Restaurant accounting & bookkeeping 101: A guide for your restaurant

Your passion might be food, but to keep your restaurant afloat, you also need to have a handle on the numbers. Between managing food costs, juggling payroll, and dealing with unexpected expenses, staying on top of your books can feel like a full-time job. And with tight margins and fluctuating costs, even a busy restaurant can struggle if the numbers don’t add up.

The restaurant industry is poised to employ 15.7 million people and generate $1 trillion in sales in 2024. To meet this demand, cut costs, and increase efficiency, restaurant owners are using technology more than ever for various tasks, including bookkeeping and accounting. 

Whether you run a diner, coffee shop, or upscale establishment, here's what you need to know to optimize your bookkeeping operations and keep your business running smoothly and your customers coming back. 

Bookkeeping for restaurants: A step-by-step guide

Step 1: Track your sales and revenue

Step 2: Manage your expenses

Step 3: Streamline payroll processing

Step 4: Reconcile your accounts

Step 5: Prepare and analyze financial statements

Types of bookkeeping methods for restaurants

How to choose the right accounting software for your restaurant

Common bookkeeping challenges in restaurants

Finding the right bookkeeper for your restaurant

How to hire a bookkeeper

Support your business with a restaurant bookkeeper

Bookkeeping for restaurants: A step-by-step guide 

Bookkeeping is key to any successful restaurant. The best accounting practices for restaurants include regularly updating financial records, tracking expenses accurately, and performing monthly reconciliations to ensure financial accuracy and compliance. This step-by-step guide will walk you through the key processes to keep your restaurant’s finances in order.

Step 1: Track your sales and revenue

Effective restaurant bookkeeping starts with tracking your sales and revenue. Most restaurants use accrual accounting, which means they record revenue and expenses when they are earned or incurred rather than when cash actually exchanges hands. This data will help inform decisions about everything from menu offerings to staffing. The following are ways to keep tabs on it all:

Generate daily sales reports

As a restaurant owner, your bookkeeping requires meticulous daily sales tracking. Monitoring your sales by initiating daily reports helps you identify revenue streams. What are your best-selling menu items? What are your restaurant’s peak hours? What’s the average check size? These reports will provide insights. 

Integrate with a Point-of-Sale (POS) system 

Tracking becomes significantly easier if you integrate your POS system with restaurant accounting software like QuickBooks Online. Automating the transfer of sales data minimizes manual errors and saves valuable time.

Leverage a mobile app

As a restaurant owner, you may be chatting with customers, visiting suppliers, or meeting with contractors. A mobile app allows you to run the financial side of your business from your smartphone. Track income, expenses, and more, wherever you are. 

Step 2: Manage your expenses 

From food costs to labor expenses, every dollar you spend impacts your profitability. Your bookkeeping system must allow you to keep tabs on the following so you can know where your money is going and identify potential ways to save. Consider restaurant accounting software that syncs with apps that organize sales, employees, and back-of-house. Monitor your money by overseeing the following:

Accounts payable

Set up a streamlined system, such as QuickBooks, to track supplier invoices. An organized system helps ensure timely payments and good vendor relationships.

Inventory purchases

Regularly record purchases of food, beverages, and other supplies so you can track costs and monitor inventory levels, helping to prevent spoilage or overstock.

Payroll and labor costs

Accurately track employee hours, wages, tips, and related taxes. Consider using payroll software to automate calculations and ensure compliance with labor laws, such as those related to minimum wage, overtime pay, training, meal breaks, and uniforms.

Overhead expenses

Record all overhead costs such as rent, utilities, licenses and permits (alcohol licenses, etc.), marketing and advertising, and accounting and legal fees.

Step 3: Streamline payroll processing

Every business owner needs to pay their employees accurately and on time. However, in the restaurant industry, tipped employees, shift variations, and overtime regulations complicate the payroll process. Automating payroll tasks can greatly help reduce errors, save time, and assist with labor law compliance.  

Again, this is where payroll software comes into play. It simplifies calculations, automates tax filings, and ensures accurate and timely payments.

For example, say there’s a busy cafe with numerous baristas and servers working different weekly shifts. Calculating each employee's wages, tips, and taxes would be time-consuming and could significantly increase the risk of errors. By using payroll software, the cafe owner can automate these processes, saving time and ensuring accuracy.

Step 4: Reconcile your accounts

Account reconciliation is verifying that your internal financial records align with external statements from your bank and credit card companies. Since restaurants may accept cash, credit cards, and other payment methods, account reconciliation is even more important.

Compare statements

Regularly cross-check your restaurant's daily sales reports, cash register totals, and credit card receipts with the corresponding deposits and fees on your bank and credit card statements. Look for any inconsistencies in amounts, dates, or transaction details.

