Your Full Guide to Restaurant Accounting: Software and Best Practices

The restaurant industry in the United Kingdom (UK) is booming. There’s great demand for novel and delicious food offerings as Covid-19 recedes into the background and people look for new ways to delight their taste buds. But managing a restaurant business goes beyond merely offering tasty morsels of food.

It’s also about being savvy as a restaurant business owner and managing your cash flow effectively so that you’re able to run a strong business for many years to come. Whether you run a restaurant on the high street or you have food trucks around your city, one essential when it comes to managing your money is using the right restaurant accounting system.

In this article, we focus on a few essentials before choosing the right restaurant accounting solution for you. We also emphasise a few of the industry’s leading options to help you make an informed choice. 

Ready to begin?

What is Restaurant Accounting?

Restaurant accounting is as much about managing your business’ cash flow and expenses as it is about being compliant throughout the year and during tax season when needing to file your tax returns.

As a business owner, you have a legal obligation to declare your income and expenses so that the right sales tax is deducted and paid to the revenue service. With such an obligation, many restaurant owners either manage their books on their own or they use the services of bookkeepers.

While the former is a simple way to manage your books, the latter can incur excessive costs, depending on the specific services you need carried out for you and your specific business needs.

Essential Restaurant Financials: Income, Balance Sheet and Cash Flow

If you’re just starting out as a restaurant owner, you need to stay on top of your business’ finances. The most important ones are your income and expenditure, the balance sheet and your cash flow. 

• Income is self-explanatory. It is what you earn as a result of every sale.
• Expenses, on the other hand, are what you spend on the restaurant, and these can be fixed (which remain the same over time) or variable (which vary with every new purchase you make).
• The balance sheet lists your business’ assets, liabilities and business capital to give you an idea of how much and where your income and expenses are coming from and going to, respectively.
• Cash flow is the money that goes in and out of your business on a regular basis for a certain period, say one preceding month at a time. 

Each of these must be tracked well and that’s where restaurant accounting solutions come to the fore.

How to Manage Bookkeeping for a Restaurant

As mentioned already, there are two primary ways to manage bookkeeping for a restaurant. You can either find a bookkeeper or use restaurant accounting software. Let’s explore these options in a bit more detail below.

Find a bookkeeper

The first option you might consider when aiming to manage your restaurant’s books is to find a bookkeeper. These individuals are experienced in tracking how much income and expenses flow in and out of your business. You’ll need to carefully keep track of every sale and expense and present them with the receipts captured and invoices you’ve collected so that they can enter them in their system. 

To find a bookkeeper, you may want to do prior research on the topic by exploring different bookkeeping companies. You’ll need to know that they specialise in restaurant bookkeeping and also that they have extensive experience in the industry.

Make sure you take a look at their ratings and reviews online left by current and existing customers to determine whether they are happy with the service provided. You should also consider the monthly fees for hiring a bookkeeper to manage your books. 

Use accounting software

The second option you can consider for running your restaurant’s finances is to use restaurant accounting software as part of restaurant management tools. This is a software package that is installed on your computer and, depending on the type of accounting software for restaurants you choose, you can take advantage of a number of features.

For example, some software solutions come with a restaurant accounting app where you can engage in expense tracking and income monitoring through the comfort of your smartphone. 

You can also take advantage of POS integrations, which means that as soon as you make a sale at your restaurant, the data will be fed to your accounting software so that you do not have to carry out manual data entry.

Another area where small restaurant accounting software can help is with your vendor management. Ultimately, all you need is the right computer, tablet or smartphone and an internet connection to get you set up and ready for effective restaurant management, irrespective of whether you run multiple locations at the same time.

What You Need to Track

In our discussion about expenses above, we mentioned that there are both fixed and variable ones. Tracking both of these will help ensure that you’re on the right track and are accurately capturing sales data on your restaurant accounting system. 

Let’s explore which costs you need to track in more detail below.

Payroll

You need to have staff at your restaurant business, such as waiters, hosts and hostesses, kitchen staff, chefs and cooks, delivery personnel, etc. Each of these individuals will receive a monthly salary from you and unless you frequently change the number of members in your team, these costs will be fixed every month. 

