Accounting, much like cooking, carries its own language. People not familiar with the associated terms for either are often left confused in the process or direct themselves toward a costly mistake. Whether a restaurant owner is heavily involved or minimally involved in their bookkeeping and accounting, there are some accounting terms to know and understand for making better business decisions. A few of these are defined below.
Accounts Receivable – This term is usually defined as the money owed to a business from a person or other entity. Restaurants don’t often hold an accounts receivable balance since their debtors (customers) often immediately pay their balances.
Payables – The opposite of accounts receivable is payables. This is what a restaurant owes to another person or entity. For instance, you may have a recurring payment on a loan that would be included in this category.
Assets – These are everything that a restaurant owns of value. Kitchen equipment, furniture, technology, and cash are all included in the assets category. It is important to note that equipment can lose its value over time, so the cost of these items is evaluated and reported every so often. These usually don’t affect your day-to-day profits, but may affect how much you could get for your restaurant if you decided to sell one day.
Liabilities – Whatever you owe to somebody is considered a liability. With restaurant accounting, this can include credit card tips and payroll taxes. It can also include gift cards not yet redeemed. Knowing the liabilities and assets of your restaurant can help you better understand the cash position of your business.
Cash Flow – This measures the cash in and out of the restaurant. According to accounting service RSI, recording cash flow can help a restaurant identify recurring seasons of lower inflow and/or higher outflow for the same products. With this knowledge, restaurant owners can prepare for these periods of low inflow or adjust the menu based on seasonal prices of ingredients.
Gross profit after prime costs (GPPC) – To calculate this number, you take the revenue made on the food and beverage and subtract the initial cost of the goods as well as subtract the cost of labor. This gives a restaurant owner a general idea of their profit margin to determine if the business plan is healthy or needs tweaking.
Net Operating Income (NOI) – This value is calculated by taking the total revenue and subtracting the total expenses of the restaurant. Restaurant owners can decide what to do with extra funds, such as paying off loan debt or investing in the growth of the franchise.
For restaurant owners, keeping accurate accounting records is imperative to running a profitable business. Detailed records provide restaurant owners with the data needed to make intelligent business decisions and grow their profits. Using a professional accounting service is usually advised for restaurant owners to keep track of all of the moving parts of food industry accounting.
Company Name: RSI
Contact Person: Amanda R. Wiley
Email: Send Email
Phone: (303) 458-1204
Address:1101 W. Mineral Ave. Ste. 200
Country: United States