Master Restaurant Finances in 5 Minutes With This Genius Guide
Let’s start with the basics. Because running a restaurant is a whirlwind of joy and chaos—super busy then super slow. But when it comes to finances, too many restaurateurs are flying blind, guessing their profits instead of knowing them. Jump around the guide to the different questions most owners ask me.
What is restaurant bookkeeping?
It’s tracking every penny in and out of your restaurant—sales, food costs, payroll, rent, you name it. Think of it as your financial GPS, keeping you from crashing into debt or tax trouble. It’s also the source of all your finance functions. If your bookkeeping is wrong, terrible, or slow, so is your finance team.
What are the best practices for restaurant bookkeeping?
Record daily: Log sales, expenses, and inventory every day to catch issues fast.
Reconcile daily: make sure your bank account in your accounting software matches what is in your bank.
Separate accounts: Keep personal and business finances apart—always. Personal expenses do not go through the business. Your CPA will thank you. And so will your bank account.
Track inventory: Know what’s in stock to avoid waste or over-ordering. Too much or too little food? Waste is a huge profit killer. Keep your data accurate. Trash in, trash out.
Review regularly: Identify and check your KPIs. Are trending up, down, stagnant? What can you change? Does this change effect you short term, long term, or won’t have much effect.
Hire help if needed: A pro bookkeeper saves time and headaches just like a good chef can manage the kitchen. If you aren’t good at something ask for help.
What software is ideal for restaurant bookkeeping?
This is my favorite stack I put together after working with different types of restaurants.
Point of Sale: Square or Clover
Accounting: Quickbooks
Inventory Management: MarketMan
Staff Scheduling: 7shifts
Payroll and Tips: Gusto
Marketing and CRM: Klaviyo
Want help putting together a tailored tech stack for your restaurant type (e.g., fine dining vs. food truck)? Or I can map out the monthly cost breakdown and integrations for you too.
How to best manage payroll in restaurant bookkeeping?
Gusto automates the messy stuff. It syncs with your POS to pull hours, calculates tips fairly, and files taxes without you lifting a finger. No more late nights crunching numbers—your team gets paid on time, every time, while you stay compliant with labor laws. Plus, it’s cloud-based, so you can run payroll from anywhere—kitchen, office, or even on the go.
It’s affordable and scales with you. Whether you’ve got five staff or fifty, Gusto keeps it simple, with perks like employee self-onboarding and digital paystubs. Your crew will love the transparency, and you’ll love the extra hours it frees up.
How to track inventory for restaurant bookkeeping?
Inventory tracking isn’t just about knowing how many tomatoes you’ve got in the walk-in—it’s the difference between profit and waste. In restaurant bookkeeping, your cost of goods sold (COGS) and inventory levels drive your margins. But many operators guess. Don’t. Here's how to do it right.
1. Count Weekly
Weekly inventory counts are your baseline. Count each item in consistent units—don’t switch between pounds and cases. Assign a unit cost based on your last purchase invoice. Precision matters: tracking a $0.10 change in oil cost could save you thousands annually.
2. COGS Formula
A bookkeeper is going to verify using this formula:
Beginning Inventory + Purchases - Ending Inventory = COGS
If your beginning inventory is $5,000, you purchase $7,000 during the week, and end with $4,000, your COGS is $8,000. Compare that to sales. If you sold $20,000, your food cost % is 40%. Is that too high? For most restaurants, it should hover around 28%–32%.
3. System Integration
Link your POS and accounting software. If your POS tracks sales by menu item, and your software tracks ingredient usage, you’ll catch theft, portion creep, and over-ordering—fast.
4. Audit and Adapt
Run a monthly inventory report. Spot red flags—shrinking margins, rising waste, or inconsistent vendor pricing. Those numbers tell a story. Read it.
Good inventory tracking makes great books. And great books mean higher profits, fewer surprises, and peace of mind every single service.
How to analyze financial reports for your restaurant?