Resolve discrepancies

If you find a difference between your internal records and external statements, investigate the source promptly. Was there a missed transaction, a data entry error, or perhaps an unauthorized charge?

For instance, say your bank statement shows a deposit of $500, but your accounting records show a deposit of $550. By reconciling your accounts, you can identify this issue and investigate the cause, whether it's a simple data entry error or a more serious issue like theft or fraud.

Step 5: Prepare and analyze financial statements

Bookkeeping goes beyond daily recordkeeping and involves generating certain financial statements. These documents provide overviews of various aspects of your restaurant's fiscal performance. Running and analyzing these statements regularly helps support your decision-making.

Financial report generation

Some of the basic financial reports you’ll need include: 

• Profit and loss (P&L) statements: Detail your restaurant's revenues, costs, and profits over a specific period.
• Balance sheets: Provide a snapshot of your restaurant's assets, liabilities, and equity at a given time.
• Cash flow statements: Track the flow of cash into and out of your business, revealing your liquidity and ability to meet financial obligations.

Data analysis

Once you generate the reports, you’ll want to scrutinize them carefully. Look for trends and insights into your restaurant's performance. Pinpoint areas of strength, identify potential weaknesses, and come up with solutions. Then, monitor the impact of any changes you implement.

Evaluate key performance indicators (KPIs)

Gain a deeper understanding of your restaurant operations by examining specific KPIs, such as:

Food cost percentage

This metric is calculated by dividing the total cost of ingredients used in a specific period (e.g., a week, month, or year) by the total revenue generated during the same period. By monitoring this percentage, you can identify areas where you may be overspending on ingredients, adjust menu prices accordingly, and optimize your menu by focusing on your higher profit margin dishes.

Labor cost percentage

To understand staffing efficiency and profitability, you’ll want to evaluate your labor cost percentage. Calculate this by dividing your total labor costs (including wages, salaries, benefits, and payroll taxes) by your total revenue during a specific period. Your labor cost percentage can help you determine periods when you might be over or understaffed so you can adjust. The goal is to optimize efficiency while maintaining excellent service.

Table turnover rate

The table turnover rate measures how often tables are occupied and cleared during a specific timeframe, such as the lunch rush, dinner service, or the entire day. It’s calculated by dividing the number of customers served by the number of tables available.

Analyzing your table turnover rate can help you identify service bottlenecks, optimize seating arrangements, and implement strategies to encourage faster dining experiences.

Average check size

The average check size represents the average amount of money each customer spends at your restaurant. Calculate this metric by dividing your total revenue by the number of customers served. This valuable KPI provides insights into your customers’ spending habits and can help you refine your pricing strategy, menu, and upselling techniques. 

Types of bookkeeping methods for restaurants

In the restaurant industry, margins are often tight and expenses fluctuate, which makes it all the more important to maintain financial records through accurate bookkeeping. There are two primary methods for keeping books: manual and automated. Let’s explore these two approaches and the pros and cons of each. 

Manual bookkeeping

Manual bookkeeping involves recording financial transactions by hand using physical ledgers or spreadsheets to organize data. Calculators are also essential for accurate calculations.

Automated bookkeeping

Automated bookkeeping utilizes specialized software to streamline the process. Some of the innovative tools and strategies today’s restaurant bookkeepers use include the following: 

• Accounting software: QuickBooks Online is a widely used bookkeeping and accounting software offering specific restaurant features, such as sales tracking, inventory management, and report generation. It can be customized to fit the needs of any restaurant. 
• POS system integration: Sync your point-of-sale (POS) system with your accounting software to automate sales data entry. This seamless integration ensures that all your sales transactions are recorded in real time, making it easier to manage inventory and monitor revenue. 
• Receipt scanning apps: These apps make expense tracking easier by allowing you to capture and digitize receipts with your smartphone. Simply snap a photo and upload the data directly to your software.
• Bank feeds: Linking your restaurant's business bank accounts to your accounting software allows for automatic transaction data import, saving you time and boosting accuracy.

What are the three types of bookkeeping?

There are a few different ways to handle bookkeeping, and the right one depends on how complex your restaurant’s finances are. Here’s a quick breakdown of the most common systems:

• Single-entry bookkeeping is the simplest option. Each transaction is recorded just once—either as income or an expense. It works well for smaller restaurants with limited activity, but it doesn’t offer much in terms of error detection or detailed financial insights.
• Double-entry bookkeeping is a more advanced method that records every transaction twice: once as a debit and once as a credit. This creates a built-in way to catch mistakes and gives you a fuller picture of your finances. If your restaurant is growing or has more moving parts, this is usually the way to go.
• Hybrid bookkeeping combines elements of both. It’s typically used by small-to-midsize restaurants that want to keep things relatively simple but still track certain details with more accuracy.

