Managing your finances can be one of the hardest parts of running a restaurant – and also the deciding factor between success and failure. From creating cash-flow projections to applying for loans, overseeing the financial aspects of your restaurant can sometimes feel like a juggling act.
If you're new to bookkeeping for a small restaurant, this overview will help you understand common financial tasks such as handling payroll and paying quarterly taxes. It will also cover the importance of restaurant insurance to your business's bottom line.
Restaurant bookkeeping 101
You don't need an accounting degree to keep your business on track. However, there are some basic financial tasks that you should learn as a restaurant owner, such as how to:
- Create cash-flow projections. A cash-flow projection is a formula that measures your estimated revenue after expenses (total revenue – total expenses = projected cash flow). For new restaurant owners trying to master bookkeeping for a small restaurant, creating cash-flow projections can be challenging, especially during the first year when you don't have historical data to fall back on. Still, this is a necessary part of financial planning and will help keep your restaurant on budget.
- Apply for loans. Running a restaurant isn't cheap, and most restauranteurs will require a loan at some point. There are several types to choose from, including:
- Business line of credit.
- Equipment financing.
If you're not sure which type of loan is the best fit, you may want to consult your accountant. An experienced accountant can also help you navigate the loan application process, which includes preparing financial statements and a business plan.
- Master the art of payroll. Though paying employees may seem like a straightforward task, it’s more complex than you might think. Some of the details you'll need to iron out include:
- Choosing a pay period.
- Determining how payments will be made (e.g., via direct deposit or check).
- Properly classifying employees.
- Withholding taxes.
It can be a lot to keep up with, which is why many restaurant owners outsource these functions to a company that offers restaurant bookkeeping services, including payroll management.
- Keep accurate accounting records. It's critical to maintain up-to-date financial records. Not only will it help you monitor how much revenue is flowing in and out of your business, it could also help your restaurant survive should you ever face an IRS audit. If you aren't experienced with managing the books, consider buying restaurant bookkeeping software. In addition to measuring cash flow, most software packages can also keep track of inventory, manage payroll, and run sales reports.
- Pay your quarterly employment taxes. As a small business owner, you’re required to pay quarterly employment taxes. This entails reporting what you've withheld from employees’ paychecks for federal income and Social Security / Medicare taxes, and then paying those amounts to the IRS. If your business is subject to excise tax, that will also need to be paid quarterly. Depending on the laws in your state, you may also be required to make quarterly tax payments to the state.
- Learn about savings, investment, and retirement opportunities. Restaurant owners typically don't have access to a traditional employer-paid 401(k) plan, but there are other retirement plans designed with small business owners in mind. Some options to consider include the Simplified Employee Pension (SEP) IRA or Roth IRA. A financial planner can help you choose a plan to help you meet your retirement goals.
- Hire an accountant. Restaurant bookkeeping is complicated and mistakes can be costly. If you're not comfortable doing bookkeeping for your restaurant, you might want to hire an accountant that specializes in restaurant accounting services. Not only will it remove the pressure of learning various accounting tasks, it will also free up more time that you can dedicate to other aspects of your business, such as creating new recipes or marketing the restaurant.
Small business insurance protects your restaurant from legal costs
While accurate restaurant bookkeeping can help keep your business in the black, it is still vulnerable to other financial pitfalls, such as property damage and lawsuits. For example, what if:
- Your kitchen catches fire and hundreds of thousands of dollars’ worth of equipment is destroyed.
- A customer slips on a wet floor and breaks an arm.
- A waiter overserves a customer, who later injures a pedestrian while driving home drunk.
Any of these situations (and countless others) could leave your business in financial ruin. Small business insurance policies such as business owner's insurance and liquor liability insurance can help protect your restaurant from the costs associated with commercial property damage or customer lawsuits.
Insureon has licensed agents who work exclusively with restaurant owners. These dedicated agents know the specific risks restaurant owners face, and can help ensure your business is protected with the right policies and coverage limits.
Ready to get started? Apply for coverage today to receive multiple quotes from top-rated carriers.