Essential Restaurant Accounting Tips

Proactive Cash Flow Management

Cash flow management is an area that can seem overwhelming to many business owners, but Paperchase specializes in this area to help you understand these specific factors of running a restaurant.

Ensuring all revenue is correctly deposited into your bank account and accurately reported is essential for proactive cash flow management. Staying on top of vendors and their owed credit limit, negotiating net terms, and ensuring timely payments are ways to keep your sales force in check.

Extra fees and broken service level agreements can add a real strain on your business. Paperchase specializes in vendor management, an area that is prone to change and can be unruly so you don’t have to worry about extra costs such as these.

Big payments such as rent or insurance can be stressful deadlines for business owners to manage, best practice for budgeting is to establish multiple bank accounts to keep track of your liability. Setting up a sales tax account, payment account, and general account are all examples of ways to keep a maintained budget.

Uncashed checks are another area to observe. Many restaurant employees are bankless and lots of checks must be issued. Because these funds will not be removed from your account until the checks are cashed, keep an eye on the balance of the account the funds are drawn from so that you can make sure all of your employees are paid correctly and your accounts are in check. Meticulous record-keeping is time-consuming but it is an investment in your financial future to have clarity so you can keep your restaurant afloat.


Q) What is the best accounting method for restaurants?

You’ve got two choices: cash accounting or accrual accounting. Cash accounting is easier but less accurate and may provide a misleading picture of your financial health. This method records transactions when actual cash is received or paid. When a customer pays their bill that revenue is recorded for that day, and when you pay a vendor, It is similarly recorded as outgoing funds in real time. It’s straightforward, but it is the easy way out and it is not the best practice for most restaurants.

At Paperchase we recommend restaurants use accrual accounting, as it provides the true position of where your business is financially and a more accurate reading of cash on hand.

In accrual accounting payments are booked as and when they are used rather than when they are paid. For example, a gift card is booked as revenue when it is redeemed, not when the customer purchases it. Larger expenses like rent payments, or vehicle purchases are spread out to better reflect your company’s liability.

Expenses would be recorded when incurred, such as when inventory is received or services are rendered.

Q) How do you account for tips at a restaurant?
  • Tipping is a normal practice across most restaurants, but keeping track of them can get a little All tips, direct or pooled, are a liability to the business until paid back to the staff whether via daily cash out for cash tips or through the payroll (CC tips).

  • Tips are not an income to the business and should not be treated as such. Salaried staff can not take any portion of the tips from the tip pool. Tips are typically only to be distributed amongst the front-of-the-house staff, but some restaurants provide a tip out to the kitchen staff.
  • Because they are considered personal income, tips are subject to federal income tax and should be Paperchase will work out a plan to verify you are following all regulations with tips and ensuring your employees are paid properly.
Q) How often should I review my financial reports?
  • A great business owner reviews their P&L monthly and monitors KPIs daily. This is a common area where we see restaurants go For example, a $100 subscription charge can quickly grow into thousands of dollars owed if not properly monitored.
  • Restaurants run at a rapid pace and it can be difficult to keep up with your reporting without an experienced accountant to guide you through the highlights. At Paperchase, we meet with our clients at least weekly to discuss their finances and bring things to their attention that they might have otherwise overlooked.
  • Many accountants will only provide the minimum reports necessary to run your But because last month’s news is old news, Paperchase provides our clients with weekly reporting that reflects your current position and enables our clients to make critical, swift decisions.
  • These comprehensive weekly reports detail labor costs, COGS (cost of goods sold),revenue by department by meal period, most profitable days, overtime, and comps/voids. It is especially important to monitor these KPIs because they can block your path to profit.
Q) What tax deductions are available for restaurant businesses?
  • Taxes can often be a confusing and overwhelming factor in running a business. Thankfully, our accounting professionals work directly with you to ease this fear.
  • Tax deductions are an amount of money deducted from your taxable income. Operating expenses such as buying kitchen supplies, employee wages, furniture, insurance, and marketing expenses are just a few items that fall into this category.

  • Business owners can also claim deductions on things like retirement and savings accounts, and charity donations.
  • Industry experts like Paperchase can guide and analyze these deductions so you make the most of your money. Let one of our professionals keep records of these taxes so you can run a stress-free restaurant.