Why Bookkeeping for Restaurants is so Different

Bookkeeping and Accounting for NYC Restaurants is Different than Other Businesses

It’s important for NYC restaurants and bars to use bookkeeping software solutions designed by providers which are designed specifically for the restaurant industry.  It is a known fact that restaurant bookkeeping is a different process than bookkeeping in other industries.  Restaurant managers need more timely, more detailed and more accurate financial information than most other types of businesses.  Without a proper back office software system and bookkeeping team to handle it, mistakes can be made, which can be very costly to the restaurateur in terms of money, as well as time.

A Further Explanation of the Unique Nature of Restaurant Bookkeeping

Restaurants must keep track daily food costs. It is crucial to track the cost of goods (food, paper items, other overhead costs) and payroll by each category.  Most restaurants offer promotions, such as gift certificates, buybacks and meals to employees, which all need to be tracked and documented in an accounting-acceptable fashion.  Using a cloud-based financial reporting software is crucial for accounting and control of all cash coming and going out of your business. Sadly, many large NYC accounting firms seem to run away from bookkeeping, or don’t have the hospitality industry expertise to handle restaurant bookkeeping properly.    

Overtime and Minimum Wage

Many restaurant owners are not fully aware of the potential pitfalls and issues related to dealing with minimum wage and overtime issues. The benefits of having a qualified CPAs oversight and advice more than often outway the costs the cost of the actual service. Quickly, we have comprised a list of red flags and other items you need to be aware of in the venue:

  • There is a special overtime rate calculation for your minimum wage workers.
  • A special overtime rate calculation also applies to an employee that works different positions in the restaurant in the same week.
  • By law, the minimum wage for delivery workers is higher than that of waiters and bussers.
  • In general, if a staff member works a “double” additional pay is due or owed.    

Payroll     

You may already be using an outsourced payroll company but will they be able to tell you how to manage the following:

  • Employee meal costs
  • Employee uniform reimbursement
  • Employee call in pay and spread of hours pay

Since 2014, parties of “six or more” are now classified as “automatic tips” wages.  This means that these tips will be subject to payroll tax withholding!  Not all payroll processing companies are up to date with the intricate rules of restaurant accounting laws.  Some accountants may be familiar with federal rules but not those specific to New York State and New York State laws are practically changing everyday.

Restaurant Tip Reporting and Appropriation    

Restaurant tip reporting can be a perplexing subject, so you will need to understand the nuances of the 20% rule, the new “two hour rule” and making sure all employees are actually eligible for your restaurant’s sharing or “tipping pool.”  Also recently, New York state has updated its extensive requirements for record keeping, which embodies and mandates a broad sweeping effect on most NYC restaurant employers.  Are you maximizing and taking full advantage of the FICA tip credit?     

Sales Tax   

new-york-restaurant-sales-tax-audit-analysisNew York State’s tax rules for food and beverage are subject to endless complexities.  There are a few key business rules that restaurant owners need to be aware of…

In general, under the New York Tax Law §1115, food and beverage products are exempt from sales tax. However, there are a few of circumstances where the sale of food and beverages are subject to sales, including:   

  • Food and beverages prepared by the establishment
  • Products that are sold in a different form than that in which they were manufactured
  • Products consumed on the establishment premises
  • Items that are not subject to tax, but are resold, may also be subject to sales tax depending on the situation     

New York State law requires restaurants to keep sequentially numbered and dated records for all sales at least three years from the due date of the return to which those records relate, or the date the return is filed.  Even if a receipt is not given to customers, the restaurant must record each sale in some form of a daily ledger journal or accounting software system.  If both taxable and nontaxable goods are sold to a customer, the restaurant must identify, on the receipt, which goods are subject to sales tax and which are not.   

Don’t wait until your audit, get our complimentary sales tax compliance audit analysis today.       

Conclusion

As you can see,  this is just the tip of the iceberg regarding the rules and regulations surrounding how restaurants need to handle bookkeeping and accounting procedures.  Having an accurate set of monthly financial statements from a well-maintained cloud bookkeeping system can be the difference between owing thousands or receiving a tax refund from the IRS.

Download our free restaurant tips for accounting and bookkeeping ebook guide today

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