Financial reports aren't just paperwork—they're your restaurant's health chart. Running a restaurant without reviewing these reports is like cooking without tasting your food. Here's what to focus on monthly:
1. Profit & Loss Statement (P&L)
Your P&L is the ultimate scorecard. It shows your revenue minus expenses over a specific period. Break down costs as percentages of sales:
Food costs: Target 28-32%
Labor costs: Aim for 25-35%
Rent/occupancy: Keep under 10%
Marketing: Allocate 3-5%
If your prime costs (food + labor) exceed 65%, it's time to make adjustments.
2. Cash Flow Statement
This shows money moving in and out of your business. Even profitable restaurants can fail from poor cash flow. Watch for:
Seasonal fluctuations requiring cash reserves
Large upcoming expenses (equipment replacement, renovations)
Payment timing gaps between vendor bills and customer payments
3. Balance Sheet
This snapshot shows what you own versus what you owe. Review quarterly to track:
Asset growth (equipment, property, cash reserves)
Debt reduction
Overall financial health trends
What tax considerations matter for restaurant bookkeeping?
Restaurants face unique tax situations that require special attention:
1. Sales Tax Management
Collect and set aside sales tax daily. Never treat this as operating cash—it's not yours to spend. Most states require monthly or quarterly payments, and falling behind leads to penalties that can cripple your business.
2. Tip Reporting
The IRS watches tip reporting closely. Ensure your system accurately tracks:
Cash vs. credit card tips
Tip-outs between staff
FICA tip credits (potential tax savings on reported tips)
3. Deduction Tracking
Restaurants have numerous deductible expenses:
Food waste (document properly before discarding)
Uniforms and linens
Smallwares replacement
Cleaning supplies
Menu printing
Keep digital records of receipts—paper fades, and the IRS requires documentation for deductions.
How to master restaurant cash flow management?
Cash flow problems close more restaurants than bad food ever will. Here's how to stay liquid:
1. Weekly Cash Forecasting
Project 4-6 weeks ahead, including:
Expected sales (based on last year plus current trends)
Regular expenses (payroll, rent, utilities)
Irregular expenses (quarterly taxes, equipment repairs, seasonal inventory)
2. Vendor Payment Strategies
Negotiate better terms (net-30 instead of COD)
Schedule payments strategically around your cash inflows
Build relationships for flexibility during tight times
Consider vendor consolidation for better pricing and terms
3. Emergency Fund
Maintain a cash reserve covering 2-3 months of fixed expenses. This isn't profit—it's your restaurant's insurance policy against:
Equipment failures
Seasonal downturns
Unexpected repairs
Economic disruptions
What are the biggest financial mistakes restaurant owners make?
After working with hundreds of restaurants, I've seen these costly errors repeatedly:
1. Emotional Menu Pricing
Price based on data, not gut feeling. Calculate your actual food cost per dish (including waste and prep labor), then multiply by 3-4 to set menu prices. Don't fear raising prices on popular items—your regulars come for the experience, not just the price.
2. Ignoring Small Variances
A 2% increase in food cost might seem minor, but on $800,000 in annual food sales, that's $16,000 vanishing from your bottom line. Investigate every variance, no matter how small.
3. Overlooking Labor Efficiency
Sales per labor hour (SPLH) is your productivity metric. If one shift averages $45 per labor hour while another hits $65, there's an opportunity to adjust scheduling without affecting service quality.
4. DIY Accounting When You Should Outsource
Many owners waste 10+ hours weekly on bookkeeping they're not trained for, making costly mistakes. That time could be spent on menu development, staff training, or guest relationships—things that actually grow your business.
Final Thoughts: Financial Mastery Equals Restaurant Success
The difference between struggling restaurants and thriving ones often comes down to financial discipline. When you master your numbers, you:
Make decisions based on facts, not feelings
Spot problems before they become crises
Identify opportunities for growth and efficiency
Sleep better knowing exactly where you stand
Remember: Great food gets customers in the door once. Great service brings them back twice. But great financial management keeps your doors open for years to come.
Want personalized help taking your restaurant's finances to the next level? I offer one-on-one consultations to build custom financial systems tailored to your specific operation.
Reach out today to transform your restaurant's financial performance: https://waldensg.com/