How often should I update my bookkeeping records?

For restaurants, it’s best to update your bookkeeping records daily, or weekly at the very least. Why? Because with so many transactions—e.g., sales, payroll, supplier invoices, tips—it’s easy for things to slip through the cracks. Staying on top of your books helps you catch mistakes early, avoid surprises, and keep a clear picture of how your business is doing.

How to choose the right accounting software for your restaurant

Follow these steps to help you find a solution that fits your restaurant’s needs, budget, and growth plans.

Step 1: Assess your restaurant’s bookkeeping needs

Consider your current bookkeeping process and pain points. Are you spending too much time on manual data entry? Do you need better inventory tracking? Identifying your needs will help you choose a system that fits your business.

Step 2: Determine your budget

Accounting software comes in all price ranges, from free basic tools to feature-packed solutions with monthly fees. Before committing, take a look at your budget and weigh the costs against the benefits. Figure out what you’re willing to spend and balance that with the time and stress you’ll save by automating tasks.

Step 3: Choose between manual and automated bookkeeping

Once you determine your budget, decide whether you opt for manual or automated bookkeeping. While you might use a manual system when first starting your restaurant, transitioning to automated bookkeeping as your establishment grows offers increased scalability, efficiency, and accuracy to take you to the next level.

Step 4: Look for restaurant-specific features

If you decide to use accounting software, it’s a good idea to look for features to help make bookkeeping easier, including:

• POS integration: Syncs with your point-of-sale system for automatic transaction tracking.
• Inventory management: Helps monitor food costs and reduce waste.
• Payroll processing: Ensures accurate wage, tip, and tax calculations.
• Financial reporting: Generates profit and loss statements, cash flow reports, and more.

Step 5: Compare and use free trials

Compare different platforms based on features, pricing, ease of use, and customer support. Once you’ve narrowed down your options, take advantage of free trials and demos. Most providers offer trial periods where you can test the interface, explore features, and see if the software fits your workflow.

Step 6: Train your team

Once you pick a platform, identify who will be responsible for bookkeeping tasks—whether it’s a manager, bookkeeper, or accountant—and provide them with proper training. Most accounting software providers offer tutorials, webinars, and customer support, so take advantage of these resources. Investing time in training now will prevent costly mistakes later and help your restaurant run more smoothly.

Step 7: Regularly review and adjust

As your restaurant grows and your financial needs evolve, it’s important to regularly review your bookkeeping system to ensure it’s still the right fit. Check in every few months to see if your software is still meeting your needs. If it isn’t, don’t hesitate to adjust settings, explore new features, or even switch to a different platform that better supports your business.

Common bookkeeping challenges in restaurants

The restaurant industry experiences unique bookkeeping challenges due to its fast-paced nature, perishable inventory, and frequent cash transactions. Let’s look at some of the obstacles restaurant owners often face.

Managing inventory

Perishable inventory poses a unique challenge for restaurants, as spoilage and waste can quickly erode profits if not carefully managed. To minimize inventory issues, implement the following:

Point-of-sale (POS) system 

A POS system with integrated inventory management can track real-time stock levels, automate ordering, and generate reports on usage and waste. You’ll know what you need to order and what you don’t.

Regular inventory counts 

Schedule regular physical inventory checks to verify stock levels against your POS system data. By identifying discrepancies, you can avoid overstocking or shortages. This helps keep your customers satisfied and your business from wasting money.

The FIFO method

Adopt the "first in, first out" method to ensure older inventory is used before newer items, reducing the risk of spoilage.

Sales data analysis 

Tracking sales trends allows you to forecast demand so you can adjust your inventory ordering accordingly.

Handling seasonal fluctuations

Restaurants, especially those in tourist destinations or areas with distinct seasons, often experience significant fluctuations in revenue throughout the year. Here are some ways to manage seasonality:

Develop budget flexibility 

Create budgets anticipating and accommodating seasonal sales and expense changes. For example, if you're a beach-side bar, allocate more funds for staffing during peak vacation season and less during slower periods.

Track and analyze sales data

Regularly review sales data from previous years to identify patterns and trends. This information can be invaluable for predicting future fluctuations and making informed decisions.

Build a cash reserve 

Set aside funds during peak season to cover expenses during slower periods. 

Adjust your marketing and promotions

Adapt your marketing efforts to target specific demographics during different seasons. For example, offer off-season specials or discounts to attract locals during slower periods.

Dealing with cash transactions

The restaurant industry's high volume of cash transactions increases the risk of errors, discrepancies, and even theft. 

