While recent studies have shown that the restaurant industry has grown in the past few years, the fact remains that about 17 percent close within their first year of business. There are, of course, any number of reasons why a new restaurant may be forced to shut its doors, but certainly one of the most vital elements of running a successful company is keeping the books. Choosing the right accounting software to help you do that can be overwhelming, to say the least.
There are a ton of accounting systems out there, each with myriad features and applications available for customization. That's why it's important to know the basics about restaurant accounting software before you begin your search for the system that best fits your needs, whether you're tracking payments, payroll or produce.
Here's what we'll cover:
Running a restaurant means keeping up with a lot of things, not the least of which is expenses. Fortunately, a good accounting system specifically geared toward your industry can alleviate much of this work by managing every aspect of your business's finances. Most restaurant-specific accounting systems offer the following modules:
Essentially, restaurant accounting software will offer the same modules as general accounting systems, but the functionality will be more directly tailored to restaurant management. Most restaurant bookkeeping software offers integration with other systems, such as point of sale (POS) and tax management or expense tracking and payroll.
Payroll overview in Xero
|Expense tracking||Tracks every dollar spent—from the purchase of ingredients for recipes to the cost of keeping the lights on. This function ensures business owners or managers won't miss anything, so that the books will always be balanced at the end of the quarter and there won't be any surprises when tax season arrives.|
|Inventory tracking||Ensures businesses comply with the U.S. Generally Accepted Accounting Practices (GAAP) and tracks what a business spends on ingredients or supplies in order to provide a comprehensive report of where money goes. Inventory tracking software is especially important for restaurants because it can save money by preventing over-ordering and help chefs plan menus according to the availability of ingredients.|
|POS integration||When integrated with restaurant-specific software, POS systems help servers calculate bills with state tax, incorporate tips, adjust inventory and print receipts. Some systems work with tax reporting modules to automatically produce filled-out government documents.|
|Payroll processing||Some systems offer their own payroll tracking capabilities, while others are designed to work with stand-alone payroll software. Either way, having a reliable system in place allows restaurant managers to keep track of employee hours, automatically calculate payments and cut checks, cut down on human error and generate employee tax documents such as 1099s or W-4s.|
|Reporting tools||Prevents managers or restaurant owners from having to manually code data in order to see where money is going. Reporting tools can provide specific sets of information to provide as narrow or broad a view of a business's finances as is necessary.|
|Banking integration||Some systems allow businesses to link their bank accounts directly to the software to enable one-click payments and faster deposit times. This can save a great deal of time by taking over the menial task of manually recording every purchase or sale.|
|Profit/loss statement||Keeps a running tab on the real balance of funds throughout a fiscal quarter, and produces reports whenever managers need them.|
The first step in determining which restaurant accounting system to invest in for your business is to figure out what kind of buyer you are. The majority of companies fall under one of the following three categories:
Small businesses looking to grow. Think of this as the local restaurant that recently made the decision to expand—be it through extending hours and bringing on more servers to cover those shifts or opening a second location. You may already have an accounting system in place, but you're quickly finding that growing means keeping more plates in the air (pun intended), and investing in a more capable software system is the best way to manage that.
Best-of-breed buyers. Restaurants that fall into this category are likely looking for software that offers a specific feature, such as payroll or inventory. Functionality will definitely be the most important consideration for this buyer, but integration—for example, an accounting system that can be linked to a tax management system in order to fully automate paperwork and IRS reporting, should not be overlooked as it can mean the difference between hours of manual data input and automatic data sharing. Beyond that, software that can integrate with other solutions can make things easier down the road when these buyers get ready to grow.
Enterprise or multilocation buyers. This bucket holds those eateries that are already very well-established; think multiple locations and availability in many different regions. These businesses are already operating on a relatively large scale, but may be prepared to upgrade accounting software to a more robust enterprise resource planning suites (ERP) that will offer fully integrated functionality. ERP systems afford large entities the ability to consolidate multiple companies and operate at an international level.
When it comes to cost, businesses typically spend more upfront on perpetual licenses. This price tag can vary depending on things such as service tier, level of customer support and any update or maintenance fees. Cloud-based software, however, is usually priced per month according to the number of users or employees and the number of applications required.
Over time, the costs for each type of deployment will converge, but this should still be a consideration for restaurants that might not have as much room in their software budget at first.
Software-as-a-Service (SaaS). SaaS is a subscription-based software deployment and housing model. With this type of system, users log into a web browser in order to access the software. SaaS offers much lower upfront costs and faster implementation, and it is quickly becoming commonplace in markets such as retail and human resources.
Mobile accounting. As we come to rely more and more heavily on our cell phones and mobile devices to get stuff done, accounting vendors (and other market-specific software, for that matter) are now offering mobile integrations. This allows you to access cloud-based software on your iPhone and do things such as snapping a photo of a receipt and uploading it, then watching the software automatically incorporate that transaction information into your accounts.
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