The Big Mistake

One of the biggest mistakes I see, when I take on a new client is that their books are not set up properly. By books I mean their accounting. I’m going to share with you the proper way to set up your books so you can get the numbers you need to explode the sales and profits in your restaurant.

Hey everybody my name is Ryan Gromfin.  I’m an author, speaker, chef, restaurateur and I’m the founder of www.TheRestaurantBoss.com as well as www.RestaurantProfitandPerformance.com. And like I said earlier, today I am going to show you how to setup your restaurant accounts.  I’m going to talk to you about some really, really important stuff. It may not be the sexiest and the most fun.   Usually these videos are about increasing your sales, more profits and better management. Today is a little drier, It’s about accounting and it’s particularly about making sure that three very important accounts that you have set up in whatever software you use all match. That’s going to be some kind of an income or sales account, your expense or cost of goods sold account in your inventory.

I see a lot of restaurants where their income accounts or their sales accounts look something like restaurant, patio, catering, banquets, something like that. But then their cost of goods sold or one of their expense accounts looks like food, beverage, beer, wine… Inventory accounts—if you even have them are usually all over the place.

So in the next couple of minutes we’re going to jump inside my computer, and I’m going to show you how you should set up your accounts. If you don’t do the accounting yourself forward this video to your bookkeeper. Make sure that they have your restaurant accounts set up this way. It’s the only way you’re going to get accurate numbers.

Let’s jump inside my computer and I’ll show you exactly what I mean.

How to Setup Your Restaurant Accounts

Alright! So welcome inside of my computer.  Very quickly, I just want to kind of show you how to build the accounts in whatever accounting software that you use. I like to call these categories—and then the one thing you want to make sure it that whatever categories you make here… you want to make sure that your income or your SALES ACCOUNTS, your purchases—also known as your COST OF GOODS SOLD accounts, and your INVENTORY ACCOUNTS… all match this same setup.

So everybody’s going to start with a cost of goods sold. If you only track one thing in your restaurant, it’s going to be COST OF GOOD SOLD. But a lot of people like to track food and beverage. So then your accounts are going to look something like this where you’re going to have a master account is your cost of goods sold…and underneath that you’re going to have a food and beverage account. But then some people like to track more stuff. Some people like to track a beer, wine, liquor. I prefer to track ‘beer draft’ and’ beer bottled’, as well as ‘wine’ and ‘liquor’.

So then you can see… Now you have your ‘Food’; your ‘Non-Alcoholic Beverage’—which would be like sodas, milk, juice ,coffee… and then you have your ‘Draft Beer’; your ‘Bottle Beer’; your ‘Wine’; your ‘Liquor’…

This is exactly how I like to set up accounts assuming you sell all this stuff. And then like I said, these would be your Income, your Cost of Goods Sold, your Expense Accounts, as well as your Inventory Accounts.

Some people sell merchandise in their restaurants, it should go under Cost of Goods Sold, but it’s not under Food or Non-Alcoholic Beverages or Beverages. It is it’s own category. 

The Next Step in Setting up Your Restaurant Accounts

Make sure that your income or sales accounts, your expense or cost of goods sold accounts, and your inventory accounts all match. Because imagine if you had these as your cost of goods sold or your purchases accounts, but then you had a ‘Restaurant and Catering’ as your income account, where would ‘Restaurant’ go? How would you know what your food cost is?

Let me explain that to you a little bit further. You have to compare food purchases—to food sales, in order to get food costs. But if you don’t know what your food sales are. If you only know what your total restaurant sales are. You have no number to compare that to. So that means that, when you enter in your sales for the day. You have to break it down into these exact same categories, which means that these exact same category is set up exactly the same way… need to be in your POS system where cash register so you can extract that data in the exact same manner.

How do I enter my Sales and Costs

Now the last part. The most complicated part to this is when you order your food and stuff. You have to break down your invoices. You know draft beer, bottle beer, wine, liquor…that’s pretty easy to break down on an invoice. Things you have to be careful of though, is like you might order cocktail napkins and straws from your bar vendor/supplier. Those probably don’t go into your beer cost. Those would go into a direct operating expense. Totally different another conversation!

Same thing from your broad line distributor, you may order mostly food from them but it’s not only food. So you have to go through each invoice and make sure that when you enter your food purchases.  You may have a thousand-dollar invoice from your broad line, but maybe only $750 dollars of that is food. $200 of it might be chemicals.  And $50 of it might be paper.

This is what your Restaurant Accounts Should Look Like

COGS

     Food

     NA – Beverage

     Beverage

          Beer

               Beer – Bottled

               Beer – Draft

           Wine

           Liquor

     Merchandise

Want to Try the Restaurant Accounting and Cost Control Software Yourself

Hey folks, I hope that was helpful. Also, I just gave you a sneak peek into something that I am extraordinarily proud of. For the last couple months I’ve been developing this  software and you are the first people who have ever seen that. It’s not even released yet, it’s not quite done. Well depending on when you’re watching this video it might be totally done and I will have an update below this video to let you know that, but if you’re watching this video live. Like right when I sent it out to you, the day I posted it? It’s not quite ready but it’s close.

There’ll be a button below if you’re watching this video on YouTube, that will be a link. Come on back to my website where there will be a button that you can either learn more about the software if it’s live and ready to go, or I’m looking for some beta testers who want to really help me develop this into the perfect restaurant accounting and cost control software for your restaurant. And there’ll be a button or form you can fill out to potentially be one of those beta testers for me.