As a Restaurant Owner, Here Are Five Essential Accounting Reports You Need to Review In Each Month's Financial Closing

Review your Balance Sheet

While most restaurant operators review their profit and loss statement monthly, few take the time to review their balance sheet. A great way to determine if your financials are correct is to view your balance sheet and look for any negative numbers. Negative values are usually a result of missing data or incorrect coding. Either way, these negative values can definitely have an impact on your profit and loss statement if they're actually incorrect.

Review Your Inventory Usage vs Purchase

The inventory usage report is designed to measure every ingredient you sell during a specific period and comparing that to every item you purchase during the same period. For example, if you purchase 150 beef patties during the week but you only sold 75 beef patties during the same period, it's not necessarily a problem because the sales could offset the following week however if that trend continues, then you most definitely have a problem.

Forecast and Budget

There's no quicker way to identify a problem and drive growth compared to forecasting and budgeting. For those who aren't fully aware of the difference, a budget is plan that sets spending limits while a forecast is a prediction of future revenue.

For example, a budget should cover your labor expense, rent, supplies, utilities, etc.... and although you can create a revenue budget, your forecast would be the effective tool.

When thinking about your budget, keep in mind that your budget is broken down between controllable and fixed expenses and even though almost no expenses can be completely controlled, if the expenses aren't managed properly they can be higher than necessary.

Forecasts are a great way to set goals and get an insight into your restaurant like never before. For example, let's say that you forecasted for your restaurant to generate $225,000 in the month of May however you only generated about $200,000. After realizing that you're $25K short of your forecast, your next response should be "what happened?".

When it comes to forecasting, multiple things can impact the success of your restaurant. This includes everything from weather, to holidays, national events, local competition, poor service, changes to your menu, a terminated employee and more.

In short, by analyzing your forecast and budget, you stand to learn a lot about what impacts your restaurants and how to manage through it all.

Review your Statement of Cash Flow

If you've ever looked at your financials and wondered why it showed a profit, but your bank account made you feel like something was missing, then you'll want to start reviewing your statement of cash flow. What is a statement of cash flow.

In most cases, today's accountants and bookkeepers will use the accrual method of accounting. This is when your company recognizes its expenses when they occur versus when they're paid. For example, if you received a shipment of bread on June 20th but you didn't pay for the bread until July 2nd, if you didn't use the accrual method, the cost of that bread would not be recorded until July 2nd, the date you paid for it.

A statement of cash flow is the report that can actually show you where you spent your money during the period while your profit and loss statement is designed to show activity beyond just the movement of money.

General Ledger Details

The GL Detail Report is a listing of all the details behind every entry recorded in your financial reports. By getting a copy of your GL Details with your other financial reports, you'll have the answer to many of your questions, right in front of you.

In Summary

Reviewing these five essential restaurant accounting reports can help identify potential issues early, make informed decisions, and drive growth. Remember, a proactive approach to financial management is key to maximizing efficiency and profitability in your restaurant operations. Stay diligent, and your efforts will pay off in the long run.