Given the thin profit margins and high failure rate of the restaurant industry, an owner needs to harness every available resource to build and maintain a thriving restaurant. An accounting professional experienced in advising restaurants can help paint a full financial picture of the business. This helps restaurant owners plan for the future, improve bookkeeping and accounting practices, address inefficiencies, and minimize surprises at tax time. Here are a few ways you can work with your accountant to increase profitability and gain a better understanding of your operations.
Restaurants tend to generate even more extensive records than many other types of businesses. Inventory, food costs and payroll costs can fluctuate from day to day, and money is constantly moving in and out in different and sometimes inconsistent ways. Daily sales reports also generate huge amounts of data. In short, a restaurant should have a long paper trail. Be sure to share all of this with your accountant so they can dig deeply into those records.
Disorganized or incomplete records will be an indicator to your CPA that some processes should be improved or technology updated so that you can generate accurate and complete records. This will be the first step towards developing useful financial statements. If you don’t already have one, they may recommend working with a bookkeeper to make sure all your receipts, invoices and payment records are accounted for and that your chart of accounts is accurate and complete.
High employee turnover and the presence of cash are just two of the factors that contribute to fraud in restaurants, so internal controls are a critical piece of any business audit for a restaurant. Your accountant can review your procedures and assess the strength of your internal controls. For example, how is cash reconciled at the end of every day? Are there always two people present while cash is being counted? How are vendor invoices processed and paid? Who has the authority to sign checks from the restaurant’s accounts? Are financial responsibilities split among multiple trusted parties?
If you have a partner or employee who’s more closely involved in the restaurant’s bookkeeping than you, work with them to make sure you’re clear about the logistics behind your restaurant’s day-to-day financial procedures.
An accountant with strong restaurant industry experience will be able to provide insight and guidance beyond tax compliance. They can help you develop a deeper understanding of how money moves through your restaurant and how you could potentially do things more efficiently. While every business is unique, your accountant may ask about anything from the kitchen equipment to the type of materials that are used for the menus. One of the areas we often find opportunities for improvement when working with restaurants is their technology. Most restaurants use a POS (Point of Sale) system, and a reservation program, but haven’t implemented an automated general ledger and financial reporting bookkeeping system. This software integrates sales, purchases, payroll, and other aspects of accounting, and eliminates paper-based systems. Getting a sense of what’s working efficiently, what’s bringing in customers and where money is being spent on supplies and equipment are all details that can help fill in the picture when creating a business plan.
Owning a restaurant takes a tremendous amount of effort, sacrifice and passion. No restaurant owner enjoys having an outsider come in and say they’re doing something wrong. Your accountant may uncover unpleasant truths, like the possibility that a trusted employee has committed fraud or that your business has made accounting mistakes in the past. However, allowing your accountant to thoroughly examine your financial data and business practices can shine a light on inefficiencies and financial risks.
An accountant can help reveal insights you can leverage to improve your restaurant, grow your profits and get closer to achieving your personal and business goals. Having a supportive advisor identify vulnerabilities in your internal controls or inefficiencies in your inventory management may help your business avoid fraud or waste. And if you want to secure new or additional funding, working with an experienced accountant can provide the reassurance that your financial records are in order before you approach a bank or other lender.
From helping restaurant owners maintain tax compliance to strategizing about ways to reach your goals and increase profits, we’re here to offer whatever kind of support your business needs. Contact us today.
Stephen is a Certified Public Accountant and holds a Master’s Degree in Taxation. He has a diverse background of experience in the public accounting field over the past 38 years, ranging from the former Big 8 to being one of the founding partners of our firm. He specializes in the Restaurant and Food Service Industry and works with individuals and small businesses at developing them into flourishing companies while helping them to save tax dollars along the way. Active in the community, he is a past President and Treasurer of the Everett Chamber of Commerce and is a Director of the North End Chamber of Commerce. He is a former Chairman of the Everett School Building Commission and a City Tax Assessor.