You may spend your days training staff, reviewing your menus, meeting with vendors, and working on marketing campaigns. There’s only so much time in the day, and it’s easy to overlook your books.

However, if you don’t keep track of your accounts, you may find your invoices piling up and the tax man calling.

Should you consider hiring a bookkeeper?

When to hire a bookkeeper is different for every restaurant owner. To help you make this decision, we’ll review the responsibilities of a bookkeeper, explain the difference between a bookkeeper and an accountant, and explain the benefits of adding a bookkeeper to your staff (or bookkeeping services).

What Does a Bookkeeper Do?

Think of a bookkeeper as the financial quarterback of your business. They perform all the day-to-day financial tasks that keep your restaurant up and running. For example, the responsibilities of a bookkeeper often include:

• Paying invoices from your vendors
• Accepting payments on your invoices
• Performing payroll
• Tracking receipts
• Paying bills
• Recording all your business’s daily transactions

Bookkeepers are in charge of your business ledger and make sure it always balances.

Bookkeeper vs. Accountant

The terms “bookkeeper” and “accountant” are often used interchangeably, but these are actually two different positions with unique responsibilities. If your bookkeeper is the financial quarterback of your restaurant, an accountant will act as the financial coach of your business. An accountant looks at the big financial picture. They often create budgets, run reports, and handle your company’s taxes.

While a bookkeeper is typically a transactional role, an accountant is more of an analyst who will track the business’s financial health and make recommendations to improve cash flow and profit.

An accountant can perform bookkeeping duties but a bookkeeper cannot serve as an accountant.

When to Hire a Bookkeeper

If you have the funds, the best time to hire a bookkeeper is when you first begin your business. An experienced bookkeeper can set you up right, creating a well-organized ledger and developing best practices from the start.

If you’ve been doing your own bookkeeping and don’t have a strong accounting background, it may be difficult and time-consuming for a bookkeeper to come in later and re-organize your system to meet industry standards.

That said, if you need to save on funds, you may have to hold off on hiring a bookkeeper in the beginning until you can afford their services. If you find that you don’t have the time or ability to manage your payments and payroll, that’s a good clue that it’s time to hire a bookkeeper.

Hiring a Bookkeeper

Your bookkeeper will be managing your books and will have access to your accounts, so it’s imperative to hire someone who is organized, reliable, and trustworthy.

Look for candidates with experience, especially in restaurants. Don’t hesitate to call previous employers to ensure the job candidate left in good standing.

Should You Outsource Your Bookkeeping?

You may wonder why you should hire a bookkeeper. After all, adding another staff member will increase your overhead. In the restaurant business, where margins are infamously tight, another employee could be difficult to support.

However, implementing good bookkeeping processes is incredibly important. A bookkeeper keeps the bills paid and the lights turned on. They send out checks to your employees and ensure your books are balanced. No restaurant (or any business) can last for long without solid bookkeeping.

That said, you don’t necessarily need to hire a full-time or even a part-time bookkeeper. Instead, you can save overhead by outsourcing your bookkeeping needs. RASI is a company built to provide back-office services for the hospitality industry. That includes bookkeeping services. We are happy to take over your bookkeeping needs so you can focus on running your restaurant.

The post When Should You Hire a Bookkeeper? appeared first on Restaurant Accounting Services, Inc..

Many restaurant owners start out by doing their own books, but as your business and responsibilities grow, you may find yourself too overwhelmed to handle the finances.

You need to hire someone but should you bring on an accountant or a bookkeeper? Though these terms are often used interchangeably, they are two separate positions with different responsibilities.

In this article, we’ll look at the difference between bookkeepers and accountants. We’ll review the function and responsibilities of each role, and then look at whether you should hire in-house or outsource.

What Is a Bookkeeper?

When it comes to accountant vs bookkeeper, think about your bookkeeper as the person who tracks your restaurant’s day-to-day transactions. They are on the ground, making sure your bills are paid, recording your sales, and keeping track of your taxes.

Bookkeeper responsibilities typically include:

• Performing payroll
• Sending invoices
• Paying invoices
• Recording receipts and bills
• Maintaining the business’s ledger

Bookkeepers are great at keeping your accounts organized and making sure everyone gets paid. They tend to be less expensive to hire than an accountant and can also give you a day-to-day understanding of your business.

