As a restaurant owner, you are many things: manager, host, customer service representative, cook, cleaner, inventory manager, cashier, social media manager, bookkeeper, dishwasher and the list goes on and on. With so many things to do and only 24 hours a day to do them all, how do you decide what’s most important, what you need to do yourself, and what you can hire someone else to do?
Often times restaurant owners try to do it all themselves and by doing so, they sacrifice quality, time, and insight, especially when it comes to the state of their business’ finances. And what’s more important than your business’ finances?
Financial reporting: build your restaurant a solid foundation
Financial reporting might sound like a scary concept, but broken down, it’s really just how much money you’re making vs. how much money you’re spending. Doesn’t every business want to know that? Especially restaurant owners, given the small margins that restaurants operate in.
Yet, many restaurants have little insight into their finances. As long as they have cash in the bank account, they think things are okay. While money in the bank does provide some comfort, it won’t help you determine whether you can afford to hire that extra chef or open a third location, or whether you’re spending too much on food costs in relation to your menu prices. We’re guessing the 17 spreadsheets you manage and the incredible amount of information you store in your head also don’t give you such clarity. What can provide you with said clarity is an accounting platform and people to help you manage it.
Building a solid foundation for your restaurant’s finances is essential no matter what, but if you have dreams of expanding into delivery, adding locations, or adding product lines like your incredible salsa, salad dressing or dry rub, it’s absolutely imperative.
Get out of Excel and onto an accounting platform: 5 common myths, busted!
The number one recommendation we make to restaurants is to get set up on an accounting platform. However, we hear a lot of objections about how accounting platforms won’t meet their needs. Here are a few of the common misconceptions we hear:
1. Accounting platforms are inflexible: I don’t want to have to abide by their categorization
You can set accounting platforms up with whatever account categories you choose. Seriously, anything. If you’re a pizza parlor and you want to separate out dough as a specific cost, you can. If you want to add subcategories of flour and spices costs to your dough, that is also doable (although not recommended). Accounting platforms are used by so many different industries and types of companies, they have to be flexible or no one would use them!
2. I won’t be able to organize my restaurant’s information in the way I want to.
You can organize the information in whatever way you like. For example, we have one restaurant client with three locations who wanted to see what each individual restaurant’s Profit & Loss, as well as the P&L for the three restaurants as a whole group. After the initial setup, all this detail can be viewed in the accounting platform with a few clicks of a button. With this level of visibility, the owner is able to make decisions either on the individual restaurant level or for the group as a whole. For example, if the owner is considering a big advertising campaign for the newest location, he might decide to spend the money even if it pushes that location into the red, as long as the restaurants as a group are still profitable.
3. My restaurant is unique and complicated: it will take too much time for me to set up.
See blog post intro above… we know you have so much on your plate, but there are certain things–like setting up an accounting platform–that you don’t have to do yourself. And, you can be as involved or uninvolved in that process as you like. Most of our clients provide us access to their accounts and step back to let our bookkeepers and accountants do their magic. Some like to get in the weeds and dictate account categories.
Whichever approach you choose, the setup time is nothing compared to the time you’ll save through the platform’s ability to automate. For example, say you spend $100 every month on flour to make pizza dough and you pay for it with your credit card. Instead of manually needing to add and classify that expense every month, QuickBooks will learn from the first time you classified that transaction and continue to classify it in the same way unless you tell it not to. Now multiply that by the multiple dozens of transactions you have every month and the efficiency becomes apparent.
4. I don’t know which accounting platform to choose so I just keep everything in Excel.
There are several platforms out there, including ones that do a lot more than just your finances. Some, like Restaurant 365, can do everything from accounting, catering, inventory, and payroll but will run you $299 per month with a $2999 setup fee. Sage 50 has a basic version, which focuses primarily on organizing finances and managing cash flow for $44 per month.
Most of our clients use QuickBooks or Xero. Both cost about $30 per month for the basic version. If you’re just getting started, we recommend QuickBooks, as it’s more intuitive, has slightly better functionality, is easier to master, is used by almost all bookkeepers and accountants, and links to pretty much anything you would need it to link to. You can always get more complicated systems as your business grows, but first, focus on the basics.
5. Accounting platforms are too expensive.
For $30 a month, you can have basic visibility into your how your business is doing. Don’t you think that’s worth the price of a single veal bolognese?
Now that you have data, maintain and review it
So, you’ve decided to get up and running on QuickBooks. The worst thing you can do is get all your information into the platform and never touch it again. These platforms are meant to be living, breathing snapshots of your business, but the only way the data will be accurate and actionable is if it is continually managed… and you do not need to be the one managing it.
Hiring a good bookkeeper to classify your transactions and help reconcile your accounts will enable you to confidently see what’s happening in your business and focus on what really matters to you and your restaurant, whether that’s cooking, talking to your customers, launching a product line, or figuring out how to scale nationally.
Paro is proud to serve as the outsourced finance department for several restaurants and to participate in this week’s National Restaurant Association conference at McCormick Place! We also partner with Chicago’s food & beverage incubator, The Hatchery, to offer financial workshops and member discounts.