Implement cash handling procedures

Establish clear guidelines for handling cash, such as requiring multiple employees to count cash drawers and limiting access to cash registers.

Use a POS system

A point-of-sale system can accurately track cash transactions, reducing human error risk and providing detailed reconciliation reports.

Regularly reconcile cash drawers

Compare cash on hand with sales records at the end of each shift to identify any discrepancies.

Keep cash and deposits secure

Store cash in secure locations and make regular deposits to minimize theft risk.

Organizing a high volume of daily transactions

Staying organized can be a challenge as restaurants process a multitude of transactions daily. Below are tips for maintaining recordkeeping efficiency and accuracy:  

Categorize transactions

To simplify tracking and analysis, create detailed categories for both income (e.g., dine-in, takeout, delivery) and expenses (e.g., food, beverage, labor). An accounting software system can do this automatically.

Leverage technology

Use accounting software like QuickBooks or POS systems to streamline data entry, categorization, and reconciliation, saving time and reducing errors.

Reconcile daily

Reconcile daily sales, expenses, and bank deposits to catch mistakes early.

Conduct regular backups

Regularly back up your financial data to prevent loss due to technical issues or accidents.

Properly reporting tips

Tips are a significant portion of income for many restaurant employees. It’s essential to track and report them carefully to ensure employees receive what they earn and the restaurant complies with tax regulations.

Understand the reporting differences

Employees are responsible for tracking and reporting their cash tips to their employers. On the other hand, credit card tips must be collected, allocated, and reported to employees.

Implement a tip reporting system

Provide employees with clear instructions on how to track and report cash tips. For credit card tips, use a POS system or software that automatically tracks the tips and allocates them to employees based on hours worked or sales.

Educate employees

Ensure employees understand their obligation to report all tips accurately. Inform them about the tax implications of tips and how they are reported on their paychecks.

Review and reconcile tip reports

Tip reports must be reviewed regularly for accuracy. Flag any errors and take steps to resolve them. Reconcile tip data with payroll records to ensure proper reporting to tax authorities.

Finding the right bookkeeper for your restaurant

Outsourcing your restaurant's bookkeeping to a professional can save you valuable time and ensure accurate financial management. By entrusting this task to an expert, you free up resources to focus on delivering exceptional dining experiences and growing your business.

When searching for the right bookkeeper, prioritize these qualities:

Experience

Ideally, your bookkeeper should have a proven track record of working with restaurants or businesses in the food service industry.

Qualifications and expertise

Look for bookkeepers with experience in the restaurant sector and relevant certifications or credentials that showcase this expertise.

For example, consider bookkeepers with bachelor's degrees in fields like business and those with certifications from the American Institute of Professional Bookkeepers (AIPB), the National Association of Certified Public Bookkeepers (NACPB), or the Intuit Academy.

Excellent communication skills

You'll want a bookkeeper who can explain financial data clearly and concisely, keeping you informed about your restaurant's financial health.

Signs you’re ready to hire a bookkeeper 

Think you might want to hire a bookkeeper? Consider the following to see if your restaurant could benefit from partnering with a pro. 

Significant growth

A booming business means your records are growing—and so can the responsibilities to manage it all. Hiring a bookkeeper could help keep you on track. 

Mistakes in the book

Even small mistakes can cause major issues during reconciliation. A bookkeeper is meticulous about numbers and details.

Time constraints

A bookkeeper handles the record management tasks, freeing up your time to focus on other priorities.

How to hire a bookkeeper

If you’re ready to hire a bookkeeper, follow these steps so you can find a qualified professional who meets your restaurant’s needs, fits your budget, and helps keep your finances in order.

Step 1: Define your needs

Determine the specific bookkeeping services you require, such as daily transaction recording, payroll processing, financial statement preparation, and tax compliance.

Step 2: Search for candidates

Use online directories, professional networks, or referrals to find potential bookkeepers. If you have QuickBooks, you can add on QuickBooks Live Experts and have a certified virtual bookkeeper handle your books, providing professional support and peace of mind. 

Step 3: Conduct interviews

Interview candidates to assess their experience, qualifications, and communication style. For example, inquire about their experience with payroll for tipped employees.

Step 4: Check references

Contact their references to verify their work history and performance. Check that their experience aligns with the information they provided during the interview.

Step 5: Establish an agreement

Clearly outline the scope of work, fees, and payment terms in a written agreement.

Support your business with a restaurant bookkeeper 

Run your restaurant with peace of mind, knowing that your books are accurate and up-to-date. Consider QuickBooks Live Experts, which pairs you with a dedicated team of certified bookkeepers who handle your books for you and provide expert support. Set yourself up for stress-free bookkeeping and concentrate your efforts on keeping your customers happy so they return again and again and spread the word about your fantastic food and service.