Accounting for New Jersey Restaurants: A Step-By-Step Guide
Many people dream of operating a restaurant, but without help, that business can fail. In some cases, these entrepreneurs focus on the food rather than the accounting side. While it might seem like a flashy business, proper accounting is vital to running a successful restaurant. If you have a restaurant in New Jersey, here is our step-by-step guide to help with those accounting duties.
Establish Your Accounting Practices
If you don’t know what you are doing with accounting, get some help. Find someone who has experience in the food and beverage industry. It will be better for your bottom line when your accountant knows the basics of the cost of goods sold, inventory management, and business operations. Many small business accounting services can help you with various practices, from tax services to payroll.
However, you need to keep all of those initial records in the proper order. Think about purchasing software that can track your expenses and profits. Some software is designed for restaurants. These programs allow you to create invoices, generate profit and loss statements, review cash flow, and track your revenue. With that, you can keep ahead of any surprises while accessing this information on demand.
Track Your Cash Flow With a Chart of Accounts
Your accountant might set up a chart of accounts to manage liabilities, expenses, assets, revenue, and equity. All of those items are broken down into categories. That information helps you to track the most critical areas of your business. If you don’t know what to track, your accountant can help you with these items.
Select the Right Point-of-Sale System
When you use the right point-of-sale system, you can tie all aspects of your restaurant together. These programs do more than create receipts or place orders. They can help with sales reporting and inventory management. Remember to find a system that your entire team can use.
Track the Right Information
Restaurants have different metrics that need to be tracked. Otherwise, you don’t know what is happening with your food costs, labor, and profits. You need to keep an eye on inventory. Consider implementing an inventory management system that can help you understand your business. Some systems can calculate which items are selling the best. When you track your inventory, you can take advantage of supply and ingredient discounts, avoid wasteful spending, and better understand your economics.
Any restaurant business is concerned with sales. You need to understand how much money is generated through different business areas. Some restaurants make more on food items than alcoholic beverages. You can also determine whether diners patronize your business for breakfast, lunch, or dinner when you track your sales.
Your restaurant stays in business by the amount of cash coming into the establishment. For that reason, you need to manage your money. Check your cash every day. You should run these reports on a weekly and monthly basis. With that, you can see trends in sales and make payments to vendors.
Speaking of vendors, they must be paid on time. While payments can be challenging to meet initially, you want to ensure that you receive goods from these suppliers. You can track expenses with accounting software. These programs can help you schedule payments so that you never miss another invoice.
One of the keys to a restaurant’s success is the quality of the employees. If you want to keep these valuable members of your business, you need to pay them. Tracking payroll can be challenging. Staff members are on different wage structures, and you have to think about those tax processes. Whether your employees are full-time, part-time, hourly, or salaried, you must ensure that they are always paid on time.
Finally, reconciliation is significant. This process makes sure that you account for everything in your business, including bank accounts, payroll, loans, and credit card bills.
Remember Reporting and Analysis
If you don’t have experience in the restaurant industry, there are specific calculations for accounting. These calculations can help generate financial statements and reports. When you work with a professional accountant, they can help you better understand some of these terms.
Cost of Goods Sold
With this calculation, you know how much it costs to make the food. You can calculate this by adding your initial inventory with your purchased merchandise. After that, subtract your existing inventory. When you have an accurate inventory, you can determine your exact costs of goods.
This metric includes the cost of goods sold and the amount of labor. Your labor costs will reflect all of the benefits, payroll taxes, and wages for your staff. In general, those total labor costs should be less than one-third of your total revenue.
This metric might seem the same as the cost of goods sold, but it is different. Food costs are a ratio that is divided by the number of items needed to prepare a dish. If you want to determine these costs, you need to split the cost of goods sold by your total revenue. Take that number and multiply by 100.
There are other costs that you need to operate a business, such as electricity, equipment costs, and rent. You can break down these costs on a daily or monthly billed basis. These costs must be paid whether your restaurant is successful or not.
After calculating all of your sales and expenses, you can find gross profit by subtracting those expenses from sales.
Tracking your income and expenses is the least glamorous part of operating a restaurant in New Jersey. While you can handle some accounting responsibilities, think about seeking professional assistance. With an accountant, keep track of all areas in your business so that you can make solid financial decisions.
Looking for an Accountant for Your Small Business?
TMD Accounting has over 40 years of helping small businesses throughout Gloucester County. We can assist with payroll, taxes, and other financial matters. We want your restaurant to stay on track. Schedule a consultation by calling 1-856-228-2205.