A restaurant has unique financial burdens and many new-comers to the industry make the mistake of only focussing on marketing and customer services without meticulous bookkeeping. Restaurant owners, in particular, benefit from consulting with tax, payroll and accounting experts regarding the financial side of starting up, owning and managing a restaurant.
We have looked at the top financial and accounting mistakes that restaurant owners make and things that they should be doing to ensure financial success and strongly recommend that should you plan on opening a restaurant to seek accounting and financial advice and assistance from experts.
Non-existent or Poorly Managed Accounting System
Managing a restaurant without a proper bookkeeping system is a fatal mistake. The first thing any investor will ask to see is the bookkeeping system. You at least need to have a proper accounting package. It is recommended to invest in a proper Point-of-Sale (POS) system that will enable you to get daily, weekly and monthly reports on sales, discounts, payouts, orders, commissions and more. Incorrect posting of financial transactions is a sure sign of a restaurant going downhill. You cannot play the guessing game in an industry with cut-throat margins. The success of a restaurant is directly linked to how well the accounting is done. Bookkeeping must be done according to best practices and must meet industry standards.
Not Having the Support of a Professional Accountant
With so many hidden costs to manage in addition to payroll and taxes, the restaurant owner simply will not be able to manage the books alone. Running the business requires a hands-on approach, even with several managers. This means having to divide attention between front of house activities, dealing with safety regulations, complying with municipal laws, managing the stock, bar and kitchen, dealing with employees and ensure proper marketing and events. It is impossible to handle all the above and the books without compromising somewhere. This is why it is so important to outsource functions such as payroll, accounting, bookkeeping and taxes to an accounting and tax company.
Core Operation Expenses Poorly Managed in Relation to Sales
With stock purchases and manpower costs accounting for over 60% of the costs of running a restaurant, it is an industry that requires meticulous control over expenses. Cutting on quality of products is not the answer. Managing waste and where you buy make more sense. Insurance, energy and rental costs are rather stable, but you need to manage your labour, marketing, and stock costs to ensure higher profits. Planning of stock purchases, control over theft and wastage, and correct menu planning are aspects that can help you streamline costs and ensure profitability. Note that it is important to pay the minimum wages and to ensure correct submission of taxes as to avoid additional costs associated with penalties. Here too restaurant owners benefit tremendously from accounting and financial advice from experts.
Compromising on Location for the Sake of Saving on Rent
Location, location, location! That is the motto of the real estate world and with good reason. Though you will want to negotiate a favourable lease to reduce this monthly expense, selecting a location based purely on the affordability of the premises is a mistake. The cost of rent you save may not be enough and you will end up having to spend extra money on marketing and specials to get the traffic if the restaurant has a poor location.
Not Counting and Costing the Stock Inventory
Your purchases should not be confused with the usage. Your kitchen staff may steal food stuffs, the bar tenders may over pour and waiters may not charge customers. You need to count and cost the food and beverage inventory at specific intervals to ensure consistency in sales and purchases. Also keep price hikes in mind. Your beer inventory should be counted and cost calculated once every seven days, wines and liquor every two weeks.
Not Getting Daily Reports
Not checking the daily sales, purchases, payouts and commissions is a mistake. The only way to manage problems is to immediately act to avoid losses and future problems.
Don’t try to be the accountant, owner, manager, bartender, stock controller and marketer all at once. Get financial and accounting advice to help you avoid costly mistakes and outsource bookkeeping to minimise the risk of fraud and incorrect accounting.