3/10/2024 0 Comments Cash basis accounting cogs![]() You can track all your monthly expenses and revenue. Then you can compare it to your 4-week financial period to see if you’re staying on budget or not.Ĥ. You’ll be able to keep a finger on the pulse of your business’ health. After all, your main concern as a restaurant owner is knowing exactly where your money is going.ģ. You’ll see whether you’ve paid all your expenses or not. For example, if a distributor claims they haven’t been paid, reconciling your statements will help you catch a check that hasn’t cleared or other missing payments.Ģ. Reconciling your bank and credit card statements can also help you proactively address a bunch of other problems that might pop up…ġ. Or you may find yourself without the overhead you thought you had. And if you don’t reconcile your bank and credit card statements each month, you won’t catch these errors. Well, it’s perfectly natural – even common – for accounting errors to happen a few times a month. ![]() The problem is if you don’t take the time to make sure they match… you’re going to have major problems. So sometimes tasks slip through the cracks… like remembering to reconcile your bank and credit card balances every month. Related post: 7 Restaurant Accounting Questions You Should Be Asking #3 Not Reconciling Bank and Credit Card Balances Every Month This makes it impossible to see the proper balance of profits and losses during any given time period… so when you look at your finances on a cash basis, you’re not getting an accurate number. And with cash accounting, you record these expenses and earnings when they’re actually paid, not when the services are rendered.īut that means if you order maintenance work on an oven in your kitchen and don’t pay the invoice until the following month… the expense won’t be reflected in the proper time period. The concepts are pretty simple…Īccounting requires you to look at expenses and revenue. What’s the difference between cash and accrual accounting? The other huge mistake restaurants make when it comes to their accounting is looking at finances on a cash basis instead of on an accrual basis. #2 Looking at Your Financials on a Cash Basis That’s because the majority of your business lands on specific days of the week, so it’s easier to see trends and changes by doing your accounting using a 4-week timeline. In other words, each statement includes the same number of Mondays, Tuesdays, Wednesdays, etc.Ī 4-week cycle may not be as important in some industries, but it’s essential in the restaurant industry. On the other hand, when you use a 4-week cycle from Monday to Sunday, you can accurately compare time periods from this year to the same time periods last year. There weren’t the same number of Fridays and Saturdays during July of last year as this year… so your numbers are going to be off. Instead, you should use a 4-week accounting period that begins on a Monday and ends on a Sunday.įirst, using a 4-week cycle makes it easier to compare profits and losses (P&L) to other financial statements.įor example, it’s not accurate to compare your P&L for July of this year to July of last year. In other words, only balancing your budget at the end of every month… October, November, December, etc. The first mistake you should avoid with your restaurant accounting is only looking over monthly financial statements. Which means every penny you save or spend has an impact on your bottom line.īecause managing your budget and keeping an eye on your money is so important, we’ve put together 5 critical mistakes restaurants make with their accounting… and how to fix them. ![]() There’s no way around it… your finances are a major part of your daily operations. The truth is, if you don’t take your restaurant accounting seriously – seeing exactly where your money is going and why – you’re most likely headed towards disaster. The one way to tell if your restaurant is doing well? The problem is… they don’t necessarily mean profits are up. Yes, these are all reasons why you may think you’re running a healthy business. How do you know your restaurant’s doing well?
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