Restaurant profit margins are the percentage of revenue a restaurant keeps after paying for all the expenses. Restaurant profit margins are a key indicator of a restaurant’s financial health and performance, and they can help restaurant owners make informed decisions about pricing, menu, inventory, staffing, and marketing.

However, tracking restaurant profit margins can be challenging, as it requires accurate and timely accounting of all the income and expenses related to the restaurant business. In this article, we will show you how to set up accounting to track restaurant profit margins effectively and efficiently.

What are the components of restaurant profit margins?

Restaurant profit margins can be divided into two types: gross profit margin and net profit margin.

• Gross profit margin is the percentage of revenue that a restaurant keeps as profit after paying for the cost of goods sold (COGS), which is the cost of the food and beverages that are sold to the customers. Gross profit margin can be calculated by subtracting COGS from revenue and dividing the result by revenue. For example, if a restaurant’s revenue is $10,000 and its COGS is $4,000, its gross profit margin would be 60% ($10,000 – $4,000) / $10,000.
• Net profit margin is the percentage of revenue that a restaurant keeps as profit after paying for all the operating expenses, such as rent, utilities, wages, taxes, and marketing. Net profit margin can be calculated by subtracting operating expenses from gross profit and dividing the result by revenue. For example, if a restaurant’s gross profit is $6,000 and its operating expenses are $3,000, its net profit margin would be 30% ($6,000 – $3,000) / $10,000.

How to set up accounting to track restaurant profit margins?

To set up accounts to track restaurant profit margins, you need to follow these steps:

• Choose an accounting method: You need to choose an accounting method that suits your restaurant’s needs and preferences. The two main accounting methods are cash basis and accrual basis. Cash-based accounting records transactions when cash is received or paid, while accrual-basis accounting records transactions when earned or incurred, regardless of cash flow. Cash-based accounting is simpler and easier, but accrual-based accounting is more accurate and realistic.
• Choose an accounting software: You must choose an accounting software that helps you automate and streamline your accounting process. There are many accounting software options available, such as QuickBooks, Xero, FreshBooks, and [Wave]. You should look for accounting software that is easy to use, affordable, secure, and compatible with your point-of-sale (POS) system and other tools.
• Record your income and expenses: You need to record all your income and expenses related to your restaurant business in your accounting software. You need to categorize your income and expenses by account, such as revenue, COGS, rent, utilities, wages, taxes, etc. You also need to reconcile your bank and credit card accounts with your accounting records, and make sure that they match. You also need to identify and resolve any discrepancies or errors, such as missing transactions, duplicate transactions, incorrect amounts, or wrong classifications.
• Prepare your financial statements: You need to prepare your financial statements, such as income statements, balance sheets, and cash flow statements, that show the financial performance and position of your restaurant business. These statements help you calculate and track your gross profit margin and net profit margin, as well as other financial ratios, such as profitability, liquidity, solvency, and efficiency. You also need to compare your actual results with your budget and forecast and identify any variances or gaps.

Conclusion

By setting up accounting to track restaurant profit margins, you can improve your restaurant’s financial health and performance, and make informed decisions about your restaurant business. You can also contact TMD Accounting, the best small business accountant in NJ, to get professional help with your restaurant accounting. We offer a range of accounting services, including bookkeeping, payroll, tax, and accounting, for small businesses in various industries, including restaurants. We have the expertise, the experience, and the resources to handle your restaurant accounting with accuracy and timeliness.

Contact us today at (856) 228-2205, or email us at info@tmdaccounting.com, or visit our website at https://tmdaccounting.com/. We are located at 202 Ganttown Road, Turnersville, NJ 08012. TMD Accounting, the best accounting firm in New Jersey.

A financial audit is an independent examination of the financial statements and records of a business by a certified public accountant (CPA) or an external auditor. The purpose of a financial audit is to verify the accuracy and completeness of the financial information and to ensure that the business is complying with the applicable accounting standards and tax laws.

