The restaurant industry’s margins are slim, so success strongly hinges on sound financial management.
The demand for specialized accounting services has never been more pronounced than where we see it today.
Restaurant owners have recognized the necessity of partnering with accountants proficient in both general financial practices and the intricacies of restaurant operations.
These specialized accountants aren’t just number-crunchers, but seasoned professionals who have walked the restaurant floors themselves.
They draw firsthand from their own experience to educate and empower restaurant owners with tailored financial strategies, industry-specific reporting, and insightful financial analysis.
In this blog, we delve into the vital role that restaurant-specific accountants play in guiding restaurateurs toward financial success in a dynamic and competitive landscape.
Top 3 Reasons Why Using Hospitality-specific Accountants is a Must
1. The benefit of receiving weekly financial packages
Receiving a weekly financial package ensures that a restaurant operator can keep their finger on the financial pulse of their operation weekly and make any necessary adjustments in a timely and accurate manner. Those who look at a bi-weekly or even monthly P&L are already at a disadvantage – it’s akin to reading the newspaper from a few weeks ago, today – the headlines are no longer relevant. Hospitality-specific accountants ensure that a restaurant operator reviews the correct financial statements regularly to provide operational insights into which restaurants can take action.
A weekly manager meeting to review the P&L will assist in maintaining profitability. It’s a best practice to review the following areas: Sales, COGS, Labor, Direct Operating Costs, Advertising, General Admin, R&M, Occupancy (other factors in the P&L include Retail, Bonuses, Owner Related Expenses, and Amortization & Depreciation).
Bonus: Daily/Weekly Labor Reporting rectifies over/under staffing before it becomes too costly, enabling operators to create immediate scheduling fixes
- Back Office’s SLA Report (Sales and Labor Analysis) provides key metrics daily to better understand how an operation is currently performing in relation to Sales and Labor, compared to the numbers they had forecasted in those areas.
Weekly Balance Sheet Review:
Reviewing the Balance Sheet weekly means looking at the operation’s Assets, Liabilities, and Equity. These reviews help an operator to make educated, profitable decisions based on their current operational position.
Bonus: Reviewing Credit Card Tips Payable is crucial for a true cash position each week (these are under Liabilities). CC Tips Payable are tips that an operator collects throughout the week and pays out to their employees on their paychecks. When paying out Credit Card tips on checks, having a weekly pay frequency is critical to ensuring proper cash flow for both the employees and the restaurant. Reviewing CC Tips Payable weekly ensures an operator will catch any discrepancies with over or underpaying their staff.
Weekly Cash Flow Statement:
The Cash Flow Statement demonstrates the effect that cash inflows and cash outflows have on the cash position for the business; it represents a combination of the following:
- Activities resulting from the daily operations represented on the P&L
- Overall activities and health of the business as represented on the Balance Sheet
2. The value of operational education from a Period End Review Process
A Period End Review combs through the Balance Sheet and the P&L to compare an operation’s current performance to industry standards, as well as like-concepts. This type of review enables restaurants to determine where they can improve and grow in an immediate sense.
Hospitality-specific accountants will showcase that there are five main areas where restaurants should focus at the close of a period and work with an operator to review each area successfully:
- COGS: Cost of Goods – Food costs and pour costs
- LABOR: The employees that are working in the FOH, the BOH, or any other positions on the payroll
- EXPENSES: Any items below the line (items on the income statement that do not directly impact profit)
- ANALYSIS: Focusing on any particular category and taking a deeper dive into each of those accounts (COGS, Balance Sheet, etc.)
- RECONCILIATION: Determining where items were coded, what items need further review, and what adjustments need to be made
3. Expertise and accurate reporting with budgeting and forecasting
Hospitality-specific accountants will help guide the creation of a budget dependent upon a restaurant’s specific needs and help forecast for the future. Additionally, by utilizing historical metrics, restaurant accountants will assist in improving the precision of an operator’s budgeting and forecasting. This will increase an operation’s ability to take care of their guest, their team members, and manage their cash flow through the following ways:
- Allows the opportunity to adjust for unforeseen circumstances
- Assists in maintaining consistent profitability
- Affords operators the ability to be proactive as opposed to reactive
- Allows flexibility in staff training
- Allows operators to plan for rewarding teams with bonuses and wage increases
- Affords operators the ability to provide the proper tools for their team’s success
- Assists in understanding potential profit and how it relates to your debt servicing