Although restaurants are fun businesses, they are still businesses. This means that managers and owners need to spend time analyzing inventory levels, cash flows, profits, and losses. In order to analyze these items, the actual data needs to be tracked using restaurant accounting software. Fortunately modern technology has made the data generation process much easier.
Automating the Income Statement
For restaurants the income statement is an excellent indicator of how the business is doing. The income statement contains all of the revenues the restaurant has generated. Restaurants generate revenues by making sales of food and beverages. If a restaurant has a point-of-sale (POS) system that is integrated with the restaurant accounting software, then every time food or drink is sold, the income statement automatically reflects the sale. This means that revenue is automatically credited. Basically the POS system sends the data entered from the register directly to the accounting software. The accounting software recognizes the data and puts it in the correct category.
The income statement also lists all of the expenses that restaurants incur. Some normal expenses for restaurants include the cost of the food and drink (known as cost of goods sold), employee payroll expenses, rent, utilities, and cost of equipment. Again technology can save you time, energy, and data-entry errors. When a product is sold and your employee enters the information into the register, the cost of the product (the price you paid for it) is also sent to the accounting software. The accounting software will then debit cost of goods sold for the price of the product. This means that your company can have up-to-date information on profitability with minimal effort.
Note that some manual entry is still required. For example, your accountant(s) will need to update the cost of the food and drink. The POS system doesn’t automatically know how much was paid for restaurant ingredients. However, with an integrated system, you should only have to enter the cost once and then the system will do the rest (of course if prices change you will have to update them).
Most accounting software for restaurants will be able to automatically generate reports for you. The software comes with some preformatted income statement reports that are very useful. However, you can decide to customize the report to fit your style and needs. Most successful managers look at these reports regularly to see how the restaurant is doing. If profitability is down, the accounting software can separate costs by entrees and show which entrees are under or over performing.
Cash Flow Statement
Although the income statement is extremely important for restaurants, everybody knows that “Cash is King.” Income statements tend to tell a company’s story using accrual based accounting. Unfortunately accrual based accounting doesn’t reflect the cash position of the company. Most restaurant accounting software packages can help automate the task of changing the accrued number to cash-based numbers.
Today, the software world is moving more and more towards integration or enterprise resource planning (the Internet and online accounting services have made this possible for businesses). The idea is that the different parts of the business or restaurant should be able to talk with each other. The days of having to reenter data from one system into the next are coming to a close and this is great news for restaurant owners. Using modern technology it is no longer a hassle for restaurant owners to analyze important information about the profitability of their restaurants.