Restaurant owners surely have a lot on their plate. Usually, they’re the person  troubleshooting the endless  issues to keep things running smoothly. Often, they don’t have time to focus on financial management. An accountant can solve this problem, but it's a luxury that many small businesses cannot afford to invest in. Here are some tips on restaurant financial management that can be solved with some basic accounting skills and procedural methods.

 

 1). Invest in an accounting system. The most commonly used software solution for accounting is QuickBooks. Consistent management of your general ledger is key for accuracy and accountability. Every transaction must be recorded into the general ledger in order for the system to work effectively. The Restaurant Operators Complete Guide to QuickBooks is recommended for restaurant owners to read before installing QuickBooks.

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 2). Keep operating costs lower than total sales. Statistics say that restaurant food and beverage purchases, plus labor expenses (wages plus employer-paid taxes and benefits) account for 62 to 68 cents of every dollar in restaurant sales. These costs are referred to as a restaurant’s “prime cost” and unlike fixed costs, they can be monitored and adjusted. An owner can control costs like product purchasing and menu selections to decrease output costs.

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 3). Price your dishes appropriately.  Many restaurant owners price their dishes based on the prices of their competitors. While this is a useful technique, it may not be efficient in reducing costs and raising profits. It’s important to price your dishes appropriately based on the cost of making the recipe, and to continually monitor and adjust prices as supplier costs fluctuate. 

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 4). Keep track of inventory. It is a common mistake for restaurant owners to review their profit/loss statement and assume that their food cost can be divided by sales in that period to find the profit. This isn’t the case. The inventory at the start and finish of the period must be known in order to calculate food costs accurately. Inventory changes are essential to take into account when calculating profit and loss.

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 5). Prevent product waste. When ordering more product than you need, waste is unavoidable. Actively managing inventory prevents food from rotting or being over portioned in a dish. A simple equation to help prevent waste is:

• Step 1. Multiply your average monthly food sales by your food cost %.

• Step 2. Divide that number (your average monthly food usage) by 30 (days/month)

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 6). Utilize a balance sheet and profit/loss statement. For a restaurant to be successful, a weekly report at the very least is needed. The formatting of the report should be categorized. Inventory, suppliers, labor, and sales should all have a start and end period.

 

A successful restaurant owner takes the initiative to put simple accounting strategies in place. It may seem as if a restaurant owner has to do it all; but, with some good software and a systematic method put in place, keeping a restaurant on track financially will create financial rewards well worth the work.