Let’s say you have a great homemade pizza recipe and you want to open a restaurant. You’re a great cook, but you have no business experience. Restaurants are known to be one of the most difficult businesses to start. According to a study done by The Ohio State University, over half of all new restaurants close or change ownership in the first three years of business. Most of these failures can be attributed to the owner’s experience and business knowledge. One business area in particular, restaurateurs struggle with, is accounting.
Your first instinct as a restaurant owner is to take on the accounting yourself. But, without the business and financial background you might make some mistakes that could cause the failure of your restaurant. Here are some of the most common restaurant accounting mistakes that owner’s make.
- Bookkeeping errors: Manually entering row after row of data is time consuming. There’s also a good chance that during all the time spent inserting data, errors occurred. It only takes one movement to enter that 20$ invoice as a 2$ invoice.
- Not reconciling bank and credit cards balances every month: As a restaurant owner, you’re busy with customer service and making sure your menu items are perfect. But, if you don’t take the time to make sure the balances match each month, it will be harder to recognize changes in your cost of sales, trends in revenue, or have a handle on the company’s cash flow.
- Getting behind on vendor invoices: Once your invoices start to pile up they need to be taken care of right away or else your reporting will get outdated and vendor payments will go out late, or worse, your vendors may stop delivering.
4. Not using a 4-week accounting period: A monthly accounting period makes sense for many businesses, but not restaurants. Restaurants make their profits on specific days of the week (like weekends) and months have different numbers of days of the week, so looking at monthly financials will not help you see trends.
There are many errors that could occur doing your own restaurant accounting, especially if you don’t have a financial background. As the owner, you need to make sure that your documents are up to date and they are completed correctly so you don’t have issues later. After all, you rather spend your time perfecting your pizza recipe and interacting with your customers!
This post is brought to you by the fine staff at BookWerks. The restaurant bookkeeping specialist.