Restaurant Bookkeeping: A Comprehensive Guide for Managers

Effective restaurant bookkeeping is essential if you want to ensure your operation’s success. With a comprehensive system in place, you’ll be better positioned to make informed decisions, control costs, and maximize profits.

In this article, we discuss how to get started with restaurant bookkeeping and the terms and practices that make it work.

How to get started with restaurant bookkeeping
Terms to know
Restaurant bookkeeping best practices

How to get started with restaurant bookkeeping

Learn the terms and metrics

Restaurant bookkeeping — and accounting in general — can sometimes feel like trying to speak a new language.

You can make the process easier by learning a bit about the fundamental terms and metrics that are relevant to the restaurant business before trying to put them into practice.

For example, do you know what cost of goods sold, gross profit, and prime cost mean? Do you know how to calculate them? Committing this information to memory can help streamline the bookkeeping process and make it feel a little more accessible.

Get help from an accountant

One of the best things you can do to ensure that your bookkeeping is accurate is to get help from an accountant.

Whether you hire someone to do the books for you or learn from them how to do the job yourself, consulting with a qualified accountant can help you gain a deeper understanding of the important numbers and financial processes that affect your restaurant.

Use reliable software

Regardless of whether you hire a full– or part-time accountant to manage the operation’s finances, it’s important to use reliable restaurant accounting software to keep track of your income and expenses.

In most cases, software can help you save time, improve accuracy, gain real-time insights, and streamline reporting for a more comprehensive accounting process.

Terms to know

Cost of goods sold

Cost of goods sold (or COGS) refers to the amount it costs your restaurant to produce an item on the menu and can be figured using the following formula:

Cost Of Goods Sold = Beginning Inventory + (Purchased Inventory – Ending Inventory)

As a general rule, your cost of goods sold should make up about one-third of your restaurant’s total expenses.

Gross profit and gross profit margin

Gross profit is the money your restaurant brings in after subtracting the cost of goods sold and is calculated with the following formula:

Gross Profit = Total Revenue – Cost Of Goods Sold

Gross profit margin is a percentage that essentially tells you how much your restaurant gets to keep from every dollar earned.

To calculate gross profit margin, use this formula:

Gross Profit Margin = (Gross Profit / Total Revenue) / 100

Ideally, you want the gross profit margin to be at least 70% — meaning the restaurant keeps $0.70 for every dollar that comes in.

Table turnover rate

Table turnover rate refers to the number of times you cycle customers through your tables. It’s calculated using the following formula:

Table Turnover Rate = Parties Served / Number Of Tables

This variable is an indicator of total revenue — the more people you can move through, the more money you can make.

If you find that your table turnover rate is low, look for ways to increase efficiency in the kitchen, move slow customers through their service, or even extend operating hours.

Revenue per available seat hour

Revenue per available seat hour (or RevPASH for short) can help you determine whether the seating space in your building is arranged in a way that generates maximum profit.

To calculate RevPASH, use this formula:

Revenue Per Available Seat Hour = Total Revenue / (Available Seats x Total Operating Hours)

With this number in hand, you can start to think about ways to get more people into your restaurant (e.g., add another table or use smaller and more stools at the bar) in order to boost revenue.

Labor cost percentage

Labor cost percentage can help you estimate how much your business spends paying employees — costs such as salaries, benefits, insurance, overtime, and payroll taxes — compared to the money it brings in.

Here’s the formula:

Labor Cost Percentage = (Total Labor Cost / Total Revenue) x 100

To make this calculation work, pick a time period (e.g., one day, one week, one month), figure out how much your restaurant spent on labor, figure out how much money it brought in, and then plug those numbers into the equation.

For more insight into how labor costs impact your business, check out these articles from the Sling blog:

Prime cost

Prime cost is an extremely important bookkeeping metric because it gives you insight into the two largest expenses you have direct control over: labor and food.

Calculate prime cost with this formula:

Prime Cost = Cost Of Goods Sold + Total Labor Costs

Prime cost can then be used to calculate a benchmark number: prime cost as a percentage of sales.

With your prime cost number in hand, divide it by your total sales and then multiply by 100. This will show you what percentage of your total sales go into purchasing food and paying your staff. Ideally, you want it to be 60% or less.

For more information on prime cost and how it can benefit your restaurant, check out this article from the Sling blog: Prime Cost: Why It Matters For Your Restaurant And How To Calculate It.

Restaurant bookkeeping best practices

Categorize income and expenses

To keep everything organized in your restaurant bookkeeping, create categories for all of your income and expenses.

Common categories include:

Food sales
Beverage sales
Food costs
Rent
Payroll
Supplies
Labor

When money comes in or goes out, enter the amount in your accounting software and tag it or mark it so that you can easily recognize which category it belongs in.

Implement double-entry restaurant bookkeeping

In double-entry restaurant bookkeeping, every financial transaction in your business affects two accounts: a debit account and a credit account.

Think of the debit account as the source of the funds and the credit account as the destination of the funds. A very simple example of a double-entry bookkeeping entry would be:

Debit: $500 from your bank (that could be cash, a check, or a credit card payment)
Credit: $500 to Supplier A

These entries are recorded in the same ledger (where the dollar amounts should match) and serve to ensure that your books are always balanced.

Talk to an accountant to learn more about double-entry bookkeeping and how it can benefit your restaurant.

Record transactions every day

Regardless of the amount of money that comes in or goes out, be sure to record those transactions every day.

This includes things like:

Daily sales
Inventory purchases
Bill payments
Employee payroll

Entering your numbers every day can help you stay ahead of all the data that will come in the next day and make your restaurant accounting easier.

Track accounts payable and receivable

One of the most important activities in restaurant bookkeeping is keeping track of accounts payable and accounts receivable.

Your accounts payable is the money you owe to vendors, while your accounts receivable is the money others owe to you.

Reconcile account statements

At least once a month — typically when you receive a bank statement — take the time to reconcile your accounts so that your records are accurate and match what the bank is telling you.

Simplify restaurant bookkeeping with Sling

One of the largest and most impactful variables in restaurant bookkeeping is labor costs. Without proper tracking and control, these costs can have a dramatic effect on your business’s bottom line.

That’s where Sling comes in.

While Sling is not a replacement for a qualified accountant or accounting software, it can help restaurant managers and owners monitor and manage labor costs more effectively with tools such as:

Powerful scheduling that allows you to see the cost of a shift as you go
Overtime, double-booking, and time off notifications
Built-in time clock
Task management
Geofencing
Communication
Integrations with other common restaurant software

Sling is an incredibly powerful employee management system that can help you organize and optimize team schedules and activities so that labor cost overruns become a thing of the past and restaurant bookkeeping gets easier.

To get started for free and to find out more about how Sling’s powerful scheduling, timekeeping, and task management features can transform your organization, your workflow, and your restaurant bookkeeping, visit GetSling.com today.

This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for specific advice.

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