What Is an Accountant?

While bookkeepers focus on the nitty-gritty of your daily business transactions, accountants look at the big picture. Their job is to generate reports, forecast trends, and help you make better financial decisions.

Accountant duties include

• Creating yearly, quarterly, and monthly budgets
• Doing the business’s taxes
• Creating financial statements and reports
• Analyzing a business’s performance
• Making recommendations to improve a business’s finances

While accountants can perform bookkeeping, bookkeepers can’t be accountants. An accountant gives you a better understanding of your restaurant’s financial health. They provide deep analysis and expertise that can lead to improved profits.

Accountant vs Bookkeeper: Which One Should You Choose?

When considering whether to hire an accountant or bookkeeper, the answer will depend on the specific needs of your company. If you simply need help keeping your books in order, a bookkeeper may be the right choice. If you want someone on your team to analyze the financial performance of your restaurants and help you structure a budget, an accountant could be the way to go.

These two positions are not mutually exclusive. As your business grows, you may find you need both an accountant and a bookkeeper. In fact, these two positions can work well together, with the bookkeeper performing the daily financial tasks and the accountant managing the business’s overall financial picture.

Should You Hire In-House or Outsource Bookkeeping and Accounting?

Now that you understand the difference between a bookkeeper and an accountant, you can better determine what you need in your business. Bringing on a new employee, whether a bookkeeper or an accountant, can add a lot of overhead to your business. You may also find that you don’t yet have the need for a full-time bookkeeper or accountant.

In this case, it may make financial sense to outsource your bookkeeping and accountant. RASI can help. We offer a full suite of back-office services specifically for the hospitality market. We can take on all your bookkeeping needs and serve as your company’s accountant. Learn more about all the financial services we offer.

The post The Key Difference Between Bookkeepers and Accountants appeared first on Restaurant Accounting Services, Inc..

If you own a restaurant or any type of business, you will have to perform bookkeeping to track all your income and expenses. A well-designed bookkeeping program can ensure that your bills are paid, you receive money for your invoices, and you have money set aside for your taxes. Not sure how to do bookkeeping for a small business?

This article will serve as a short overview of bookkeeping for a small business. We’ll review what bookkeeping is, how to get started, and whether you should consider outsourcing your bookkeeping services. 

Bookkeeping Basics for Small Businesses

In a nutshell, bookkeeping is the process of tracking and managing a business’s financial transactions. A bookkeeper will create a ledger or “set of books” for this purpose. Back in the day, these books were physical objects where transactions were written down. These days, almost all bookkeepers use dedicated software to make the process faster and more efficient.

A bookkeeper performs a number of important tasks for a business, usually including:

• Tracking all bills and receipts
• Paying invoices
• Sending invoices
• Handling payroll

The Difference Between Accounting and Bookkeeping

Many people assume that bookkeeping and accounting are the same thing. In fact, though they overlap in some areas, bookkeeping and accounting are two separate specialties. Bookkeepers are administrators, managing the day-to-day financial transactions of a business. 

An accountant takes a broader view of a company’s finances. They are more likely to generate profit and loss reports, prepare a business’s tax returns, and provide strategic financial advice. For example, an accountant may recommend how to cut costs or create departmental budgets.

How to Start Bookkeeping for a Small Business

Many small business owners start out by doing their own bookkeeping. If you are organized, self-motivated, and have taken accounting classes, you may be able to serve as your own bookkeeper. Even if you haven’t taken accounting classes in school, you can find many free or low-cost videos, books, and programs on bookkeeping basics for small businesses.

Step one is to invest in bookkeeping software.

You can find many great software reviews online. Look for software that meets your budget and the needs of your business.

Next, set up your books.

It can take time to determine different expense categories, input your vendors, and link your accounts, but this is worth doing right. In fact, you may even wish to hire a bookkeeper to set up your books and give you a quick how-to course on how to manage them before taking over the process yourself.

Step three, start bookkeeping.

You’ll want to carve out time on a regular basis to input all your business transactions into your software. Some business owners do this daily while others choose to perform their bookkeeping weekly. Some business owners even wait until the beginning or end of each month to do their bookkeeping, though this isn’t considered best practices.

