Restaurant operators face unique financial pressures—rising food costs, tight margins, and frequent regulatory changes—that demand specialized accounting solutions.
Accurate and informative restaurant accounting is crucial for making sound decisions on a daily basis.
In this article, we’ll break down why restaurant accounting requires a specialized approach, clarify the difference between bookkeeping and accounting, and highlight the real value of getting it right.
We’ll also walk through the top seven restaurant accounting mistakes to avoid, explain how to get strategic support, and answer the most common questions restaurant leaders have about financial management.
Restaurant accounting requires a specialized approach because standard accounting methods don’t address the industry’s unique challenges—like thin margins, perishable inventory, and high transaction volumes. Operators need financial systems that deliver actionable insights specific to restaurant operations.
Effective restaurant accounting is a strategic tool for growth, not just a back-office task. When your financial processes are dialed in, you move from firefighting to proactive management.
Not using a four-week accounting period makes your restaurant’s financial data hard to compare and less actionable.
Monthly accounting periods can mislead restaurant operators because weekend traffic skews results. Months with more weekends look better, even if daily performance is weak.
The solution is to switch to a four-week period (or to 13 periods per year). This format standardizes data and makes it easier to compare period-to-period – and that means it will be easier for restaurant businesses to generate meaningful insight and make good decisions.
Using a cash basis for restaurant accounting records transactions only when money changes hands, which can hide upcoming expenses and income. This method is best for very small businesses without inventory.
This allows income and expenses to be matched to the time periods in which they actually occur, and also gives visibility into upcoming cash flows.
Inventory is the pulse of a restaurant, and monthly reviews aren’t enough. Weekly monitoring helps you avoid costly mistakes.
Inventory also drives your Cost of Goods Sold (COGS), a key metric for restaurant profitability. Consistent inventory management keeps your numbers accurate and your kitchen running smoothly.
Another common mistake in restaurant accounting is not doing regular reconciliations for bank and credit card balances.
Reconciliation is, essentially, the act of comparing two record statements against each other to identify, and reconcile, any discrepancies or errors. This is important in any industry, but for restaurants – which process high frequencies of transactions – it’s particularly crucial, because small inaccuracies can add up to big problems.
You should reconcile your bank and credit card balances on at least a monthly basis.
Accounting with inaccurate data leads to unreliable financial reports. Bookkeeping errors are common, especially with manual entry, but you can reduce risk by following two steps:
One reason for bookkeeping errors is excessive manual data management. Optimized accounting software can help minimize this issue.
We’ve written about the top restaurant accounting software solutions—see the article for the full picture—but one great option is Restaurant365. This solution is built to handle all of the back office needs that restaurants have, from inventory management to labor and scheduling.
The bottom line: integrated data increases accuracy in the accounting process.
Many restaurants make the mistake of working with a general accounting provider who lacks industry experience. Restaurant accounting is different, and providers with deep experience deliver higher quality and strategic insight.
At Global Shared Services, we have over a decade of expertise in restaurant accounting. We’ve served restaurant businesses across all 50 states, and that experience has enabled us two major advantages:
Want to avoid restaurant accounting mistakes and help your business to thrive? Get in touch with us today to learn more about how we can help.
Restaurant accounting goes beyond standard bookkeeping. It’s a specialized system designed to handle the high volume of financial transactions, food and beverage costs, labor costs, and sales tax common in the restaurant industry. Because margins are thin and costs fluctuate daily, effective restaurant accounting helps restaurant owners maintain accurate financial records, manage cash flow, and ensure compliance with generally accepted accounting principles (GAAP).
Most restaurants use accrual accounting rather than cash accounting. Accrual accounting records income and expenses when they occur—not when cash changes hands—providing a clearer picture of financial health. This method produces more accurate financial statements, such as the balance sheet, profit and loss statement, and cash flow statement, which are essential for tracking a restaurant’s financial performance and making informed decisions.
Regular financial reporting is critical for understanding your restaurant’s financial performance. Monthly profit and loss statements, cash flow statements, and balance sheets reveal how much revenue you’re generating and where you can control costs. Weekly reports like the daily sales report and inventory counts help track inventory, identify trends, and keep prime costs—food and labor—within target ranges.
Restaurant bookkeeping focuses on recording daily financial transactions—sales, purchases, payroll taxes, and accounts payable—within an accounting system. Restaurant accounting, on the other hand, analyzes those financial records to produce insights through key financial reports. Together, these processes create accurate financial data that guides better cash management and cost control.
Modern restaurant accounting software integrates with your point of sale (POS) system to automatically sync food sales, beverage sales, and labor data. The right restaurant accounting software streamlines inventory management, payroll, and accounts payable, ensuring accurate financial reporting and faster decision-making. Cloud-based accounting systems like Restaurant365 and QuickBooks also simplify compliance with local laws and automate bank statement reconciliations.
Prime cost—the sum of food costs and labor costs—is one of the most important financial metrics in restaurant accounting. It directly affects gross profit and net profit. Effective restaurant accounting tracks these expenses weekly, using reports from your POS system and accounting software to help you control costs, maintain ideal food cost percentages, and boost overall profitability.
The three key financial reports every restaurant business should monitor are the profit and loss statement (or income statement), balance sheet, and cash flow statement. These reports show your restaurant’s financial performance, highlight cash flow trends, and support accurate financial reporting for lenders, investors, and tax compliance. Reviewing these regularly helps you make data-driven, informed decisions about operations and expansion.
Outsourcing to experts in restaurant accounting gives you access to specialized knowledge, accurate financial reporting, and systems built for restaurant-specific accounting considerations. Professionals can set up a restaurant accounting chart of accounts, optimize your accounting method, and monitor key performance indicators such as prime costs and cash flow. With accurate financial data and automated accounting systems, restaurant owners can improve efficiency, increase net profit, and strengthen long-term financial management.
Most restaurants use accrual accounting because it matches income and expenses to the period they occur, giving a clearer view of profitability. Small restaurants may start with cash-basis accounting, but accrual is preferred as operations grow.
The accrual method with a 13-period (four-week) calendar is best for most restaurants, as it provides accurate, comparable financial data.
You can do your own bookkeeping with restaurant-specific software, but most operators prefer to outsource for accuracy and time savings. Outsourcing also provides access to specialized insights you might otherwise miss.
The 30-30-30 rule suggests allocating 30% of revenue to labor, 30% to COGS, and 30% to operating expenses, aiming for a 10% profit margin. Actual percentages may vary depending on your restaurant’s concept and efficiency.
Choose software that integrates with your POS and payroll systems. Look for features like daily sales reporting, inventory management, and automated accounts payable to streamline your financial processes.
