5 Things to Know Before Working with a Restaurant Accountant

job of a restaurant owner restaurant accounting
5 Things to Know Before Working with a Restaurant Accountant

Why is it that as business owners and restaurant owners that it sometimes feels like accountants show us smoke and mirrors? A lot of restaurant owners don't know what the heck accountants are saying to us. They feel beholden to them but don't know what's going on. In this video I'm going to identify five things you need to understand before working with a restaurant accountant to avoid creating an accounting nightmare.

When I say an accounting nightmare, I mean when you don't have your numbers, or when you get your numbers, you don't know what they mean, or when you get your numbers, they're late. The next thing you know you're paying too much in taxes or too little in taxes, or you get a letter from the IRS, and you find yourself working with an accountant to amend return after return.  

So let me start off with saying that probably 95% of all restaurant owners who are trying to avoid losing money think they're the ones who should be doing their books. I'm going to tell you for 95% of you, you should NOT be the ones doing your own accounting. There are about 5% of you that are just numbers, numbers, numbers, numbers people, and you enjoy it. As long as you're working on your business strategically, I'm okay with it. But for the majority of you, you sit there in front of your computers, and you battle with accounting, and you don't know what to do, and you spend hours on YouTube or calling your accountant just to do a simple journal entry.

Why is that a good use of your time?

You shouldn't be doing your own accounting. You should be working on budgets, marketing, developing your managers, holding them accountable, leading your business forward and leading your team. You need to be working strategically on your business. I’m willing to bet the money you think you’re saving by doing your own QuickBooks entries is costing you thousands upon thousands of dollars in lost opportunities because you're not leading your business.

With that said all accountants are not created equal and even good accountants can set you back a little bit. To help you get on the best footing with an accountant, here are five things you need to understand before working with a restaurant account.

  1. Set your chart of accounts Your chart of accounts is a listing of all the items that are in your profit and loss statement. They're buckets, if you will, where you put expenses and sales. The problem is many accountants grab a default chart of accounts from say QuickBooks for your restaurant and it's not good for you. Or maybe you know you've created your own chart of accounts, and you don't understand the numbers from your accountant. How do you know if you have a bad chart of accounts? If I were to look at your P&L and ask you to tell me what this number means or what goes into it, and you don’t know, or you have to ask your accountant, that's no good. There is no wrong chart of accounts, so the chart of accounts your CPA or a bookkeeper has provided you, or the one you created is not wrong. They all pay taxes, but can they help you run your business? To make it more productive for you, separate sales by category – food, bottle beer, draft beer, wine, liquor. Separate restaurant positions rather than basic categories such as front of house, back of house and salaried or hourly employees. When it comes to your operating expenses, I'm not as concerned, but you need to tell your accountant what goes in that bucket. I don't care if your chart of accounts says “XYZ,” and you know gloves are in there, you need to make sure that when you look at your P&L, you know every number that goes in there.
  2. Understand that it's garbage in, garbage out. It's extremely important that you provide your accountant with the right information in a timely manner. It's critical things like inventories and payrolls are broken down by category. Gross sales by category, cash in, credit cards in, write all the deposits and much more. You cannot blame your accountant for giving you bad numbers if you give them bad information. It is up to you to ensure you are giving them what they need in a timely manner.
  3. Your bookkeeper and/or your CPA are not your business advisors. They may understand the restaurant business a little bit, but how many times have you talked to your CPA or your bookkeeper and they tell you your food cost is high? They’re basing this comment off a benchmark and who said those benchmarks are what you should follow for your restaurant? Your food cost percentage is based on your location, style of service, price point, quality of product, minimum wage and core values. You should not be taking business advice. What you should be taking is tax advice.
  4. It costs you more money to do your own accounting versus hiring an accountant. You may sit there and count that you’re saving $1,500 or $1,800 a month doing your own accounting, but I'll guarantee you have been losing thousands of dollars on a weekly basis in missed labor opportunities. You've been losing hundreds if not thousands of dollars on a weekly basis when your food cost is out of control because you're not managing your restaurant or training your people and holding them accountable. That $1,800 – or less – could be making you thousands upon thousands of dollars because now you're using those numbers and putting systems in place to achieve numbers you need to hit your key performance indicators (KPIs) and make the money you deserve. But if you’re stuck doing journal entries, how would you know?
  5. Just because you hire an accountant doesn't mean you're not involved in the process. Internally, one of my member mentors is an off-the-charts-numbers person. When it comes to leadership styles, he and I geek out on budgets and all the numbers and all the things that go into it. We have consistent conversations about how the members we work with hand over their accounting to an accountant and then just assume it’s all being done correctly. You may have an accountant, but you cannot separate yourself from the process. You have to double check that those buckets of information in the chart of accounts looks right on a weekly and monthly basis. It is your responsibility to manage the process. You will still be involved with your numbers, even though you have an external accountant or bookkeeper.

If you can understand these five things that I just went over and how important they are to you, you're going to be on your way to having great data to make great decisions and ultimately lead your restaurant to success.

Be sure to visit my YouTube channel for more helpful restaurant management video tips.

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