Your bookkeeping software may also include invoicing, payroll, and reporting capabilities. Depending on your comfort level, you may want to utilize these features and handle more financial aspects of your business. 

Should You Outsource Your Bookkeeping?

As your business grows, your time often becomes more limited. Additionally, you may find that your bookkeeping grows in complexity as you bring on more employees, work with more vendors, and open additional locations. 

If you want to focus on higher-level tasks, it might be time to outsource your bookkeeping. You can do this in several ways. First, you can hire a dedicated full-time or part-time bookkeeper for your business. If you’d rather not bring on a new employee, you can hire a freelance bookkeeper or work with an online bookkeeping firm. Most bookkeepers will charge a set monthly rate based on how much work they perform for your company.

RASI offers bookkeeping services specifically for the hospitality market. We can take over your bookkeeping, payroll, accounting needs, and more. If you want to spend more time leading your company and less time managing your books, consider our comprehensive restaurant bookkeeping services!

The post How to Do Bookkeeping for Small Business: Everything You Need To Know appeared first on Restaurant Accounting Services, Inc..

How to Get a Business Loan for a Restaurant?

If you think you might want a loan for your restaurant, there are a few prerequisites to understand. First, assess your business prospects. Lenders want to place their money with businesses that are in good health and are likely to pay them back. You’ll need to assemble financial information to prove you meet that standard. Do you have a record of recent profit? Can you demonstrate through your books that you take in more than you spend on a regular basis? Your cash flow statement is a good place to look for this information. Once you can demonstrate that you have a profitable operation, turn your attention to the future. What projections can you make for your grow over the next one to five years? Let’s assume you have both solid profitability and encouraging growth prospects. The next step in preparing to take out a loan is to understand your creditworthiness. In the US, this is handily encapsulated in your credit rating, a single numerical score provided by the three major credit rating bureaus. According to Equifax, a credit rating above 670 is typically considered good, while scores above 740 are very good, and above 800 is excellent. A second factor to consider is your collateral. What valuable assets could you offer to a lender to secure your loan? The better the collateral you post, the more likely you are to find a lender.

4 Major Types of Restaurant Business Loans

There are four major types of restaurant loans to consider: small business loans, a business line of credit, a traditional commercial loan, and business credit cards.

SBA Loans for Restaurants

The US government supports credit provision to small businesses through the Small Business Administration (SBA). The SBA will guarantee eligible loans, thereby reducing risk for lenders and incentivizing them to work with small businesses. The process to secure an SBA loan begins with making an application to a private lender that partners with the SBA—which in the US is most banks and credit unions. If you can show strong personal and business finances and are willing to personally guarantee the loan, SBA-affiliated lenders are likely to work with you. There are many types of SBA loans, ranging from SBA microloans (below $50,000) to the more common SBA 7(A) loans of up to $5 million.

Business Line of Credit/Working Capital Loan

Working capital or business lines of credit are intended to help cover regular operational expenses such as payroll, rent or inventory costs. You wouldn’t use them to finance large one-off expenses like a land purchase or expansion to a second location. The lending standards for lines of credit vary by lender, but in general you should be able to demonstrate a strong financial position that gives them confidence you’ll have the cash available to meet your loan obligations. One nice feature of a line of credit is that it functions like a creditcard, allowing you to spend more as you repay previous balances.

Traditional Commercial Loan

The most common loan offering from banks and credit unions is the commercial loan. The amount and repayment period depends on your negotiations, but the basic structure is consistent: the lender will go through a careful inspection of your finances to assure themselves that you are credit-worthy, will demand collateral, and will offer a modest interest rate that averages 6 to 8%, while accommodating large loan totals. The commercial lending process demands high credit scores and the patience to wait for up to six months for a loan to close, but if you can meet this bar, the terms are attractive.

Business Credit Cards

We’d be remiss not to mention one of the most common sources of financing for small businesses: the credit card. Business credit cards are widely available and offer quick and easy access to moderate sums of money. Their major downside is that the interest rate is typically high, making credit cards an expensive method of financing. If you have to cover a short-term expense and will quickly be able to repay the balance, a credit card can be a convenient option. Be careful not to fall into the trap of carrying large ongoing balances at high interest.

Specific Capital Needs for Restaurants

Restaurants have characteristic financing needs that can be met with specific restaurant loan products. Here we’ll cover them in brief.

