Many restaurant owners set up their restaurants so that they can serve great food, not so they can spend hours working on very detailed bookkeeping. If you are spending too much time on your accounting, have no confidence in your numbers and KPIs, or – worse – your accounting is so out of date that it’s not useful, you might consider handing that work over to someone else. Let’s discuss why you should outsource your restaurant’s accounting.
Outsource Your Restaurant’s Accounting to Bring in Useful Data
Restaurant owners need their financial data to do two things:
- Provide a dashboard of the concept’s performance and trends in order to make decisions in real-time, and
- Serve as a diagnostics to show strengths and weaknesses to help owners make meaningful changes and develop long-term plans.
In order to get to those KPIs, all your financial data needs to be converted from basic transactions like purchasing ingredients, paying your employees, selling meals, and paying various taxes, into real metrics like food costs and cost per menu item, labor costs, and revenue per square foot. That conversion takes quite a bit of time, expertise, and consistency – which you probably don’t have available to spare for accounting. By outsourcing your restaurant’s accounting to a firm that specializes in processing that information, you have access to up-to-date KPIs and regular financial reporting without eating into your time and energy. This allows you and your outsourced accounting team to more quickly and easily identify issues and take action before it’s too late.
Gain Accounting Expertise from your Outsourced Accountant
Speaking of your outsourced accounting team, outsourcing your restaurant’s accounting also gives you access to not only your current KPIs, but also a wealth of expertise that’s typically not available from hiring a single, in-house bookkeeper. For example, your outsourced accounting team will typically have a staff accountant with years of experience managing AP, tracking and reconciling invoices, ensuring all financial softwares are properly syncing and reconcile, and troubleshooting errors; a senior accountant who oversees and reviews weekly accounting, and pushes regular updates to team members; and a CPA-licensed advisor who regularly reviews your financials and can alert you about concerns and potential improvements. Your outsourced accounting advisor can help you make strategic decisions based on your KPIs, identify tax savings, and help you with tax planning so that the process is buttery smooth when it’s time to actually file.
Although the accounting team as a whole is definitely important, let’s focus on the advantages of having an accounting advisor for just a moment. The “old” way of accounting has traditionally involved retaining a bookkeeper and possibly AP and payroll clerks to manage the day-to-day accounting, then hiring a tax CPA once a year to prepare and file taxes. If you’re okay with your current situation and are not looking to grow and scale, this setup may be fine for you. But, it’s a very reactive approach that often costs restaurant owners lots of improvement opportunities and serves up a nice headache once a year as you answer your tax accountant’s questions and chase down support. The proactive approach offered by outsourcing your restaurant’s accounting provides you with year-round tax advice, an extra level of oversight to ensure your financials are correct, and a sounding board to help you identify and implement improvements.
When looking for an outsourced accounting provider, focus on finding a firm with restaurant accounting expertise. This will help you get to the best resources and recommendations, as that team will be familiar with the best software available and how to make them work, restaurant industry best practices, and the quick changes in the restaurant environment. For the rest of this discussion, let’s assume that the outsourced accounting team does specialize in restaurant accounting.
Outsource Your Restaurant’s Accounting to Decrease Costs
This is actually a two-pronged advantage to outsourcing.
Contract Service vs In-House Hiring
While it is very unusual for a smaller restaurant concept to hire a dedicated financial team in-house, a complete team would include a bookkeeper, an AP clerk, a payroll specialist, possibly a separate high-level accountant, and a CFO or controller. Even if you skip the separate accountant, the restaurant owner serves as the CFO/controller, and you combine two of the other roles, you’re still looking at two separate employees – and very likely a lack of segregated duties, which creates the opportunity for fraud and theft (we’ll discuss this more, later). Not to mention, unless one of those people also happens to be a small business tax expert (unlikely), you’re missing the tax planning and advisory aspect altogether. Even so, this small team adds up to a significant investment after regular salaries, payroll taxes, and any insurance/benefits you offer.
Alternatively, outsourcing your restaurant’s accounting gives you access to all of the necessary roles for (typically) a flat monthly fee that works out to be much less than hiring even just two full-time accounting team members in-house. This is because the outsourced accounting team will cover multiple clients, and will design your engagement to assign easier tasks to lower-cost resources and limit the high-cost resources to only when needed. Check out How Much Does Restaurant Accounting Cost and Why to further understand the outsourced restaurant accounting pricing model.
