Restaurant Bookkeeping: The Numbers Every Owner Needs to Track

Restaurants operate on some of the thinnest margins in any industry — typically 3% to 9% net profit. At those margins, sloppy bookkeeping doesn't just create accounting headaches. It can mean the difference between staying open and closing.

Restaurant bookkeeping has unique requirements that don't apply to most other businesses. Here's what you need to track and why each number matters.

Food cost percentage is the ratio of what you spend on food and beverage to what you bring in from food and beverage sales.

Formula: (Cost of Goods Sold ÷ Food & Beverage Revenue) × 100

Most restaurants target a food cost percentage of 28% to 35%. If yours is higher, you're either over-purchasing, experiencing theft or waste, or your menu prices are too low.

To track this accurately, you need:

• Invoices from every food and beverage vendor
• Inventory counts (beginning and ending) for each period
• Sales data broken down by category

Labor is typically the second-largest expense after food. Labor cost percentage includes wages, payroll taxes, and benefits as a percentage of revenue.

Formula: (Total Labor Costs ÷ Total Revenue) × 100

Combined food and labor costs — called "prime cost" — should ideally stay below 60% to 65% of revenue. If prime cost is above 70%, you're likely losing money.

Every day, your POS system generates a sales report. That report needs to match your actual cash deposits, credit card settlements, and any other payment methods. Discrepancies — even small ones — add up fast and can indicate errors or theft.

Daily reconciliation is a discipline that most small restaurants skip until something goes wrong. By then, months of discrepancies are hard to untangle.

Restaurants typically have multiple food and beverage vendors, each with their own invoices, payment terms, and delivery schedules. Tracking what you owe and when it's due prevents late fees, damaged vendor relationships, and supply disruptions.

In QuickBooks, each vendor should have a profile, and every invoice should be entered when received — not just when paid.

Restaurants collect sales tax on food and beverage sales (rules vary by state and sometimes by item type). That tax needs to be tracked separately and remitted to the state on schedule. Commingling sales tax with operating funds is a common mistake that creates a painful surprise when the remittance is due.

A restaurant's chart of accounts needs more granularity than a typical service business. Key accounts to set up:

Revenue:

• Food Sales
• Beverage Sales
• Catering / Events (if applicable)

Cost of Goods Sold:

• Food Cost
• Beverage Cost

Operating Expenses:

• Labor — Kitchen
• Labor — Front of House
• Payroll Taxes
• Rent / Occupancy
• Utilities
• Supplies (non-food)
• Marketing
• Equipment Maintenance
• Credit Card Processing Fees

Getting these accounts right from the start means your reports actually tell you something useful about your business.

1. Not tracking food cost by category. Knowing your overall food cost is useful. Knowing that your beverage cost is 22% but your food cost is 41% tells you where to focus.

2. Mixing personal and business expenses. Common in owner-operated restaurants, and it makes your books unreliable.

3. Not reconciling the POS to the bank daily. Small discrepancies compound quickly.

4. Ignoring accounts payable. Paying vendors from the bank without recording invoices means your expenses are understated until the payment clears.

5. Treating owner draws as expenses. If you're taking money out of the restaurant for personal use, that's an owner's draw — not a business expense. Recording it as an expense makes your P&L look worse than it is.

Ideally, daily for sales reconciliation and weekly for vendor invoices. Monthly reconciliation of all bank and credit card accounts is the minimum standard.

If you're doing your own books and falling behind, the backlog compounds fast in a high-transaction business like a restaurant. A professional bookkeeper who specializes in restaurants can handle the volume and keep you current.

The Gap ProAdvisors works with restaurant owners to set up and maintain accurate books in QuickBooks Online. Contact us for a free consultation, or get a cleanup quote if your books need a fresh start.