July 14, 2024
restaurant industry

Exploring The Unique Challenges of Restaurant Accounting

Restaurants in Oakland face multiple challenges as a business. Inventory management, customer management, demand forecasting, etc., a restaurant has many things to take care of. As demand increases, so does the need to scale up. 

The best way for a restaurant to manage its increased needs is to have an end-to-end management system. Other than the demand and inventory-related challenges, restaurants are also burdened with the task of hiring the right staff. 

In between so many tasks, accounting can become overwhelming. This is where a restaurant CPA in Oakland can help you. This article will discuss the various unique challenges of restaurant accounting and how you can solve them. 

The need for effective accounting in therestaurant industry

Before diving into the unique challenges of restaurant accounting, it is crucial to understand why a restaurant needs effective accounting. 

Restaurant accounting involves the collection, interpretation, and analysis of financial information. This includes revenue, cash flow, inventory, and income statements. It allows all restaurant owners and managers to document financial transactions and determine how well their business is performing. 

An accountant who is specialized to work for a restaurant can be a valuable asset to your business. They help you manage your cash more efficiently, balance your books, predict profits and losses, plan for the future, etc. 

As a business owner in Oakland, California, it is important that you are aware of your business’s financial performance. More than 50% of businesses fail within five years of their launch due to a lack of understanding of the finances. 

Unique challenges of restaurant accounting 

Do you want to know the secret of a thriving restaurant business? Knowing the challenges and mitigating them consistently. 

Almost all businesses have similar accounting problems. However, every industry has certain unique problems that must be addressed to beat their competitors. 

Here are some pressing restaurant accounting challenges and how to prevent them. 

Varying revenue streams

When it comes to a restaurant, there is not just one revenue stream. Sometimes, you may have customers dining in, and other times, they may get takeout or order online. Moreover, there are sales tax and tips to account for. If you also provide catering services, you must also account for revenue coming from that area. 

Unpredictable revenue streams and seasonal fluctuations can make it difficult to maintain a consistent cash flow. This can later lead to problems in paying the staff on time and other issues. 

SOLUTION: Implement a system that integrates all revenues into one platform. 

Inventory management

Efficient restaurant accounting and inventory management are the backbone of a successful business. Restaurants must buy raw materials as inventory before they convert them into a product they sell to the customers. Managing inventory allows you to record and manage the value of goods sold and minimize them. 

It is important for restaurants to count their inventory regularly– daily, weekly, and monthly. There is always the risk of ingredients rotting, expiring, or getting wasted. 

SOLUTION: Use inventory management software that offers real-time tracking. 

Labor cost management

The restaurant labor costs include the total costs you spend on your labor, including salaried and hourly workers, as well as taxes and employee benefits. The amount you spend on labor costs affects your prime cost, which is the total cost of goods sold and total labor costs. Bonuses, payroll taxes, overtime, etc., should also be accounted for. 

Overspending on labor or understaffing can pose a number of problems for your business. 

SOLUTION: Calculate labor cost percentage and aim for the costs to be around 30% of your gross revenue. 

Take charge of your finances!

Running a restaurant is not a piece of cake. You will encounter various challenges down the road. However, keeping up with the current trends and having a professional by your side can be highly beneficial. Hire a restaurant accountant today!