Before we jump in, it’s important to note how bookkeeping differs from accounting.

While there’s often overlap between the two, bookkeeping is the administrative, transactional side of the equation. With restaurant bookkeeping, you record your business’s financial transactions, including purchases, returns, and orders, in addition to logging receipts and payments from customers and vendors.

While accounting involves bookkeeping, it also requires a look at the bigger financial picture. Bookkeeping and other data are used to gain insights and take action on them.

If you need accounting support, refer to our handy guide: Restaurant Accounting Made Simple in 2024.

With this in mind, let’s dive into the six steps of a comprehensive restaurant bookkeeping system.

Step 1: Create a daily sales report

Your first step is to create a report of the restaurant’s daily sales. Completing this daily log lets you see how your restaurant is doing in real time. You know at a glance how much the business made or comped, which allows you to compare your performance over time.

Your daily report should include cash and credit card payment breakdowns. Separately recording these payment methods aligns with how the funds arrive in your bank account since credit cards typically take up to two to three days to process.

Depending on your business, you may also want to record different types of sales. For example, you could log food and beverage sales separately and further break down sales for alcoholic vs nonalcoholic beverages.

Whatever system you choose, make sure it’s consistent to ensure accuracy.

While putting this off to a weekly recording schedule may be tempting, given your other responsibilities, doing so means you run the risk of inaccuracies and errors. Schedule daily sales reports as part of your regular routine so that you don’t miss a step. You could even make this report part of your Daily Restaurant Closing Checklist.

The good news? Many daily sales reports now come from point-of-sale (POS) systems.

Step 2: Sync with a robust POS system

If you invest in a comprehensive, automated POS system for your business, you save time, money, and effort in the long run.

While POS systems used to be limited to the cash register, today’s options typically include features beyond the transaction itself.

Once the customer swipes their credit card or the staff member enters the cash sale into the electronic register, the system generates details about that sale to provide your business with actionable, long-term insights.

Accuracy and efficiency also ramp up with automation. Since the information is automatically generated, you’re not faced with tedious data entry.

Depending on the POS system you select, you can customize the sales categories to suit your business needs. For example, you could categorize sales in the following ways:

• Food and beverage sales

• Alcoholic and nonalcoholic beverage sales

• Appetizer, entree, and dessert sales

• Lunch, happy hour, and dinner sales

• Cash, credit card, and gift card payments

Many robust POS systems also include options to track other data points, including:

• Inventory

• Orders

• Expenses

• Customer information

• Menu item performance

• Daily restaurant performance

Customize the POS system to meet your specific needs, and your daily sales reports will become automatic.

While there are different POS systems to choose from, one popular option is Square. This tool provides intuitive software that connects the dining room to the kitchen to keep everyone on the same page.

The best part? Square now fully integrates with Lark. Connect Square directly to Lark Base to easily view sales data in your customized dashboard, identify patterns, and take action.

Step 3: Establish your accounts payable

Another vital piece of restaurant bookkeeping is setting up a solid system for your accounts payable.

Prompt, accurate payments to vendors help establish trust and maintain relationships. You must also ensure your system provides timely remittance of payment for maintenance, repair, renovation, licensure, and other services to keep your business legal and compliant.

Unlike sales reports, accounts payable systems should be established weekly. Set a regular time slot in your calendar to pay, send, and record each bill so you can accurately estimate cash flow and bank balances.

Choose a consistent payment method that you can commit to. Here are some popular options, along with their pros and cons:

Checks

A significant advantage to paying by check is avoiding transaction and convenience fees. You may also be able to manage your cash flow more easily, as it typically takes a few days for a check to process.

The downside is that vendors must wait longer for payment, which doesn’t foster goodwill in your business relationship. Checks can also be expensive to buy in bulk.

Online bill pay

Online bill pay is a solid, secure option for setting up recurring payments to vendors, utility providers, and other regular services.

Not all businesses are set up to receive these payments though, which may mean you’re adding another payment method to your system.

Make sure your system is set up to record recurring payments so that you aren’t faced with fees for insufficient funds. Online bill pay may take several days to process, too, so you must stay on top of your timelines if you choose this method.

ACH transfers

Some ACH transfers, like online bill pay, go from bank to bank, so they typically don’t involve a transaction fee.

Others, like PayPal and Venmo, do add convenience fees to the transaction. These transactions also take a few days to process — though you may be able to speed the process up by paying more. ACH transfers are also secure and not as susceptible to fraud.

Credit card

Since credit card payments take a few days to process, ensure you’re paying your vendors and other service providers in a timely manner. Check whether they’re incurring fees for this form of payment, as you may want to shift to another option.

With a credit card, you risk incurring high interest rates if you’re not paying off the balance each month.

Step 4: Manage your employee payroll

You’ve recorded sales and paid your bills. Now, it’s time to take care of your employees.

There are numerous components to running employee payroll. If you’re not aware of the regulations and requirements, you risk making costly mistakes.

Companies average an 80.15% payroll accuracy rate per year, with each error costing them an average of $291 to fix.