Finally, if you hired your accounting team entirely in-house and then lost an employee, you would have to cover the costs of hiring a new employee for that role, and deal with the incomplete work in between. An outsourced accounting team will have enough experienced team members within the firm to cover for the loss of staff, and prevent gaps in the accounting work when a team member is sick or takes vacation. As an added benefit, an outsourced accounting team can scale the engagement to your specific needs, and quickly adapt as your restaurant experiences shifts in operations and seasonal swings.
Cost Savings from Proactive Financial Management
Your outsourced accounting team will have extensive training on managing AP and mitigating billing issues. They can help you save money by tracking credit memos and ensuring they are properly applied, prioritizing bills that have shorter net pay periods and that have discount net pay, and preventing or pushing back on inappropriate late fees. This type of work is often de-prioritized by in-house personnel and owners who are handling more than just the accounting because it can be very time-consuming, but this type of AP management can save a restaurant hundreds of dollars a week.
Reduce Your Risk by Outsourcing
Not only do you mitigate the risk of your financial team leaving by outsourcing your restaurant’s accounting, but you also reduce these risks to your restaurant:
- Risk of Error – by having multiple levels of review, an outsourced accounting team can catch errors in your financials and financial processes before they compound into major issues for your restaurant.
- Risk of Theft – outsourcing your restaurant’s accounting inherently creates segregation of duties, which reduces (several) risks by making it more difficult for one person to commit theft, or fraudulently pay themselves from the restaurant’s funds. Segregating duties creates checkpoints which are performed by different people. By disconnecting the accounting from the people who handle cash, creating an approval and custody audit trail in the AP process, and implementing reviews by multiple people, your outsourced accounting team can help prevent and/or catch theft.
- Risk of Fraud – this ties in closely with the risk of theft, but also consider the risk of hiring someone in house who doesn’t actually know what they’re doing. If you hire an internal accountant who claims they can do it all, only to slowly discover that they can’t answer your financial questions or keep up with your bill pay, you’d lose months of useful data, the cost of paying them as an employee, the potential opportunities and extra/late fees that were overlooked, and the cost of having to catch up your financials. When you outsource your restaurant’s accounting, you wisely pass this risk on to the accounting firm – who can likely mitigate this risk much more efficiently.
- Risk of Access/Information Breach – admittedly, there isn’t much your outsourced accounting team can do to prevent the theft of credit/debit card information at your restaurant’s location(s), but they can help secure your restaurant’s financial information with accounting-industry-standard security protocols, controls access, and information backup to prevent financial loss.
When looking for your outsourced accounting firm, ask potential firms how they allocate resources, segregate duties, maintain confidentiality, identify fraud, and keep your records safe. Then, compare what it would cost for you to do all of that in-house to get a more complete picture of this value.
Outsource Your Restaurant’s Accounting so You Can Get Back to Your Restaurant
This is the advantage of outsourcing your accounting that will resonate with you the most personally. You didn’t start your restaurant concept so that you could spend hours paying food vendors, chasing credit memos and returns, worrying about sales taxes, and guessing at your financial position – and we appreciate that. Outsourcing your restaurant’s accounting allows you to go do what you do best: running your restaurant, opening more locations, spending time with your family, or sipping piña coladas.
You already know that scaling your restaurant is a challenge. Increasing customer volume and hiring new employees to support that growth quickly tests your restaurant team’s skills and capabilities; you don’t need the stress of managing your accounting to compound that challenge! Outsourcing your restaurant’s accounting not only helps you get to accurate and timely KPIs, but also gives you the freedom to act on that financial information as a restaurant owner/operator, instead of getting bogged down in the transaction details.
Ready to Outsource?
Whether you’re a very hands-on restaurant owner, or want absolutely nothing to do with it, outsourcing your restaurant’s accounting helps ensure you have useful and timely information, connects you with the accounting expertise you need, saves you the cost of lost opportunities and in-house salaries and taxes, reduces your restaurant’s financial risk, and frees you from the stress of accounting. If you’re ready to set up an outsourced accounting engagement, or just have questions about what the process might look like for you, schedule a call to connect with The Fork CPAs.