A Beginner's Guide to Bookkeeping for Small Restaurants

When it comes to owning a small restaurant, it takes more than simply creating delicious food to ensure your business succeeds. What about the backend side of things? You know, the business admin and bookkeeping? Even the smallest of restaurants need to keep an eye on their accounts to effectively manage the day-to-day finances of their business and track any profits they’re making while knowing where to make any future improvements.

Here are the first steps you should take to get you started.

Consider how you will keep your records

Depending on your budget, there are various ways that you can keep your books, ranging from setting up your own spreadsheet to hiring a professional team of accountants who provide restaurant bookkeeping services and can do all of the hard work for you.

Know what bookkeeping tracks

In short, if you’re doing your own bookkeeping, you need to track each of these things:

• Sales: How much money is going into your till

• Cost of food and supplies: How much money you’re spending on food for your menu

• Labour: How much money you’re spending on staff labor

• Inventory value: The monetary value of the stock you are holding at all times

• Fixed costs: These are usually regular outgoings, such as rent and waste disposal

• One-off costs: Anything unexpected that you’ve spent money on 

Accounting ratios

To work out where there is room for improvement at your restaurant, you should create monthly profit and loss statements using the information above. You can then use the following formulae to determine future business strategies:

• Gross profit = sales – cost of goods sold

You can use this figure to create sales targets

• Gross profit margin = (gross profit / revenue) x 100

You can use this figure to help set prices on your menu

• Operating profit = gross profit – operating expenses (including labor, fixed costs, one-off costs)

This is the amount left over after all operating costs are taken from gross profit

• Net profit = operating profit – taxes and other expenses

Ultimately, this is the figure you need to focus on to determine whether your restaurant is making money or not.

Tips for small restaurant bookkeeping

It can seem pretty overwhelming at first, so here are our top tips to bookkeep efficiently:

• Keep track of every payment, including all of the dates they were made

• File bank statements and invoices in order, so you have them on record, and they are easy to locate when necessary

• Be strict with creating monthly profit and loss statements

• Consider hiring a company to do your bookkeeping for you, which will, in turn, free up your time, so you can concentrate on growing your restaurant business

It’s perfectly understandable to want a team of qualified accountants to look after your books for you, especially if you’re a chef with a passion for delivering mouth-watering meals or a restaurateur with a desire to mingle with diners front-of-house. Of course, hiring professional bookkeepers also reduces the risk of error when it comes to your financial recordings. 

If you’re a small restaurant owner, then get in touch with PrixFixe. Our friendly team of experts provide accounting and bookkeeping services, specifically for businesses within the hospitality industry. 

Options for Restaurant Pandemic Assistance

A lot of businesses got stiffed on the Restaurant Revitalization Fund (RRF) Grants. After the program closed on May 3rd, less than 10 days after the launch of the program, the Small Business Administration ended the program on Jul 3, 2021, claiming they had released the full $27.6B the organization was allocated. More recently, the list of recipients was released, sending many independent restaurant owners into a fury, as the receipts on the top of the list were large franchises of Dunkin Donuts, Denny’s and Panera, rather than actual independent restaurants. In the end, 5% of the RRF receipts, ended up with 40% of the money.

That leaves many small business owners out of the pool. A staggering $60B in applications is left unfunded. That begs the question, what options are left for those that weren’t lucky enough to receive RRF money?

EMPLOYER RETENTION TAX CREDITS (ERTC)

The ERTC is the red-headed stepchild of pandemic relief. The program was quickly shoved in the corner in favor of the Paycheck Protection Program. However, now that time has passed and the PPP has been fully utilized, business owners and accountants are turning their attention to this program. It works in tandem with the PPP (but you can’t use the same money on both programs, effectively double-dipping), but you can earn a credit of up to 70% of wages per quarter, with a limit of $10k per employee per quarter for 2021.

Do I qualify for ERTC?

This setup is similar to the PPP programs.

1. If you have less than 500 full-time employees

2. And:

   1. Operations either fully or partially suspended due to orders from a governmental authority due to COVID-19, OR; 

   2. The business experienced a significant decline (50%) in gross receipts when comparing either the calendar quarter or the prior quarter to the corresponding quarter in 2019.  

Well, then you’re in luck, you’re eligible for the ERTC.

How do I apply?

Reach out to your accountant. This is an absolutely BRUTAL process to calculate these numbers, and it's absolutely not something you should do only on your own. Your accountant should be able to help with this, but be patient, as they have a lot of work on their plate already. Ask them honestly if they are going to be able to handle it, and if not, reach out to other accountants to get it done.

The Economic Impact Disaster Loan (EIDL)

There is a staggering $30B remaining in the Economic Impact Disaster Loan. Qualified businesses (which is basically anyone who was open prior to 2020) can take advantage of this program. While the other options have been either grants or tax credits, this program comes in the form of a loan through the Small Business Administration. Applicants can qualify for up to a $500k loan at 3.75% for 30 years. In the world of commercial loans, this is a rock bottom rate and a great term. There are some strings attached to this loan (can’t be used for new equipment or expansion of the business), but, if you’re willing to take on some debt, you might as well take advantage of this cheap money.

The calculation for the loan amount is your 2019 Gross Profit (Revenue - Cost of Goods Sold). 

You can apply for this loan here, and if you have all the information, it takes about 20 minutes. 

But what about the Restaurant Revitalization Fund?

If you’re still holding out for the RRF, don’t. Simply put, the political capital behind replenishing the fund is few and far between. The Independent Restaurant Coalition is putting pressure on Capitol Hill, but it doesn’t seem like politicians are interested in replenishing the fund now that businesses are opening back up. There are some clever bills out there, looking to reallocate unused aid, such as the ENTRÉE Act, but there isn’t much news on the progress of the bill. In short, plan for the worst, and hope for the best.

Also, call your state representative and demand support.