Accurate and timely payments help to maintain employee satisfaction. After all, no employee wants to work for a business that doesn’t keep track of their hours and pay them accordingly.

With payroll, you’re responsible for:

• Tracking your employees’ attendance and the regular hours they worked

• Tracking your employees’ overtime, absences, and leave requests

• Managing the differences in employee pay — for example, an HR staff member may have a salary, while wait staff are paid by the hour

• Withholding funds for wage garnishments

• Choosing a consistent, reliable payment method

Running a compliant payroll also involves paying the applicable taxes from every paycheck. Employers are responsible for remitting payroll taxes, which include the percentages of each employee’s pay that fund Medicare, Social Security, and unemployment. You may also be responsible for withholding income taxes, which vary by state and region.

Plus, if you provide health or retirement benefits, you must account for these deductions, too.

Finally, keep on top of the regulations related to tipping and employee reporting to maintain compliance with labor and employment laws.

With the complexities involved in payroll, you might consider outsourcing this step instead of tackling it yourself. Gusto and OnPay are two popular options for doing this.

Step 5: Reconcile all accounts regularly

This step in restaurant bookkeeping is less intimidating than it sounds.

Reconciling your accounts simply means comparing them to catch any inaccuracies, inconsistencies, or errors. This process also gives you a big-picture view of your monthly expenditures.

Any account with a beginning and ending balance should be part of the reconciliation process. These include the following:

• Bank accounts

• Credit cards

• Business loans

• Lines of credit

• Payroll liabilities (or the amount you owe but haven’t yet paid)

Review your written checks, credit card receipts, and other payment methods against your bank accounts to ensure the accuracy of entries.

Plan to reconcile your accounts monthly when statements are issued and easy to access. That way, if there are any issues, you can address them right away and prevent them from snowballing. In addition, you’ll be less liable for fraud if you catch and report suspicious transactions early.

Reconciling your accounts can result in:

• Correcting inaccurate ledger entries

• Discovering missing checks

• Finding incorrect deposits

• Locating cash inconsistencies

• Identifying fraudulent transactions

• Noticing discrepancies with orders and inventory

Use automated, integrated accounting tools to streamline processes, increase accuracy, and save time (and frustration). These systems also help ensure greater accuracy and compliance with tax reporting.

Step 6: Review your financial reports (and make any necessary adjustments)

The final step in a solid restaurant bookkeeping system is to review financial reports.

Restaurants often run with tight profit margins, so mistakes can be costly. The profit margin is only 3–5%, on average, for full-service restaurants. This is slightly higher for fast-casual establishments, at 6–9% on average.

Run these reports weekly to stay on top of your restaurant’s financial situation and make adjustments if needed.

Here are the essential reports to review:

Chart of accounts

Your chart of accounts lists each of your accounts in one handy place. It’s a key component of your general ledger, showing exactly how your business earns and spends its dollars.

A chart of accounts is typically divided into five separate accounts:

1. Revenue

2. Expenses

3. Liabilities

4. Assets

5. Equity

You may opt for sub accounts within each type, too. For example, your expenses account could be subdivided into food costs, rent, utilities, equipment maintenance, staffing, etc.

Cost of goods sold (COGS)

Your COGS is the total amount spent on food, ingredients, and packaging to prepare and deliver a meal. This metric also includes food waste and spoilage for increased accuracy.

COGS is calculated by adding the beginning inventory and the purchased inventory and then subtracting your ending inventory. Over time, this financial report yields valuable information, such as how seasonal price variations or changes to the supply chain have affected your bottom line.

Aim to meet the 28–32% benchmark for food costs.

Labor costs

Restaurant labor costs include the amounts you pay in wages, salaries, benefits, and payroll taxes for your employees.

Direct labor costs include frontline workers and kitchen staff, while indirect labor costs involve HR and other workers who support operations.

Running labor cost reports can give you detailed insights into your staffing needs. You may discover patterns of over- or understaffing and uncover seasonal variations.

These reports also show how gratuities are managed, whether they’re built into the bill, added to a common pot, or provided directly to the individual.

Building and maintenance costs

Run individual reports to track your building and maintenance needs over time. They should include rent, utilities, property taxes, and equipment upkeep and repair. You can also track business inspection results and make the necessary adjustments.

Save $100,000+ a year with our three inspection tips for your restaurant business.

With these numbers at hand, you can plan for upgrades, equipment replacement, and, if you’re interested, business expansion.

Marketing costs

Marketing reports show you the breakdown of your marketing efforts, implementation, and results.

Gather insights into your successful and unsuccessful campaigns so that you can make any necessary changes.

HR and payroll costs

Check your HR and payroll costs to see where you can make adjustments. Your costs will vary depending on whether you staff personnel on-site, run the processes yourself, or outsource.

Check the accuracy of your reports and look for any inconsistencies. This is especially critical for tax reporting and potential audits.

You already know that managing the books is just one part of owning a restaurant. Review our Insider’s Guide to Restaurant Management for even more tips.

With this six-step bookkeeping procedure in mind, let’s review a comprehensive tool you can use for support.