A financial audit can provide many benefits for a small business, such as:

• Enhancing the credibility and reliability of the financial statements
• Improving the internal controls and processes of the business
• Identifying and correcting any errors or frauds in the financial records
• Providing assurance and confidence to the stakeholders, such as investors, creditors, regulators, and customers
• Helping the business to obtain financing, attract investors, or sell the business

However, a financial audit can also be costly and time-consuming for a small business, as it requires:

• Hiring a qualified and independent auditor
• Preparing and providing all the necessary financial documents and records
• Cooperating and communicating with the auditor throughout the audit process
• Implementing and following up on the audit recommendations and findings

Therefore, a small business should carefully weigh the pros and cons of having a financial audit, and determine the optimal frequency and timing of the audit based on its needs and goals.

Factors to Consider When Deciding the Frequency of a Financial Audit

There is no one-size-fits-all answer to how often a small business should have a financial audit, as it depends on various factors, such as:

• Legal requirements: Some small businesses may be legally required to have a financial audit annually or periodically, depending on their industry, size, structure, or location. For example, some states may require certain types of small businesses, such as nonprofits, to have an annual audit if they receive a certain amount of revenue or donations. Some federal agencies may also require small businesses that receive grants or contracts from them to have an audit every year or every few years.
• Contractual obligations: Some small businesses may be contractually obligated to have a financial audit by their lenders, investors, partners, or customers. For example, some banks may require small businesses that borrow money from them to have an annual audit as a condition of the loan. Some investors may also require small businesses that receive funding from them to have an audit every year or every few years as a way of monitoring their performance and risk.
• Business objectives: Some small businesses may voluntarily choose to have a financial audit to achieve their business objectives, such as improving their financial management, increasing their profitability, or expanding their market. For example, some small businesses may have an audit before they apply for a loan, seek new investors, or sell their business, to demonstrate their financial health and potential. Some small businesses may also have an audit to identify and address any weaknesses or opportunities in their financial operations, and to implement best practices and standards.

Best Practices for Determining the Frequency of a Financial Audit

Based on the factors above, a small business should consider the following best practices when determining the frequency of a financial audit:

• Consult with a CPA or an external auditor: A CPA or an external auditor can help a small business to assess its need and readiness for a financial audit and advise on the optimal frequency and timing of the audit. A CPA or an external auditor can also help a small business to prepare for the audit, and to conduct the audit efficiently and effectively.
• Review the financial statements and records regularly: A small business should review its financial statements and records regularly, such as monthly, quarterly, or annually, to ensure that they are accurate, complete, and up to date. A regular review can also help a small business to detect and correct any errors or irregularities in its financial records, and to avoid any surprises or issues during the audit.
• Consider the cost and benefit of the audit: A small business should consider the cost and benefit of the audit, and compare them with its budget and goals. A small business should weigh the advantages and disadvantages of having a financial audit, such as the impact on its cash flow, reputation, growth, and risk. A small business should also consider the alternatives and options to a financial audit, such as a review, a compilation, or a self-audit, and evaluate their suitability and feasibility.

Conclusion

A financial audit can be a valuable tool for a small business, as it can provide assurance, confidence, and insight into its financial performance and position. However, a financial audit can also be a costly and time-consuming process for a small business, as it requires preparation, cooperation, and follow-up. Therefore, a small business should carefully consider the factors and best practices that influence the frequency of a financial audit, and decide the optimal frequency and timing of the audit based on its needs and goals.

If you need professional help with your financial audit, you can contact TMD Accounting, the best small business accountant in NJ. We offer a range of accounting services, including bookkeeping, payroll, tax, and accounting, for small businesses in various industries. We have the expertise, the experience, and the resources to handle your financial audit with accuracy and timeliness. Contact us today at (856) 228-2205, or email us at info@tmdaccounting.com, or visit our website at https://tmdaccounting.com/. We are located at 202 Ganttown Road, Turnersville, NJ 08012. TMD Accounting is the best accounting firm in New Jersey.