Restaurant Equipment Loans

If you’re replacing your ovens or refrigerator, you may want to secure an equipment loan. These are specifically designed to cover one-off expenses at favorable terms.

Inventory Financing

Financing is available to help with inventory purchases like large food orders. While it’s better to be able to cover these costs from your operating revenue, new restaurants might not yet have reached that point. In that case, inventory financing is your friend.

Working Capital

Regular expenses like payroll and rent can be supported by a working capital loan. See the section on lines of credit for more information. WATCH THE FULL VIDEO BELOW!

Get to Know Your Capital Lenders

Local Banks

One of the most common lenders available to the restauranteur is the local bank. These come in many flavors and varieties, yet tend to structure their lending in similar ways. For small businesses, they will often offer SBA-backed loan products that carry a partial government guarantee. Note that you will have to post collateral and personally guarantee the loan as well. The local bank is always worth checking out as a lending option. If they like your business plan and cash flow, your terms may be favorable.

Credit Unions

The credit union is highly similar to a local bank, with the structural difference that a credit union is owned by its members. In practice, they have similar products and lending standards to small and regional banks. They are worth a visit on your tour of lenders, and can sometimes offer better terms than comparable banks.

Large Banks

Banks with hundreds of branches spanning multiple states qualify as large banks. These institutions may have greater appetite for large loan amounts than your local banks, if you can satisfy their lending criteria. Be prepared for a bureaucratic process and long closing times.

Specialized and Alternative Lenders

The advent of the internet has opened up lending to many new entrants. You can find a wide diversity of online lenders who specialize in certain types of businesses or financial products. RASI can vouch for the expertise of Adesso Capital. They understand the needs of restaurants and offer a variety of loan products such as SBA loans, equipment financing, and lines of credit.

Find the Right Lender at the Right Terms

As we’ve seen there are several types of restaurant loans and lenders. It pays to determine your capital needs in advance, and go to the lender that offers a matching loan product. With any lender, the attractiveness of the product and terms you are offered will be a function of your creditworthiness. This is largely determined by the health of your balance sheet, specifically free cash flow. Lenders want assurance that you can afford to service the debt you wish to take on from available operational cash. When assessing a given credit product, pay attention to the loan size, repayment terms, closing process, collateral, and guarantees (if any). Note that it may be better to take on a smaller loan amount if that reduces the burden of interest to a point where you have greater confidence in your ability to support the loan from free cashflow. LISTEN TO THE FULL PODCAST EPISODE BELOW!

Restaurant Business Loand Frequently Asked Questions

What types of restaurant loans are available?

There are loan products for working capital (payroll, rent), equipment expenses, inventory, and major moves like opening a second location or purchasing your land. Consult your lender for specifics.

How do I qualify for a restaurant loan?

Much as in any business, your eligibility for a loan will be based on the creditworthiness of the business as demonstrated by the balance sheet. Lenders want to see you have the free cash to easily afford repayment.

What documentation do I need to apply for a restaurant loan?

Bring your balance sheet, cash flow statement, and a summation of your plans for the business. You may also need to demonstrate you have valuable assets to serve as collateral.

How long is the repayment period for a restaurant loan?

Repayment terms will be negotiated with your lender. Standard periods range from 1 to 5 years—shorter for small loans, and longer for large ones. If you’re buying real estate, terms can be much longer.

How do I compare different restaurant loan options?

The best way to get to know the options is to talk with lenders. Consult your local banker and credit union, and do research online. There are online products that will give you quotes from multiple lenders at once.

The post Restaurant Business & Startup Loans: Complete Guide appeared first on Restaurant Accounting Services, Inc..

Disclaimer: This blog article is strictly for educational and informational purposes only and is not intended to provide tax, compliance, legal or other advice/counsel. Every restaurant owner/operator is ultimately responsible for its own compliance with federal, state, and local regulations in regard to licenses and permits. Please contact your attorney or other relevant legal counsel if you have any additional questions or concerns regarding restaurant licenses and permits.

If you own a restaurant, you’re aware of how hectic it was just getting up and running. And if you’ve already acquired food & beverage licenses and permits, you know how daunting the process can be.

