How Proper Food and Beverage Accounting Increases Revenue

If you own, or want to open a restaurant there are things you need to know about the importance of food and beverage accounting.

Leadership Lies With Proper Food and Beverage Accounting

The media says that only 1 in every 10 restaurants succeeds in the United States, meaning 90% fail. But a study completed by Concordia University found that only 60% fail. Although both numbers are high, it does not mean restaurants are riskier than other businesses.

Concordia cites 4 reasons for failure, and weak or ineffective leadership is the first reason. Part of being an effective leader is being organized and providing proper management to the people of the business, and the behind the scenes running of it. Which is why proper food and beverage accounting is so important to success.

Other Reasons for Failure Along With Improper Food and Beverage Accounting

Poor Choice of Location: Along with effective leadership, location plays a big role. In this regard, visibility, accessibility and parking are significant factors in the success of a restaurant. As well, the demographics and neighborhood traffic generators signify the potential of accessibility to the restaurant’s target market.

Proper Competition Research: Another important factor to consider besides food and beverage accounting is due diligence with market research. Restauranteurs should never underestimate competing restaurants. Along with evaluating other restaurants in the area owners need to evaluate their ability to implement strategies to stay ahead of them.

Lack of Focus and Expertise: Running a restaurant can be overwhelming with thousands of tasks are necessary to operate the business. Balance is required, because all areas have to be tended to continually. This is why owners need to outsource tasks they aren’t comfortable doing, such as the monthly food and beverage accounting processes.

Family Balance: Another barrier to effective leadership along with proper food and beverage accounting is underestimating the drive and consistency required to run a restaurant. If there isn’t a balance it can take an extensive toll on the family members involved in the day to day business operations.

Elements of Food and Beverage Accounting

There are many factors involved in an accounting system for a restaurant, and some of which include:

• Day to day accounting

• Financial statement reporting

• Tax planning

• Advisory Support

Food and Beverage Accounting – Having an Accurate Profit and Loss Statement

One of the key financial statements is the Profit and Loss Statement. This is in part described by Investopedia:

“These records provide information about a company's ability – or lack thereof – to generate profit by increasing revenue, reducing costs, or both.”

Without proper food and beverage accounting systems in place, a restaurant will not have an accurate portrayal of whether or not they are actually making money. Those without a proper accounting background may not know how important the difference between food costs and food purchases are in the Profit and Loss Statement.

Food and Beverage Accounting - Food Costs and Food Purchases

The difference between food costs and food purchases can be described as:

• Food Costs: Food purchases t necessary to generate food sales in a specific period.

• Food Purchases: Its purpose is to tell you how much food was bought throughout the month.

As you can see, food and beverage accounting knowledge is key to the success or failure of a restaurant.

Miller Kaplan Arase LLP, a full-service public accounting firm in Los Angeles, dedicated to providing accounting, auditing, business management, tax and advisory services for food and beverage ( millerkaplanbever ), entertainment, retail, real estate businesses, tax-exempt organizations, and individuals across the US.