As a small business owner, you have a lot of responsibilities and tasks to handle every day. But one of the most important tasks is to keep your accounting records accurate and up to date. This will help you manage your cash flow, comply with tax laws, and make informed business decisions.

One of the best ways to ensure that your accounting records are accurate and up to date is to follow a month-end accounting checklist. A month-end accounting checklist is a list of tasks that you need to complete at the end of each month to close your books and prepare your financial statements. By following a month-end accounting checklist, you can streamline your accounting process, save time and money, and avoid errors and mistakes.

In this article, we will provide you with a month-end accounting checklist for small business owners that you can use to close your books and prepare your financial statements. We will also explain why each task is important and how to do it effectively.

Month-End Accounting Checklist for Small Business Owners

Here is a month-end accounting checklist for small business owners that you can use to close your books and prepare your financial statements:

• Record income and expenses: The first step in your month-end accounting checklist is to record all your income and expenses for the month. You need to make sure that you have recorded all your sales, invoices, payments, receipts, bills, and other transactions in your accounting software or system. You also need to categorize your income and expenses by account, such as revenue, cost of goods sold, rent, utilities, payroll, etc. This will help you track your income and expenses, and prepare your income statement.
• Reconcile bank and credit card accounts: The next step in your month-end accounting checklist is to reconcile your bank and credit card accounts. You need to compare your bank and credit card statements with your accounting records and make sure that they match. You also need to identify and resolve any discrepancies or errors, such as missing transactions, duplicate transactions, incorrect amounts, etc. This will help you verify the accuracy of your cash balance, and prevent fraud and theft.
• Review accounts receivable and accounts payable: The third step in your month-end accounting checklist is to review your accounts receivable and accounts payable. Accounts receivable are the amounts that your customers owe you for your goods or services, and accounts payable are the amounts that you owe to your suppliers or vendors for their goods or services. You need to review your accounts receivable and accounts payable reports and make sure that they are accurate and up to date. You also need to follow up with your customers and suppliers and collect or pay any outstanding amounts. This will help you improve your cash flow, and avoid bad debts and late fees.
• Review inventory: The fourth step in your month-end accounting checklist is to review your inventory. Inventory is the goods that you have in stock for sale or use in your business. You need to review your inventory report and make sure that it reflects the actual quantity and value of your inventory. You also need to conduct a physical count of your inventory and compare it with your inventory report. You also need to identify and adjust any discrepancies or errors, such as missing inventory, damaged inventory, obsolete inventory, etc. This will help you optimize your inventory management, and calculate your cost of goods sold and gross profit margin.
• Review fixed assets: The fifth step in your month-end accounting checklist is to review your fixed assets. Fixed assets are the long-term assets that you use in your business, such as equipment, furniture, vehicles, etc. You need to review your fixed assets report and make sure that it reflects the actual quantity and value of your fixed assets. You also need to record any additions, disposals, or depreciation of your fixed assets. This will help you track your fixed assets, and calculate your net income and net worth.
• Review payroll: The sixth step in your month-end accounting checklist is to review your payroll. Payroll is the amount that you pay to your employees for their work, including wages, salaries, bonuses, commissions, benefits, taxes, etc. You need to review your payroll report and make sure that it reflects the actual amount and details of your payroll. You also need to record any changes, corrections, or adjustments to your payroll. This will help you comply with the payroll laws and regulations, and calculate your payroll expenses and net income.
• Review taxes: The seventh step in your month-end accounting checklist is to review your taxes. Taxes are the amounts that you pay to the government for your income, sales, payroll, etc. You need to review your tax report and make sure that it reflects the actual amount and details of your taxes. You also need to record any changes, corrections, or adjustments to your taxes. This will help you comply with the tax laws and regulations, and calculate your tax liabilities and net income.
• Prepare financial statements: The eighth step in your month-end accounting checklist is to prepare your financial statements. Financial statements are reports that show the financial performance and position of your business, such as income statements, balance sheets, and cash flow statements. You need to prepare your financial statements using the data from your accounting records and make sure that they are accurate and complete. You also need to review your financial statements and analyze your financial ratios, such as profitability, liquidity, solvency, efficiency, etc. This will help you evaluate your business performance and profitability, and make informed business decisions.
• Close the accounting period: The ninth step in your month-end accounting checklist is to close the accounting period. Closing the accounting period means that you finalize your accounting records and financial statements for the month, and prevent any further changes or adjustments. You need to close the accounting period in your accounting software or system and make sure that you have a backup of your data. This will help you secure your accounting data, and prepare for the next accounting period.
• Review and improve your accounting process: The tenth and final step in your month-end accounting checklist is to review and improve your accounting process. You need to review your accounting process and identify any issues, challenges, or opportunities for improvement. You also need to implement any changes, corrections, or enhancements to your accounting process, and monitor the results. This will help you streamline your accounting process, save time and money, and avoid errors and mistakes.