Getting all of your restaurant permits and licenses in order is no easy task. Plus, it’s rarely a one-and-done scenario; thanks to ever-changing regulations, renewals (or, many times, entirely new licenses) which are required to keep your restaurant running at full capacity.

To assist your process in getting the licenses and permits needed to open and run a restaurant we put together this fact-filled guide to help your restaurant navigate the often tricky waters in acquiring them.
 

Getting Started: How to Leverage Pre-Operating Expenses

Still in the planning phase for your restaurant, but fully aware you’d like to acquire food and/or beverage restaurant permits and licenses? Well, here’s a great way to help make the process easier and more affordable (and possibly with less red tape, too): pre-operating expenses.

Opening a restaurant requires up-front purchases and expenditures that occur long before opening the doors and serving customers. These purchases are not accounted for the same way that post-opening purchases are.

Make sure that all pre-opening purchases are recorded on your balance sheet as a capital asset. With RASI’s accounting software and services at your disposal from day one, you’ll ensure that all restaurant expenses are recorded, reconciled and 100% accessible whenever you need the data.

Capturing your restaurant pre-opening expense from day one with RASI, will allow you to have greater accuracy with your cash flow and balance sheet liabilities and assets. Our supporting document shows that this can also include permits for eventual business expansion. Again, always consult with your attorney to ensure your food & beverage licenses and permits needed to open a restaurant can be included with these capital assets.

Different Restaurant Permits & Licenses Required to Run Your Business

Not sure how to get a restaurant license? Here’s a general rundown of some restaurant permits and licenses you need to know about. This list is not exhaustive; always check with state, county, and local jurisdictions to ensure full compliance with your restaurant licenses and permits.

Business License

The business license is the foundational permit for your new restaurant. Every U.S. restaurant, catering service, and related business requires a business license. And depending on where your business operates, you could pay a portion of your sales, or a flat annual fee.

Consult with your state & local resources to find the particulars on how to acquire a business license. The cost for this particular category of restaurant permits and licenses typically includes an application fee and ongoing expenses, usually less than $10,000.

Food Service License

Not all counties in the U.S. have health departments. But most do, and these agencies usually issue food service licenses. Check the U.S. Food & Drug Administration (FDA) website to learn more about how to apply in your state and county. Once processed, the local authorities will come out and inspect your facility and ensure you’re ready to open your doors. Keep in mind that regular inspections are included for any restaurant that obtains a food service license, as this is one of the licenses and permits needed to open a restaurant. Prepare to spend up to $1,000 or more for this restaurant permit & license.

WATCH THE FULL VIDEO BELOW!

Employer Identification Number (EIN)

An Employer Identification Number (EIN), is a free to obtain, unique number that identifies a business to the Internal Revenue Service. Every restaurant must have an EIN. Processing times take a while; on average, the IRS issues about one EIN per day. If possible, get the ball rolling on this restaurant permit & license as early as possible. Apply here for your EIN.

Building Health Permit

This license is closely related to your food service license, since your establishment must meet certain state and local code requirements. Even if your food preparation procedures are spot-on, it doesn’t matter if your roof is leaking or you have mold issues.

An online search for building health permits should help you find the right application, but you can also consult your attorney for accurate information. Some building health permits are less than $100, while others could cost in excess of $1,000.

Liquor License

The ability to serve alcoholic beverages is a game changer for many restaurants; this is how many establishments can yield optimal ROI. A liquor license is required to do this. Some states and counties require separate restaurant liquor permits and liquor, wine, and beer licenses.

Like the EIN license application, start this one as early as possible, since most state agencies must process a significant backlog of licenses. Check with your state and local governments on how to apply. Costs vary considerably, depending on your location. Once you have a liquor license, check out our article on how to accurately track liquor costs for your restaurant or bar.

LISTEN TO THE FULL PODCAST EPISODE BELOW!

Sign Up With RASI

Protect your assets with RASI’s accounting software and services. With continued education & training on all things accounting and payroll best practices, industry and compliance alerts, and much more. 

Request a demo, drop us a line, or call our restaurant accounting professionals today at (720) 826-9900.

The post Restaurant Permits & Licenses Needed to Open a Restaurant appeared first on Restaurant Accounting Services, Inc..

