It’s obvious – they both need to balance. You worry about balancing the beers while Restaurant Bookkeepers keeps your Balance Sheet in balance.
Every financial transaction in your business has a debit and credit. This means that if you take $10 out of one account, it, must be recorded to have a corresponding entry on the other side of the ledger. While most accounting software will take care of automatically balancing basic transactions, an error in coding a transaction can be costly for your accountant to find and repair.
If you engage with a quality bookkeeper and take the time to understand your financial statements, you will be able to trust your business’ financial reports and keep your accountant’s bill to a minimum.
Most restaurant and cafe owners can easily understand a Profit and Loss Report – it’s a basic money in and money out equation impacted by what you buy and sell.
“Anything left over is profit, so it will all be in my bank account. Right?”
Well…sort of! Any profit from your Profit and Loss report is moved to your Balance Sheet to your Equity or investment in the business. Profit is used to pay liabilities such as bank loans and suppliers. It’s not a direct indication of how much money should be in your bank account. You need to look at your Balance Sheet to know the balance of your cheque account.
A Profit & Loss report is a good way to measure how your business is performing over a period of time eg: 3 months, 6 months, 12 months.
A Balance Sheet report is a snapshot of your business’ worth / health on any given day in time. Such as the value of your catering equipment, fitout and motor vehicles, how much you owe out to suppliers or loans, cash in the bank, etc. These are your Assets and Liabilities – what you own, what you owe out and what is owed in.
If you are looking to upgrade your catering equipment, fitout or start a new food business, you will need to have accurate and up to date financial statements to show your bank or finance company. By keeping your bookkeeping up to date daily / weekly / monthly, you won’t be delayed when the next business opportunity presents itself.
If you’re still foggy on how to read your financial statements, give us a call and we will walk you through it. Understanding your numbers is a powerful way to manage business success.