Did you know that 46% of all small businesses fail because of bookkeeping errors?
Would you believe that cash flow problems wipe out another 82%?
And that overall, restaurant industry sales are down 1.9%?
These stats are no joke.
They prove that good bookkeeping and accounting processes are must-haves for keeping your restaurant alive.
They also point to the fact that it’s important to have systems, processes, and communication with your accountant… so you understand where your business stands and how you can improve it.
Sure, a deep dive into your accountant’s processes might seem like the last thing you want to do… after all, you have a million moving parts to think about every day.
But the right questions can lead to answers that ultimately prevent your restaurant from becoming just another statistic.
Because accounting can improve all other aspects of your business, we’ve put together 7 questions restaurant owners needs to ask their accountants.
#1: Do you use restaurant-specific accounting processes?
Restaurants are a unique industry. The chart of accounts, transaction processing, and reporting that go along with it are unique, too.
While you didn’t go to school for accounting, the person you hire to manage your books did.
He or she should not only be well versed in general accounting best practices but how to avoid critical restaurant accounting mistakes, too.
And good restaurant accountants should follow industry best practices.
They should know how to allocate balance sheet accounts, income & expense accounts, and accounts detail like direct operating expenses.
#2: Do you use cloud-based software or apps?
Your accountant should be using cloud-based – or online – software and restaurant accounting apps to do your bookkeeping and accounting.
Using online software means you can access your accounting records anytime and anywhere there’s a connection to the internet.
Because everything is updated and stored online, you don’t have to worry about losing information.
No hard drive crashes where you lose everything.
No static spreadsheets where you can’t see your numbers in real time.
Instead, online software and apps eliminate the need to send backup files. They give you real-time information sharing between you and your accountant.
And that kind of efficiency is a godsend for a busy restaurant manager who only has so many hours in a day.
Your accountant should be using modern technology to manage your books… spreadsheets are a thing of the past.
#3: Does your accounting software integrate with your POS and automatically reconcile sales and bank deposits?
Your accountant’s software (QuickBooks, QuickBooks Online, Sage, etc.) should integrate with your POS. If it does, your sales and bank deposits will reconcile themselves automatically.
If these two systems aren’t connected, you’ve got a problem.
Manual reconciliation can be an error-prone process.
It leaves you at risk for fraud or mistakes that could cost you your business. Automatic reconciliation will ensure what’s put into your POS hits the bank when it’s supposed to.
Your accountant can then easily monitor your statements for any unusual or fraudulent activity.
#4: Do you monitor cash tips?
Cash tips are self-reported by servers. And your accountant should be monitoring the percentage of these cash tips versus cash sales.
This ratio should be close to the tip ratio of credit card tips versus credit card sales.
Why is this a big deal?
Having your accountant keep an eye on this will discourage your servers from being tempted to keep more tips than what they actually made.
And you’ll sleep better at night knowing nothing fishy is going on.
#5: Do you allocate payroll between FOH and BOH?
Restaurant accountants are often tempted to lump together FOH and BOH payroll. It can seem easier to count it as one big expense.
But a good restaurant accountant will actually drill down into your personnel expenses to, at the very least, FOH (host/hostess, servers) and BOH (kitchen, busboys).
Some even go one step further, breaking out payroll by specific roles… server, chef, line cook, etc.
Why would your accountant get this detailed?
Well, the more specific you can get listing payroll expenses, the greater your ability to see exactly where your business is profiting… or exactly where you’re losing money.
#6: Do you adjust inventory on a weekly basis?
Managing your inventory is about maximizing your cash flow and minimizing theft, spoilage, and waste. Tracking and managing inventory on a weekly basis leads to better visibility into your costs by seeing Cost of Goods Sold (COGS).
Without an inventory count, you can’t see how much you have on hand.
Without knowing how much of each item is on hand, you can’t look up the price you paid for it.
And without the prices of your food, your accountant can’t calculate COGS.
Using COGS, your accountant will be able to see exactly where you’re overspending on food, if you’re over ordering, or if someone is stealing from you.
And when food costs are going up and profits are going down, you have no choice but to keep a close eye on your inventory costs.
#7: Do you work with other restaurant owners and do you understand key restaurant metrics and what they should be for my business?
Ask your accountant how many other restaurants he or she works with. Ideally, you want to use a restaurant-specific accountant.
Find out what other restaurant’s goals are as far as profits and losses, labor costs, and food costs. Your accountant can provide these in percentage increases or decreases.
How will doing this help you?
It will give you a perspective into what other businesses in your industry are reaching for. It can give you a standard to meet.
Set up similar goals specific to your business to work toward.
There are other financial numbers your accountant and you should monitor closely, too. These include prime cost as a percentage of sales and BOH cost as a percentage of food sales.
Knowing these numbers is great… but they’re useless if you don’t learn from them and change your business because of them.
That’s why it’s important to make sure your accountant is updating you about industry benchmarks and that you’re on the same page about your restaurant’s financial goals.
YOU CAN COUNT ON THIS
Your accountant is knee-deep in your restaurant’s numbers every day.
Like it or not, you depend on this person to help you keep your business healthy. And that’s why it’s so important to make sure you’re on the same page.
By asking these 7 questions, you’ll make sure you have an accountant who understands your industry, uses modern technology & processes, and cares about the growth of your business.
Good restaurant accountants want to see the success of your business as much as you do.
They can help you bring down costs, increase profits, and alert you to theft and fraud. They’ll help you with a strategy to grow your business.
And they’ll prevent the bookkeeping errors and cash flow problems that could close your doors.
We’re big fans of RASI here at Orderly. RASI is the leading virtual end-to-end outsourced restaurant accounting firm in the hospitality market. RASI combines the expertise of professional accountants with cutting-edge technology… so you can ditch the hassle of managing your books. If you’re looking for restaurant accounting help, we highly recommend Restaurant Accounting Services, Inc.