This is where payroll processing through payroll software can help.

Inventory

Inventory costs include aspects such as the cost of furnishing your restaurant with tables and chairs, outfitting the bar area, managing the equipment and furnishing your kitchen, ensuring the lighting is in place, glassware and tableware, and much more.

While some of these costs may be fixed and once-off (such as furniture), the rest will be considered variable costs. The reason is that food and drink quantities will vary depending on the demand your restaurant is seeing in terms of orders from patrons.

Utilities

Another aspect that you need to track is the cost of your utilities. These include electricity, gas, water, heating, internet bills, etc. They do add up every month and you must ensure that they are paid on time every time. 

These costs are variable because they are determined by usage rates and these will vary every month.

Licences

Offering food and drinks requires you to have special permits and licences. 

Depending on your local authority, you may need to pay these monthly or annually. You’ll also need a licence to play music.

Insurance

Insurance is often a fixed monthly cost and acts as security in the event that something goes wrong. 

Whether it’s your fryer that has stopped working, a chair has broken or the geyser burst, the cost of replacing or repairing these can add up over time and insurance is the smartest way for you to manage unforeseen expenses.

Cash management and sales

Cash management and sales do not form part of the expenses of your restaurant. 

Instead, they manage how much income is flowing into your business so that you can calculate a sufficient amount of cash on hand based on the number of sales you ring up.

Restaurant Income Statements

You also need to analyse your restaurant’s income statements. Luckily, with the right restaurant software, you can do this with a few clicks of a button and even from your mobile device. 

Specific aspects you should monitor include:

• Food costs: These food costs are the costs that you spend on purchasing the food and drink materials to prepare your specialty dishes.
• Prime costs: In the restaurant industry, prime costs are the direct costs your business incurs. For example, they will include your labour costs and your cost of goods sold, such as food and alcohol costs.

You’ll also want to be able to quickly calculate your gross profit and net profit, your revenue, your income before and after tax, etc.

Common Restaurant Accounting Mistakes

Managing a restaurant’s books is challenging and many owners make similar mistakes with their accounts that can be avoided. 

These include: 

• Including tips as part of the sales price;
• Not adding value added tax (VAT) to the sales price;
• Discounts are not recorded on the daily statement properly;
• Gift cards are often recorded when the sale is made and not when they are redeemed.

Generally, you want to avoid these errors and this is where using the best restaurant accounting software comes in handy. But what is the best accounting software for your restaurant? Let’s take a closer look below.

Restaurant Accounting Software Alternatives

We’ve done some research and present you with the best overall accounting software contenders on the market. Here are the options you might consider.

1. FreshBooks

FreshBooks is considered the best accounting software for managing customer tabs. It has user-friendly features that are specifically tailored to the hospitality industry. 

Its top three features are payroll management, inventory tracking and expense tracking. It’s also possible to track overpayments and credit notes for regular customers.

2. Zoho Books

Zoho Books is considered the best pick for food trucks that need to track mileage. Its mileage tracking, delivery management and targeted marketing features make it stand out. 

It’s great for those that do deliveries or use delivery agents, as you can easily figure out the costs and calculate gas and time spent out on deliveries. Despite these features, one downside is that it doesn’t offer built-in payroll. However, it’s a great option overall.

3. Xero

With Xero, you take record keeping to the next level. With it, you can take advantage of multiple automated accounting tasks such as bill payments and tax calculations. It also offers integrations with other third-party applications, for example. 

On the downside, it’s not ideal if you’re a business that processes more than 2,000 transactions. Also, its early plan has limited user permissions. Lastly, advanced features have a steep price tag so it’s worth considering weighing this up against your restaurant’s needs.

4. Restaurant365

Restaurant365 shines for its financial management functionalities and its ability to manage customer relationships. It goes even further with its fixed assets tracking and contract verification options. It offers bundled service plans that include POS and store management. 

Overall, it’s great because it offers a single integrated platform for restaurant operations, accounting and reporting. Its cloud-based solution also enables you to access your restaurant’s data from anywhere. However, it is considered a costlier option and entails a relatively steep learning curve to get used to using it.