Conclusion

By following this month-end accounting checklist, you can close your books and prepare your financial statements with ease and confidence. You can also improve your accounting process, and ensure that your accounting records are accurate and up to date. This will help you manage your cash flow, comply with tax laws, and make informed business decisions.

If you need professional help with your month-end accounting, you can contact TMD Accounting, the best small business accountant in NJ. We offer a range of accounting services, including bookkeeping, payroll, tax, and accounting, for small businesses in various industries. We have the expertise, experience, and resources to handle your month-end accounting with accuracy and timeliness. Contact us today at (856) 228-2205, or email us at info@tmdaccounting.com, or visit our website at https://tmdaccounting.com/. We are located at 202 Ganttown Road, Turnersville, NJ 08012. TMD Accounting is the best accounting firm in New Jersey.

As a small business owner, you have to make many decisions that affect your finances, such as how to manage your accounting. Accounting is the process of recording, organizing, and reporting your financial transactions, such as income, expenses, assets, liabilities, and taxes. Accounting is essential for keeping track of your cash flow, complying with tax laws, and making informed business decisions.

However, accounting can also be a complex and time-consuming task, especially if you are not familiar with the accounting principles and practices. That’s why you may face the dilemma of whether to do your own accounting (DIY accounting) or hire an accountant to do it for you. Both options have their pros and cons, and the best choice depends on your needs, preferences, and budget.

In this article, we will compare the pros and cons of DIY accounting vs hiring an accountant, and help you decide which option is best for your small business.

DIY Accounting: Pros and Cons

DIY accounting means that you handle your accounting yourself, using accounting software or tools, such as QuickBooks, Xero, FreshBooks, or [Wave]. DIY accounting can be a good option for small businesses that have simple accounting needs, such as sole proprietors or freelancers. Here are some of the pros and cons of DIY accounting:

Pros of DIY Accounting

• Cost: One of the main advantages of DIY accounting is that it can save you money on professional fees. Accounting software or tools are usually free or low-cost, and you can use them anytime and anywhere. You can also avoid paying for services that you don’t need or use and only pay for the features that you need.
• Control: Another benefit of DIY accounting is that it gives you more control over your financial data and records. You can keep direct oversight of your financial details, and access and update them whenever you want. You can also customize your accounting software or tools to suit your preferences and needs and integrate them with other tools that you use, such as your POS system or your bank account.
• Insight: A third advantage of DIY accounting is that it can give you more insight into your business’s financial performance and position. By doing your own accounting, you can gain a deeper understanding of your income and expenses, assets and liabilities, and cash inflows and outflows. You can also analyze your financial data and identify your strengths and weaknesses, opportunities and threats, and trends and patterns.