50% of the restaurant concepts we see are largely “inspired” by existing restaurant operations. Beyond this, 85% of your food and supply purchases will be delivered from the same major distribution companies. So then what is it that makes your new restaurant stand out? What makes the experience like nothing we’ve ever seen?

Unfortunately, the reality here is that without a sound and detailed restaurant business plan and a commitment to following it, 75% of restaurant startups will be bankrupt within the first 24 months.

What makes up a great business plan for a restaurant?

• Executive Summary
• Market Overview
• Capital Expenses
• Forecasting Sales
• Restaurant Labor Matrix
• Restaurant Pro Forma
• Cash Flow Basics

Restaurant Executive Summary

Before we start talking about high-level concepts, let’s begin with the broadest notion of how to start a restaurant business: the executive summary of your restaurant. In other words, you need to lay out a mission statement. Any well-designed mission statement answers the following key questions (we consider this your complete restaurant vision):

• Why are you in business?
• What unique offerings will your restaurant provide that others can’t or don’t?
• Who are the key players that will create and foster your business culture?
• Where will your restaurant be in six months or even six years? Having both short and long-term goals is critical in devising a meaningful mission statement, and the eventual business plan for your restaurant.

Once you establish your mission statement, it’s time to think about the concept and execution of your restaurant, your restaurant business proposal, and important factors like capital expenses, sales, the restaurant labor matrix, and other significant considerations – which we’ll cover below! First, let’s look at Capital Expenses and Forecasting Sales, which are imperative for writing a restaurant business plan.

Market Overview

With your restaurant’s executive summary buttoned up, it’s time to roll up your sleeves and tackle the loaded question of how to start a restaurant business. The next step is to conduct some good old-fashioned market research. A thorough market overview assists in determining how your restaurant integrates and excels in the current business climate. In other words, the business plan for your restaurant should account for:

• Business trends. What are the key indicators of your restaurant’s neighborhood and other regional eateries? Think growth trends, changing demographics, which relatively new restaurants have succeeded, and more importantly, WHY they succeeded. 
• Specific market goals. Will your menu “fill the gap” with the market, or compete directly with similar cuisine offerings? 
• Projected growth. Has your local market gained or lost population in recent years? Is the neighborhood on the upswing? These are important questions to ask when thinking about where your restaurant will be 5, 10 even 20 years from now.
• Pricing and competition. Closely related to the trends and goals listed above, your restaurant business proposal should factor in things like menu pricing, competitor research, customer feedback, etc.

Restaurant Capital Expenses

Capital Expenses are the category of purchases we use to describe restaurant startup costs. Within Capital Expenses there are subgroups that assist in identifying your build-out needs. Some examples of these subgroups are as follows:

• Leasehold Improvements
• Professional Services
• Operating, Computer, and Restaurant Equipment

Each of these groups has a different amortization and depreciation schedule that is assigned to them. In most of the plans that we see, folks will use a poor estimate of what the aforementioned items will cost with the thought that once they get the doors open, everything will just work its way out because they perceive cash rolling in by the truckload.

More often than not, this isn’t the case. Therefore, carefully planning your build-out costs and Capital Expenses will save you in so many ways after you’re open.

Forecasting Sales

Similar to budgeting for your expenses, you’ll need a strategy for forecasting your restaurant sales. After all, sales pay the bills, right? Most folks will estimate their sales based on several unscientific methods.

#1) They’ll use the sales from the restaurant where they used to work, or they’ll ask the manager at their favorite restaurant

#2) They’ll simply take the square footage and divide it by what they think they’ll do in a week of sales.

While these concepts have some of the elements for what is correct, it’s not complete. You must take the key indicators below into account to effectively forecast your sales.

• Day Parts:  Does your restaurant serve Breakfast, Lunch, and Dinner? Does it just serve brunch on the weekends?
• Revenue Centers: Do you have a Bar, Dining Room, and Patio? Do you have Catering and Private Dining?
• Guest Check Average: What are your guests going to spend on average for each day part? Review our article on menu engineering to accurately determine the contribution margin per item.
• Number of Seats: This indicator is important because each seat is going to generate a certain amount of revenue. For example, what type of seating do you have? 2 Tops, 4 Tops, Banquet seating, flip-up rounds, bar stools, and fixed seating will all differently determine the maximum amount of revenue that you can generate from your restaurant.
• Table Turns: It’s important to know how many times you believe that you are going to turn over the tables in the restaurant. For example, if you have 200 seats and you have 2 table turns, then you are saying that you’ll seat 400 guests.

