Bookkeeping Accounting and Tax Filing for Restaurants Guide

nysraIf you’re reading this, it’s probably because you’ve realized that managing the back office part of your restaurant or bar is tedious, mundane and time-consuming.  And, more importantly,  it’s taking you away from your “real” work, the reason you started your business in the first place.   

Maybe your NYC hospitality business is really taking off, and you’ve outgrown the way you’ve been doing your books. You’re probably looking for a way to save time, stay compliant, provide the crucial insights you need to grow your business—and avoid hiring a costly full time in-house bookkeeping employee.   

Either way, Bookkeeping Chef fully Understands your Pain       

Fortunately, you have options. Whether your restaurant is still in its beginning stages or you’re the head of a thriving multi-location franchise, this guide will help you figure out which solution, or a combination of solutions, makes the best sense for you. And, when you’re done, you’ll have more time and energy to devote to building your restaurant’s menu, sales, bookings, revenue and brand positioning—instead of hanging out with your spreadsheets.    

back officeWhether your business is a well known thriving eatery or it’s just getting off the ground, you need at least three things. If you’ve been in business for awhile, you already know that these are non-negotiable if you do not want to fail. Investing in proper cloud-based accounting platform at the outset also means that you’ll have all the financial reports, sales, inventory P&L data available to you to make important business decisions.          

  1. An efficient way to keep your books – because you need to know how much money you have, where it’s coming from, what you owe, who you need to pay, what your cash flow looks like—otherwise, you’ll be making assumptions. And we all know what happens when you assume.
  2. A way to prepare to pay your taxes – because the government requires it, but with help from using a restaurant CPA you don’t have to pay more than legally necessary.
  1. A way to pay your employees on time – every time…otherwise they won’t be your employees for long.

How Do You Do It – There are 4 Options  

Option 1: On the cheap

Believe it or not, some companies opt not to keep their books at all. Instead, they have an accountant prepare the entire year’s worth of books at year end and file the annual tax return. This is the cheapest option, but it’s the business equivalent of flying blind. You won’t have any insight into your cash flow, daily sales, inventory or profits and loss. And you’ll still need to keep track of the bills you have to pay separately. In this age of innovation and technology, no restaurant business should choose to not care out their books.   

Pro Tip  

Bookkeeping, accounting and tax filing typically cost around 1-2% of your monthly spend- the industry standard. When calculating solution costs, remember to factor in the amount of time you or an employee will spend managing the solution, as well as much that time is worth to you. 

Option 2: Do it Yourself

The roll-up-your-sleeves approach appeals to a lot of restaurant entrepreneurs (you know who you are). This will save you money up-front, but you’ll find that you quickly outgrow DIY platforms— and that they take you away from growing your business. No matter how brilliant  you are, if your expertise is not in accounting, there is a high likelihood that you’ll make mistakes, which are expensive.  

Pro Tip  

If you decide to do it yourself, keep in mind you will need multiple vendor platforms and subscriptions, such as:

 An accounting platform like Kashoo, Freshbooks, Xero or Quickbooks

       An expense reporting platform like Expensify

             A year end accountant-Find one that specializes in Restaurant business taxes

           A payroll provider provider like ADP, Paychex or intuit

Option 3: Traditional

This may be how your grandparents think of bookkeeping and accounting, but it’s still a great option for many established hospitality companies. You may contract with an outsourced accounting firm for your day-to-day accounting needs. Or, you could hire a bookkeeper on a part-time or full-time basis. Regardless, you’ll still need another vendor to file year-end taxes.  

Pro Tip  

Not every firm or in-house team is created equal.  Depending on your business you will need professionals with different types of accounting and tax expertise. For example a restaurant should ensure that a firm or in-house team has knowledge and expertise in handling; 

 Restaurant Tips

       Cost of Goods Sold 

             Restaurant labor costs 

           Prime Cost Reporting

Option 4: Software + Service

This approach combines the expertise and hands-on service of a traditional bookkeeping/accounting firm with the agility of a tech company and the on-demand insights of DIY software. This is where Bookkeeping fits in. The advantage of service + software companies is that they aren’t entrenched in old ways of doing things. They’re adapting to modern ways of running a business, including full transparency, apps, and on-demand reports. Service + software companies tend to be cheaper than full-service firms, and they may or may not offer a comparable range of services. The best service + software companies put the emphasis on service—you have full insights into your financials, but you don’t actually have to manage them yourself. They’ll likely have far more accountants and tax experts on staff than just software engineers.

Pro Tip  

Different software + services companies provide different services and have different areas of expertise. If you go this route, make sure the company understands your business and your industry. Do not forget to ask about the level of support the company provides: will they categorize receipts for you, or will you have to do it yourself? For example, at Bookkeeping Chef we provide 3 different levels of managed bookkeeping, accounting and tax prep services. 

