I think we can all agree that 2020 has been a doozy so far, and it’s only August! You’ve no doubt been impacted by the COVID-19 situation, and you’ve probably made many changes in your restaurant operations on very short notice. Maybe you had to lay off staff for periods of time or work with third-party delivery platforms in new ways. If you were fortunate enough to obtain a loan through the Payroll Protection Program, you likely felt some relief in covering payroll and other allowable expenses. However, there is a chance that some time has passed and those funds are starting to deplete. While most restaurants are still operating at a volume below their pre-COVID days, it’s extremely important to keep your accounting records clean and updated so that you can analyze them regularly. If you haven’t been doing this before, now is a great time to implement some solid accounting practices.
Accounting doesn’t need to be complicated. In fact, the more you streamline it the easier it is to analyze. No one wants to comb through pages and pages of reports that don’t make sense or try to code expenses to hundreds of different accounts. Simplifying your chart of accounts and consistent reporting make it easy to analyze your prime costs, as well as other expenses, quickly and accurately. Once you have your accounting and reporting down, you need to review it diligently so you can make important decisions impacting your business.
Understanding your sales against your prime costs, which is the sum of your labor costs and your costs of goods sold, can help you understand how much you must charge to make a profit as well as how much you can spend and remain afloat. Of course there are other necessary costs outside of prime costs, such as rent, utilities and maintenance, but prime costs make up a restaurant’s largest expenses and are controllable. If you fail to monitor them, they can quickly get out of hand. Looking at them on a regular basis will let you adjust your course in different ways, such as hiring and scheduling employees, ordering inventory and pricing your menu. I’d be willing to bet most people reading this blog understand what prime costs are very well, but they don’t often have the time or information necessary to analyze them consistently.
That’s where a great accountant can really make a difference. Make time to talk to your accountant (or whoever handles your books) regularly, and let him or her boil down this information into a consistent format you can digest. You’re better off spending 30 quick minutes a week with your accountant than one full week a year, which is unfortunately the norm for many restaurateurs at tax time. Don’t be afraid to ask questions and challenge your processes to get everyone on the same page and working efficiently.
Speaking of working efficiently, if you’re finding your accounting is always a little (or a lot) behind you should consider if your business would benefit from using technology in new or different ways. Are you getting the information you need from our POS reporting? If not, spend time adjusting the reports to suit your needs. Are you using your accounting software in the most optimum way? There are ways to integrate and streamline processes to reduce time spent on your accounting as well as undetected errors, which can free you up to spend time making sure your restaurant successfully navigates current times.
Jessica Moulder, CPA