WATCH THE FULL VIDEO BELOW!

The Restaurant Labor Matrix

First-time restaurant operators rarely forecast their opening labor needs accurately. Restaurant labor must be forecasted using a detailed Labor Matrix. Each day and daypart, number of hourly and salaried positions (per job code), work center, and estimated wages, must be calculated against your projected weekly sales.

This enables you to accurately forecast how much cash you need to properly service your guests. More importantly, using a Labor Matrix allows you to react quickly during the erratic sales spikes that you’re sure to experience during your opening months.

Restaurant Pro Forma

Developing an accurate restaurant proforma rounds out your financial plan and solidifies your restaurant business proposal. It also provides you with the greatest chance of operating a successful restaurant. It is necessary that your pro forma is detailed and contains your revenue and expenses by period.

Restaurants should operate on a 13-period or 4-4-5 financial statement cycle versus a monthly accounting cycle.

Therefore, the year is divided into 13 periods containing 4 weeks or 28 days per period; or, 12 periods containing two 4-week periods followed by one 5-week period. These cycles ensure that when you’re reviewing historical and current data, you can look at trend comparisons and know you’re comparing apples to apples.

Restaurant Pro Form Example

Further categorical breakdowns look like this:

• Prime Cost Breakdown: This includes Food, Beverage & Labor (including Payroll Tax)
• Gross Profit Calculation: Sales minus Cost of Goods
• Direct Operating Costs: All “self-inflicted costs” includes items such as linen, restaurant, kitchen & bar supplies, china, glass & silverware, etc.
• Advertising & Marketing Plan: Both in-house and external Advertising & Promotional activities
• Repair & Maintenance: All repair and maintenance activities
• General & Administrative: Items such as legal and accounting, dues & subscriptions, credit card expenses, etc.
• Occupancy Costs: This includes rent, utilities, trash, telephone, etc.
• EBITDA: Calculated as Earnings Before Income Tax Depreciation & Amortization

Finally, your restaurant proforma needs to be forecasted for five years of detailed sales growth as well as expense changes such as rent or payroll tax increases and cost of goods. Doing so will also provide your investors with a reasonable expectation for payback on their loans.

Understanding Cash Flow Basics

Your restaurant’s budget, perhaps more than anything else, will ultimately determine your restaurant’s successful transition from a startup eatery to an established enterprise. Understanding your cash flow statement helps simplify, streamline and track the cash coming into – and going out of – your restaurant. Let’s look at the fundamentals of cash flow, which will help immensely when writing a restaurant business plan. The three mainline items include:

• Cash Beginning Balance: Your cash beginning balance is available cash from your previous balance sheet. Within the initial business plan for your restaurant, this is essentially your startup cash. 
• Cash Flow from Operating Activity: Your cash flow from operating activity is all the credits and debits associated with your restaurant business. Credits are revenue from food sales, merchandise sales, etc. Debits are inventory costs, rent, labor expenses, etc.
• Net Profit or Loss: In any given accounting period (one week, two weeks, three months, etc.), your net profit or loss is basically the difference between your restaurant’s gross profit or loss and the expenses associated with running the restaurant business. A positive value indicates a net profit; a negative amount reflects a net loss.

Knowing how to utilize and track your restaurant’s cash flow is essential to writing a restaurant business plan. For more information on the function of your cash flow statement and how it impacts your restaurant business proposal, check out RASI’s helpful article on this subject.

Plans in Place for How to Start a Restaurant Business? Contact RASI When You’re Up and Running!

RASI’s complete suite of restaurant business accounting services helps transform your concept into reality. From POS integration to financial reporting and much more, our agile, intelligent solutions empower and give restaurant owners full confidence in their business finances, allowing anyone to focus on other business-critical tasks like menu engineering, promotional events and more.

LISTEN TO THE FULL PODCAST EPISODE BELOW:

Request a demo today – we’d love to review your concept and offer practical, affordable restaurant accounting services to help you grow! 

The post How to Start a Restaurant: The Ultimate Financial Plan appeared first on Restaurant Accounting Services, Inc..