Running your own restaurant is challenging — but deeply rewarding. To help your food business survive and thrive, we’ll discuss the 5 most common mistakes in restaurant bookkeeping and how to avoid them. Read on to learn more about the importance of organised bookkeeping and how it can help you make informed business decisions in your food business.
Why is bookkeeping important for your restaurant?
Bookkeeping is important because it records the financial transactions of your food business. Accurate bookkeeping helps you track your cash flow, manage your finances and pay the appropriate taxes. If your books are a mess, you might be losing money without knowing it. When you finally spot discrepancies in your invoices and bank accounts, you won’t know where the missing money went.
If you plan to sell your restaurant, bookkeeping can make or break the business deal. If a buyer sees that your books are disorganised, they will be hesitant to purchase your restaurant. How can they trust that your figures are correct when important documents are missing and your tax returns are not coded correctly?
On the other hand, if the buyer sees that your books are done right, they will have confidence that your reported profit and wages are true. This gives your asking price more weight and puts you in a more powerful position for any negotiations.
Taking your bookkeeping seriously enables you to make wise business decisions.
What are common restaurant bookkeeping mistakes?
Most mistakes in restaurant bookkeeping stem from lack of knowledge. It’s your responsibility as an owner and operator to learn the tax system for Australian businesses. A bookkeeper who specialises in hospitality can guide you through this maze. They can clearly explain the different types of taxes for businesses and help you handle tax issues for your restaurant. If you have a lot on your plate, hiring a restaurant bookkeeper will keep your business compliant without much fuss.
- Resorting to incorrect processes to save money. If cash flow becomes a problem for your business, watch where you cut corners to survive. Some restaurants slip into incorrect processes to stay afloat, not realizing that it will hurt their business in the long run. Avoid the temptation to pay staff under the table. You won’t have problems with investors, buyers or the ATO if your books accurately reflect your employee wages. It’s never too late to get back on top of things, such as employee Superannuation payments – learn about the Superannuation Guarantee Amnesty.
- Running personal expenses through business accounts. It’s important to separate your personal and business accounts so you have a clear snapshot of your restaurant’s financial situation. It also speeds up the process of lodging your BAS and filing tax returns. Keeping your personal and business accounts separate right from the beginning will save you a lot of time, money and headache because you won’t need to hire bookkeepers to clean up your books in the future.
- Not claiming GST credits for applicable bank merchant fees. Not all bank fees are GST free, but you can get it when you’re paying merchant fees to your banks for credit card transactions. Check your BAS to see that bank fees are being coded correctly. There are actually two different codes for bank fees.
- Not claiming GST credits for leased restaurant equipment. Food business owners can claim input tax credits for rented equipment like Silver Chef rental products. Learn more about Silver Chef and how to properly categorise leased equipment by contacting a qualified hospitality bookkeeper.
- Not coding leased commercial property correctly. Your business activity statement (BAS) needs the right details about your establishment. If you have a rental agreement in place, the statement must reflect if the property is prepaid or if you’ve got a refundable bond for it. What improvements are incorporated in the lease? What specifics are included at the point of sale?
If you’re just getting started, you can read our 8 steps to getting your food business setup for compliance and success.
Or, if you’re on the go, listen to our interview with Profitable Hospitality host, Ken Burgin.
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Time to prep! Mise en place!
Christine Green and team