5. QuickBooks

Perfect for small Restaurant businesses, QuickBooks can help you with cash-flow management, reporting and even mileage tracking. It’s great for beginners and you get 24/7 support on every plan. 

You can use its mobile app to track your expenses and you can also give multiple users permission to use the software. Other big perks are its automated invoicing and user-friendly interface. 

On the other hand, customisation of inventory items is considered a basic accounting feature and if you want online payroll, you have to spend extra on this. It’s also considered to have limited industry-specific features.

6. Wave

Wave offers double-entry accounting in addition to invoicing and expense tracking. You can also use it to manage and file taxes more effectively during tax time, get automatic payment reminders, add unlimited users and get real-time data and financial reporting. 

With Wave, your tax management is essentially free. This software is quite budget-friendly for smaller restaurants and it has a user-friendly interface. While it does lack detailed reporting capabilities and its payroll services may be considered insufficient, it still packs a punch because of its affordability.

7. Bonsai

Ideal for those in catering and VIP dining, Bonsai stands out for its client management, accounts payable and contract templates. In particular, its Client Portal is ideal for managing reservations, sharing documents and even ensuring that electronic signatures are received in a safe manner. 

Despite these impressive features, its inventory management may be considered somewhat limited and it also lacks recipe costing features. Another potential drawback is that it may not integrate with all POS systems.

8. Melio

New restaurants that want effective bill management, data exports and payment tracking will love Melio. 

It has the impressive Pay Over Time feature, which is like a virtual credit line that lets you pay vendors immediately as you extend your repayments over a period of time. This means your cash flow stays robust while supplier relationships are managed in an effective way. 

Another perk is that it integrates with QuickBooks online. However, where it lacks is in limited customer management and lack of payroll integrations.

9. Sage

The Sage accounting system is known for its comprehensive accounting software features that restaurants can use. It features an intelligent general ledger with artificial intelligence, it has a rich dashboard and offers detailed reporting insights (with over 150 report templates) plus it also offers automatic order management. 

Sage offers restaurant-specific accounting solutions that are scalable and its integration with other tools make this a standout contender. However, you may find getting around the software somewhat challenging at the beginning and if you need customer support, you may find that it’s slow at times.

10. NetSuite

If you run a restaurant at multiple locations, you’ll find NetSuite as an accounting system quite helpful. Its multi-location management combined with customer relationship management features and restaurant inventory help you manage everything in one place. It’s also ideal for restaurants that are looking for scalable solutions and it is easy to use. 

You can build financial reporting and get quick access to your financial data. Plus, detailed reports are highly flexible and can easily be personalised. Unfortunately, NetSuite doesn’t offer a free plan or a free trial, its custom pricing isn’t transparent and it involves quite a steep learning curve to handle the software effectively.

Conclusion

Choosing the right accounting services or software for your business is essential if you want to have a smooth experience and good financial health when recording your business income and expenses.

While there is no perfect software out there, there are several specialised software solutions that come close to meeting a small business’ specific needs. It all depends on the type of dining establishment you run, your budget and the types of integrations and capabilities you are looking for. 

When choosing bookkeeping software with the right accounting features, make sure to look for invoice processing, vendor payments, payroll features, track inventory, track income, do bank reconciliation and more to save time. 

You may sometimes be required to pay a flat fee or a fixed monthly cost. Just be sure that it aligns with your budget and profit margins while ensuring you also get inventory reports to help you with your small business decision making processes.

Frequently Asked Questions

What is the best restaurant accounting software for my business?

The best restaurant accounting software for your business will depend on what type of restaurant you run as there are important differences between a VIP dining establishment versus a food truck. Consider your unique business needs and select the software based on its robust features and functionalities, integrations and price.

How should I choose the right accounting software for my restaurant?

A few factors to consider when choosing the right accounting software for your restaurant should include the cost factor and user-interface. Other criteria you want to focus on include the number of user permissions, whether it’s accompanied by a mobile app, what type of reporting and analytic capabilities it offers, how it integrates with your POS systems, etc.