant, we’ve collected a few essential tips.
Partner with an Accounting Firm
If you think about the daily operations of your restaurant, you likely have several staff members who are specifically assigned to certain roles. Imagine having your hostess, in charge of seating guests, need to rush back to the cook line between each guest to handle producing the order. Sounds pretty chaotic, doesn’t it?
Unfortunately, too many restaurant owners deploy this type of system when it comes to their critical finances. They expect managers or themselves, highly skilled in daily operations, to also master the skills of accounting. In reality, it is incredibly inefficient and exposes your restaurant to unnecessary risk.
Instead, partner with an accounting firm who has a unique knowledge of your industry. The food service industry, unlike most businesses, has a high volume of daily transactions from a variety of sources. Vendors, customers and staff all exchange goods and money at a high frequency. An accounting partner must understand this complexity, to guide you into a sound financial strategy.
Use a Quality Point of Sale System (POS)
When selecting a POS, owners often dedicate their time and attention to the front end process. Logically, a POS needs to make it simple and quick for staff to ring in food, the kitchen line to receive orders with all details and check-out to process payment properly.
However, take time to invest in a POS which also offers a strong suite of back-end reporting. While the reports might look a bit complex and confusing, working with a professional can turn these numbers into strategic decisions for the long-term health of your company.
A deeper dive into reports can reveal the amount of free or discounted food being given away as the result of mistakes, or the frequency in which a marketing offer is being redeemed. Some POS systems can also allow you to pull deeper sales insights on your serving staff, to determine which members are consistently up selling to higher ticket totals.
All these areas of information can allow you to make strategic decisions. If you are experiencing a high level of mistakes, you can explore ways to improve training or turnover inefficient staff. Servers who consistently up sell customers can lead training efforts to bring the remaining staff up to speed.
Track Expenses Thoroughly
As you run your business, you likely experience a wide variety of expenses coming in from a diverse set of suppliers. You might purchase meat and seafood from one vendor, fresh produce from another and beer or liquor from a wide array of suppliers.
With so many invoices, and separate payment terms from each supplier, how are you staying on top of expenses to avoid late payment fees or other costly setbacks?
Consider working with vendors to get each on similar terms. Often, suppliers can be flexible if you just ask the right questions. Having invoices arrive and become due on similar dates could be effective to keep vendors paid on time.
In other situations, your business might need the flexibility of vendors requiring payment at different points. Sometimes, a large outflow in one small period could require cash flow which does not exist. In this instance, it is important to dedicate even more time to expense tracking.
Set aside 30 minutes at the start of each day to process invoices and payments. Reviewing incoming expenses daily allows you to mark due dates on a calendar you reference frequently, and ensure all invoices are accurate compared to what was delivered. Such a system will not only allow you to keep vendors paid on time to avoid late fees, but also could identify areas where you have been paying too much for goods.
Review Inventory Regularly
The secret to a profitable restaurant is often found in the food and beverage cost of your menu items. Sometimes, the reason behind high item costs is not due the actual per item price, but rather how much of each order is going to waste before it can be sold. If you are only able to sell 50% of a seafood order, for instance, before the product goes bad – your food cost of that ingredient is essentially twice what you planned for.
As a result, contact vendors to see if you can purchase at a smaller quantity. Sure, the per item price might be a bit higher, but you save more in the long run. This tactic can apply to non-perishable items as well. Taking a look at your inventory might discover you are purchasing far too many paper goods or to-go containers than necessary. While these items won’t go bad, they do consume unnecessary shelf space and monthly funds.
Understand Buying Trends
Simply understanding your customer can go a long way towards successfully managing your books. Using your POS reports, and feedback from staff, you can determine which items are driving the most sales. Likewise, you can discover menu items which are not gaining traction with your guests.
Each item on your menu has its own unique set of challenges and costs. You might find one particular dish requires a wide amount of ingredients which can be costly to acquire. This same dish might also be one of the least popular. Eliminating the dish entirely from the menu could free up resources which were previously dedicated to keeping the item available.
Buying trends can also help you ramp up, or scale back ordering for items which have seasonal buying patterns. For instance, you might need to scale up seafood purchasing in the spring, while tapering down in the fall and winter. When you are aware of demand trends, you can cater supply accordingly and reduce waste.
It takes a lot to run a successful restaurant, and doing it alone can make it even harder. While these tips do help the common restaurant owner navigate some of the critical data for their business, the right partner can provide further insights while saving you the time and stress associated with your numbers.