    

Bookkeeping and Accounting Systems            check-list

A company’s bookkeeping and accounting needs change over time, but not every accounting solution can grow with you. There are also different methods of accounting—cash and accrual. If you’re looking for investors or lenders, you’ll want to make sure your accounts are done using accrual accounting that complies with generally accepted accounting principles, or GAAP    

Accounting must haves:                        

  • Profit & Loss statement  
  • Balance sheet  
  • Cash flow statement  
  • Accounts payable  

Keep in mind – At its core, accounting is a way to use data to navigate your business and make well-informed decisions to ensure your company’s success. So you want a tool that works for you and provides the insights you need.

Which Managed Bookkeeping Solution is Right for You?  

What stage is your hospitality company at?  

  • One location just starting – It’s great that you’re already thinking about bookkeeping and accounting! For now, we suggest using our gaap-vs-tax-basis-accountingstarter Just a Taste services package to keep good records, then upgrade when you have funding to devote to operational costs.  
  • More than one location, took investments, or showing a profit- you need a more robust solution that will help you track how you’re spending and using your money   

Your monthly spend is…  

  • Less than $ 5000 per month – You can probably use a la carte services and keep track of your monthly expenses yourself.
  • More than $ 5000 per month – Outsourcing your accounting and back office bookkeeping will ensure that all your financials are in order as you grow.

Does your company sell mostly services or mostly goods?    

(This question is tricky for restaurant bar and hospitality businesses- it’s probably a little of both.)

  • Lots of inventory makes for complex accounting. You should hire somebody to manage this or find a firm experienced in restaurant inventory management.
  • A solution that specializes in accrual/GAAP accounting is key for you to understand your financials.     

What is Your Budget for All the Financial Services Your Company needs

  • Less than 1% of your monthly spend – there’s something to be said for running lean! Tradeoffs include time and effort on your part, as well as a lack of quality control.  
  • More than 1% of your monthly spend – to ensure operational efficiency growing restaurants shouldn’t devote more than 3% of their monthly spend to all financial services.   

THINGS TO CONSIDER

  1. YOUR TIME – There can be a high opportunity cost to doing your own bookkeeping accounting. If you spend so much time on your
    books that you are sacrificing revenue generating activities, it could be time to consider outsourcing. Also consider your timequality of life—everyone needs to sleep once in awhile!
  1. YOUR MONEY – If you just opened your restaurant and you don’t think you can afford to completely outsource your accounting and bookkeeping. it’s best to maybe wait.  But running a DIY back office can have hidden costs: Your time isn’t free, moneyinaccurate books can lead to imprecise business decisions, and invoices and bills can fall through the cracks.
  1. EXPERT ADVICE – A team of accounting experts can provide insights and perspective on your industry. If you outsource your accounting, consider partnering with a CPA firm that offers guidance and consulting beyond day-to-day bookkeeping. Also, askexpert whether they have experience working with companies like yours and how they will help you achieve your business goals?       

tipsWhen You May need To Finally Hire Someone Inhouse

If you are a major restaurant group or a national chain that is heading up to an IPO, then it maybe makes sense to bring accounting and tax functions in-house. In this case, many companies hire the following roles:

  • Bookkeeper: This person keeps track of your day-to-day financial transactions, such as purchases, sales, receipts and payments.    
  • CPA: Certified Public Accountant’s can have diverse roles in your company, but they should ensure that your accounting procedures comply with GAAP. Additionally, they’ll make sure that you meet your federal, state and local tax obligations and that you claim the deductions and credits available to you. CPAs can also help you manage the financial aspects of mergers, acquisitions, IPOs, and issuing shares, among many other functions.   
  • Controller: This person is responsible for putting in place internal controls and overseeing accounting and financial reporting. Typically, a controller at a private company correlates to a public company’s CFO, acting as the decider on budgets, spending, and other financial commitments.

TRADITIONAL ACCOUNTING FIRMS:

THE PROS AND CONS   

Many restaurateurs and small businesses rely on traditional accounting firms. These provide a lot of benefits, including financial expertise and easing the back-office burden. But the scope of services provided can vary widely from firm to firm. Typically, business owners rely on outsourced bookkeepers for the following:  

  • Creating a chart of accounts                                                                   Daily-Sales-Report-Managed-bookkeeping
  • Reconciling bank, credit card, and petty cash transactions  
  • Recording payroll transactions, FICA tip credit report    
  • Track payouts, comps and vouchers
  • Online bill pay and vendor invoice processing
  • Managing accounts receivable and accounts payable  
  • Conducting a monthly close    

The Cost of Traditional Accounting

For larger businesses, the cost of accounting increases with complexity. Most traditional accounting firms charge per hour. If you go this route, ensure that the firm has expert experience in the hospitality industry and understands your financial and business goals. Ask about the level of customer service you can expect; whether you can access financial reports on demand; and if the CPA who specializes in companies like yours.  A talented Restaurant CPA can find writeoffs and deductions that save your business on income tax filings that more than pay for their fees.        