Cons of DIY Accounting

• Time: One of the main drawbacks of DIY accounting is that it can take a lot of time and effort. Accounting can be a tedious and complicated task, especially if you have multiple transactions, accounts, or tax obligations. You may have to spend hours or days each month to record, organize, and report your financial transactions, and to prepare and file your tax returns. This can take away time and energy from your core business activities, such as marketing, sales, or customer service.
• Errors: Another disadvantage of DIY accounting is that it can increase the risk of errors and mistakes. Accounting requires a lot of attention to detail and accuracy, and even a small error can have a big impact on your financial statements and tax liabilities. If you are not familiar with accounting principles and practices, you may make errors or omissions in your accounting records, such as missing transactions, duplicate transactions, incorrect amounts, or wrong classifications. This can lead to inaccurate financial statements, tax penalties, or audits.
• Expertise: A third drawback of DIY accounting is that it can limit your access to expertise and advice. Accounting can be a complex and dynamic field, and it can be hard to keep up with the changing accounting standards and tax laws. If you do your own accounting, you may miss out on the valuable guidance and support that a professional accountant can provide. A professional accountant can help you with the technical aspects of accounting, such as bookkeeping, tax preparation, and financial reporting. They can also help you with the strategic aspects of accounting, such as financial planning, budgeting, and forecasting.

Hiring an Accountant: Pros and Cons

Hiring an accountant means that you outsource your accounting to a professional accountant or an accounting firm, such as TMD Accounting1. Hiring an accountant can be a good option for small businesses that have complex and diverse accounting needs, such as corporations or partnerships. Here are some of the pros and cons of hiring an accountant:

Pros of Hiring an Accountant

• Time: One of the main advantages of hiring an accountant is that it can save you time and hassle. An accountant can handle your accounting for you, and take care of all the details and paperwork. You can delegate your accounting tasks to an accountant, and focus on your core business activities, such as marketing, sales, or customer service. You can also rely on an accountant to meet your deadlines and obligations, and to keep your accounting records and financial statements up to date.
• Accuracy: Another benefit of hiring an accountant is that it can ensure the accuracy and completeness of your financial data and records. An accountant is a trained and certified professional who has the knowledge and skills to perform your accounting correctly and efficiently. An accountant can help you avoid errors and mistakes in your accounting records, such as missing transactions, duplicate transactions, incorrect amounts, or wrong classifications. This can lead to accurate financial statements, tax savings, and compliance.
• Advice: A third advantage of hiring an accountant is that it can provide you with expertise and advice. An accountant is not only a technician, but also a strategist who can help you with the technical and strategic aspects of accounting. An accountant can help you with the technical aspects of accounting, such as bookkeeping, tax preparation, and financial reporting. They can also help you with the strategic aspects of accounting, such as financial planning, budgeting, and forecasting. An accountant can also help you with other business matters, such as business formation, financing, growth, or exit.

Cons of Hiring an Accountant

• Cost: One of the main drawbacks of hiring an accountant is that it can be expensive. An accountant can charge you by the hour, by the project, or by the service, depending on their qualifications, experience, and reputation. You may have to pay for services that you don’t need or use, or for features that you don’t need. You may also have to pay for additional fees or expenses, such as travel, software, or materials.
• Control: Another disadvantage of hiring an accountant is that it can reduce your control over your financial data and records. You may have to share your financial details and access with an accountant and trust them to handle your accounting properly and securely. You may also have to rely on an accountant to provide you with your financial data and reports and to update them regularly. You may also have to adjust your preferences and needs to suit your accountant’s style and methods.
• Compatibility: A third drawback of hiring an accountant is that it can create compatibility issues. You may have to find an accountant who is compatible with your business, your industry, and your personality. You may have to look for an accountant who has the relevant qualifications, experience, and reputation for your business and your industry. You may also have to look for an accountant who has the same vision, values, and goals as you. You may also have to look for an accountant who is easy to communicate and work with.

Conclusion

Deciding whether to do your own accounting or hire an accountant is an important decision for your small business. Both options have their pros and cons, and the best choice depends on your needs, preferences, and budget. You should consider the factors and best practices that influence your accounting needs, such as your business size, structure, industry, complexity, and goals. You should also weigh the advantages and disadvantages of each option, such as the cost, time, accuracy, control, insight, expertise, and advice.

