You have to balance day-to-day management of front  of house operations with back of house matters. Plus, you have to keep track of finances to ensure how to do bookkeeping for a restaurant that your business is successful. If numbers are not your thing, reading and understanding financial statements can seem like a daunting task.

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You need software that presents your true financial position to make informed and savvy decisions. The cost of goods sold represents the costs of making and selling your products at any given time, including inventory costs. Based on the size of your restaurant, you can set up an inventory management system that optimizes food costs and reduces waste. You can choose between cash and accrual accounting if your restaurant has less than $1 million in revenue. The most common accounting method of restaurants is cash accounting or cash basis.

How to Create a Balance Sheet for a Restaurant

Find out how much revenue you make each day and ideally break them further into food and beverage categories. The next step is to set up your chart of accounts to categorize the money flowing in and out of your business. A standard chart of accounts includes assets, liabilities, expenses, revenue, and owner’s equity. For efficient restaurant accounting, you need to understand the ins and outs of the food and beverage industry.

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For instance, with a SkyTab POS system you’ll be able to pull a profit margin report that includes inventory cost. Additionally, you can leverage one of our advanced inventory management integrations for even more data. The cash flow statement helps you understand the amount of cash coming in and cash paid out that relates to your restaurant’s operating, investing, and financing activities. Forecasting your cash flow, meaning guessing your future money situation, is crucial. By breaking down each section even further, you can make better plans. Assets refer to things your restaurant owns that can be easily turned into cash.

Sticking to a regular timeline will give you a clear picture of your restaurant’s financial health and help you avoid unpleasant surprises. As a business owner, you’ve likely realized that running a successful restaurant depends on doing many things well. One of the most critical matters is making educated financial decisions. https://www.bookstime.com/ The fiscal state of your business will determine your restaurant’s short and long-term success. Therefore, it’s imperative that you have a solid understanding of where you stand. You can easily find a sample, like the one at the bottom of this page, and download it to use as a restaurant balance sheet template.

A helping hand from tech

This method allows businesses to record their generated income when cash is received from services rendered or paid for expenses and costs. Since restaurants and bars deal with a lot of cash daily, this method is the preferred method. Restaurant accounting is unique because of the language of hospitality finance. It’s crucial to have an effective accounting system in place for your restaurant to see the success you’re after. Keeping a watchful eye on the restaurant bookkeeping process is especially important for restaurants because of their slim profit margins. Use this step-by-step guide to restaurant accounting to make your bookkeeping tasks simple and accurate.

List of key financial terms for restaurant balance sheets