Tax Filing    

Filing taxes is nobody’s idea of fun—with the exception of our tax team, they love that stuff! But taxes are necessary. And when you hire experts who understand the complexities of credits and deductions, you’ll end up paying less.      money

In our experience, people who have neglected to file their business taxes have a lot of anxiety about getting started. Don’t worry—everything can be resolved; tax experts have seen it all. The important thing is to get started by having a conversation with somebody who specializes in business taxes as soon as possible.  

Tax-filing must haves:  

  • Expertise in restaurant tax preparations and financials, so you don’t pay more than you need to  
  • Understand tax types – property, payroll, tips, sales, liquor, franchise
  • Compliance, so you avoid fines and penalties  
  • Fast response times, even during “busy” season  

tax  

Tax Filing For Restaurant Businesses   

Are you currently planning on filing your taxes yourself?  

  • Yes – This might be fine for now if you don’t have a large staff or lot of revenue. But as you grow, you will need an expert in your corner who can ensure that you stay compliant and receive every tax credit and deduction available to you.   
  • No – You’re a business owner, not a number cruncher—and we salute you.

Does your current CPA or Tax filer have expertise in Restaurant taxes?   

  • Yes – That is good news! When tax services are under the same roof as your accounting and bookkeeping, you’ll save money and have more insights into your financial picture.
  • No/not sure – Ask potential tax filers about their experience handling restaurant business taxes. Personal taxes are very different from business taxes, and the stakes are much higher too.

Things To Consider  

YOUR TIME – Entrepreneurs spend a disproportionate amount of time on taxes. In 2016, 24% of small business owners spent at least 120 Timehours managing federal taxes rather than their businesses.   

YOUR MONEY – It’s important to get taxes right. You know that missed deadlines and incorrect information can result in penalties. But moneyyou may also miss out on tax credits and deductions that could save you significant amounts of money each year.

EXPERT ADVICE – Be aware that business taxes are very different than personal income taxes. Make sure you ask any potential experttax professional about the types of clients they work with.   

Bookkeeping Chef – Service and Software  

About Bookkeeping Chef

At Bookkeeping Chef, we deliver managed bookkeeping services. Additionally, we are able to provide tax filing and accounting services by partnering with Aber CPA.   We transform business financials from an annoying hassle into a way to use your financial data to grow your business in the most effective way possible.    

  • Save time  Focus all of your time and energy on steering your business to success.
  • On-demand expertise  Partner with a team of experts who have been in your shoes and know how to guide you to success.
  • Streamline your business operationsWith your taxes and accounting under one roof, your financials will be in order. Bookkeeping Chef service offerings can scale with you as your company grows.
  • Dedicated account manager and supporting team  Your team of accounting and tax experts are here whenever you need them    

Service + Software    

Financial analytics dashboard  

-Financial insights enable smarter, data-driven business decisions

-Sync with financial accounts

Accounts payable                                                                                   How-Can-I-Trust-Virtual-Accountants

-Easy bill-pay management at your fingertips

Accounts receivable

-See who owes what whenever you need to know  

Invoicing

-Customized invoices integrated with your accounting system  

-Receipt tracking

-Shoe boxes are for shoes, not receipts

Are you a Good Fit for Bookkeeping Chef?  

restaurant-management-softwareWhether you are a small startup independent, a larger established national chain, a quick-serve location, a fine dining establishment, fast casual or a food truck we have plans for all types of hospitality businesses.  

Why Bookkeeping Chef

It’s important for you to focus on building a great brand and recruiting a top-notch team.

  • Handing over your back-office chores to Bookkeeping Chef will give you the time you need to spend on revenue-generating activities.  
  • We get it: running a business can be overwhelming. With Bookkeeping Chef, you’ll have an on-call team of experts to lean on and expert guidance to help you grow your business.  
  • As your business grows, Bookkeeping Chef will grow with you.
  • You’ll avoid hiring an expensive in-house bookkeeper employee on your payroll
  • That means you won’t have to hunt for a new solution in two years.  You’ll always know that your books are in shape and know exactly how much money you have and who you owe.      

marco“They showed me a new way of organizing accounting in the cloud. By connecting and integrating our POS system daily sales numbers of the bookkeeping software, it reduced the amount of paper receipts by over 75%. I would highly recommend any restaurant business, small or large, to try Bookkeeping Chef. What they afford you is cost effective; it gives you time, and it gives you great peace of mind.” – Owner of Tocqueville, Marco Moreira   

 

OUR FRIENDLY FINANCIAL EXPERTS CAN HELP YOU UNDERSTAND YOUR OPTIONS.  

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