How to Determine the Best Way to Manage Your Restaurant's Accounting Function

Your passion for accounting and financial reporting is probably not why you went into the restaurant business. Managing the numbers is not as fun as cooking and creating new dishes, talking with guests, or working within the quick and dynamic pace of our exciting industry where every day is different. It is most likely not what attracted you to our industry; however, skills in these areas are crucial to keeping you in business, so their importance cannot be overlooked.

Without accurate, timely information about the financial state of your business, you cannot make sound business decisions. In fact, without collecting ongoing information about your business and finances, you may not have the opportunity to correct a problem that could have been fixed, until it is too late to recover. Keeping track of things like purchases, cash balances, paid-outs and bank transactions should be an obvious part of your daily and weekly routine; after all, we're talking about your money.

From an analytical point of view, the best way to think about accounting and reporting is like driving a car. You look at the gauges on the dashboard to determine how you are doing and adjust from what you see depending on how fast you want to go, how far, how much fuel you have. In your car you have warning lights that go off in advance of an emergency so you can take care of a problem before it occurs. Accounting and reporting functions serve as a road map to help you get where you want to go. There are far too many operators who end up closing their doors because they did not identify a problem

Accounting Requires a Significant Time Commitment

From a practical standpoint, the time commitment required to complete the daily and weekly tasks that go along with all of this is often tough to fit into a busy restaurateur's day. At some point, everyone has to consider whether they have the capacity to do it themselves, hire someone to come in and do it, or outsource some or all of the functions to an outside party. The goals will remain the same; to achieve maximum accuracy, efficiency, and value through a system that works best for you and your company.

By tracking key data on a daily and weekly basis and completing financial statements at the end of each month or period, if not sooner, you will maintain the control you need to operate most effectively and keep the proper focus on your bottom line and those things that affect it. There is no question about the need for good recordkeeping and timely accounting and reporting; the question is one of how and where to do it. The outsourcing of business processes is becoming very common for almost all types of businesses and especially the outsourcing of bookkeeping and accounting for restaurants. So how do you decide if outsourcing is right for youWhen does it make sense to keep the accounting functions in-housePerhaps a combination of the two makes the most sense for you. These are the questions we'll consider.

First Things

The first thing we should do is establish what we are talking about when we say accounting, bookkeeping and reporting functions and processes, as these terms, and the level of work done within them by different operators, will vary. Below is a fairly comprehensive checklist of accounting, reporting and bookkeeping processes at work in restaurants, or that should be.

There are some things on this list you likely do yourself and do well, some things you may have others do, and maybe even some things you hadn't considered doing at all. Our list doesn't even include the multitude of various operations reports that operators should look at in their effort to best manage their businesses. These are critical gauges like product mix reports, prime cost reports, operations reports that detail metrics like average check size, table turn and staff productivity data, and so forth.

Not only must there be good accounting and reporting practices and controls in place, the feedback you get through the data must be reviewed, analyzed and used and it must be done on a real-time basis for it to be useful. Perhaps the best way to look at the decision to outsource or keep in house these functions is to first determine your true capacity for getting these things done. It probably makes sense for you to do some or all of these functions yourself and then outsource those areas that can be completed more efficiently by someone else.

The Upside of Bringing It In

John Nessel, president of Restaurant Resource Group, a Boston-based firm offering financial management tools and support services to restaurants, says that operators should retain as much of the accounting function in-house as possible solely because the more you can do in house, the sooner you will have access to the information and the better you can manage your business. Nessel believes that timely data analysis is what will make or break an operator in a competitive industry working on slim margins.

You have to be constantly vigilant of what is going on in your business and keep an eye on the numbers and what they tell you and that the closer you are to them the more likely your success in using the information as you should. In Nessel's view, the more you outsource, the more you pay less attention to the information as it moves away from your daily focus. That is undoubtedly dependent on the operator and their focal points.