If you need professional help with your accounting, you can contact TMD Accounting, the best small business accountant in NJ. We offer a range of accounting services, including bookkeeping, payroll, tax, and accounting, for small businesses in various industries. We have the expertise, the experience, and the resources to handle your accounting with accuracy and timeliness. Contact us today at (856) 228-2205, or email us at info@tmdaccounting.com, or visit our website at https://tmdaccounting.com/. We are located at 202 Ganttown Road, Turnersville, NJ 08012. TMD Accounting, the best accounting firm in New Jersey.

Running a restaurant is a rewarding but challenging business, and it requires careful attention to your finances. You need to keep track of your income and expenses, manage your cash flow, comply with tax laws, and make informed business decisions. To help you with these tasks, we have collected 5 restaurant accounting tips that can improve your bottom line and ensure your restaurant’s success.

1. Reconcile accounts regularly

One of the most important restaurant accounting tips is to reconcile your accounts regularly. This means comparing your bank and credit card statements with your accounting records and making sure that they match. You also need to identify and resolve any discrepancies or errors, such as missing transactions, duplicate transactions, incorrect amounts, or wrong classifications. Reconciling your accounts regularly can help you verify the accuracy of your cash balance, prevent fraud and theft, and avoid overdraft fees and penalties.

2. Account for required tips as restaurant income

Another restaurant accounting tip is to account for required tips as restaurant income. Required tips are the tips that you add to the customer’s bill, such as service charges, gratuities, or delivery fees. These tips are considered part of your restaurant’s income, and you need to report them to the IRS and pay taxes on them. You also need to distribute these tips to your employees according to the law and your policy. Accounting for required tips as restaurant income can help you comply with the tax laws and regulations, and avoid audits and fines.

3. Claim your tax credit on employee tips

A third restaurant accounting tip is to claim your tax credit on employee tips. Employee tips are the tips that your customers voluntarily give to your employees, such as cash tips, credit card tips, or pooled tips. These tips are considered part of your employee’s income, and you need to withhold and pay taxes on them. However, you can also claim a tax credit for the employer’s share of social security and Medicare taxes that you pay on these tips. Claiming your tax credit on employee tips can help you reduce your tax liabilities and increase your net income.

4. Use the right accounting software and point-of-sale (POS) system

A fourth restaurant accounting tip is to use the right accounting software and point-of-sale (POS) system. Accounting software and POS systems are the tools that help you automate and streamline your restaurant accounting. You should look for accounting software and POS systems that are easy to use, affordable, secure, and compatible with your restaurant’s needs and preferences. You should also look for accounting software and POS systems that can integrate with each other and with other tools that you use, such as your inventory system, your payroll system, or your online ordering system. Using the right accounting software and POS system can help you save time and money, improve accuracy and efficiency, and generate useful reports and insights.

5. Review and improve your accounting process

A fifth restaurant accounting tip is to review and improve your accounting process. You should review your accounting process regularly, and identify any issues, challenges, or opportunities for improvement. You should also implement any changes, corrections, or enhancements to your accounting process, and monitor the results. You should also consult with a professional accountant or an accounting firm, such as TMD Accounting, to get expert advice and support. Reviewing and improving your accounting process can help you streamline your accounting process, avoid errors and mistakes, and optimize your accounting performance and profitability.

Conclusion

By following these 5 restaurant accounting tips, you can improve your bottom line and ensure your restaurant’s success. You can also contact TMD Accounting, the best small business accountant in NJ, to get professional help with your restaurant accounting. We offer a range of accounting services, including bookkeeping, payroll, tax, and accounting, for small businesses in various industries, including restaurants. We have the expertise, the experience, and the resources to handle your restaurant accounting with accuracy and timeliness. Contact us today at (856) 228-2205, or email us at info@tmdaccounting.com, or visit our website at https://tmdaccounting.com/. We are located at 202 Ganttown Road, Turnersville, NJ 08012. TMD Accounting, the best accounting firm in New Jersey.