5 restaurant accounting software tips

Running a restaurant is exciting, but it comes with an endless to-do list. So how can you make the accounting simpler?

A restaurant owner using accounting software

Food, drink, ambience – and cash flow

To succeed in the competitive restaurant industry, you’ll need a firm grip on the finances. One of the major reasons why restaurants go out of business is badly-managed accounts. With transactions going through on a daily basis and razor-thin margins, it’s important to manage cash flow well and keep an eye on inventory, costs and revenue.

So it's wise to think about restaurant accounting software before you open your restaurant. You'll need a system that is:

  • online – you can access it anytime, anywhere on your laptop or smartphone
  • accurate – you’re able to make business decisions with confidence
  • easy to use – you can hit the ground running
  • smart – you’re able to see the health of your business in real-time
  • flexible – you can be confident it will cope with the challenges of running a restaurant

Here are five tips to help you understand the basics of restaurant accounting, so you can set up a system that works for you.

1. Get a back-end system that’s flexible

Restaurants do lots of their business outside conventional working hours. Lunchtimes, evenings, weekends and holidays are busy periods for most restaurants. This has an effect on payroll. You'll need an industry solution that can handle:

  • Open shifts and replacements: Do you often have employees cancel a shift or need immediate help? Never do the ring around again. Get restaurant accouting software that makes it easy to offer open shifts to either selected people or your entire workforce.
  • Employee tips: In many countries it's normal for customers to tip a percentage of the total bill. Sometimes this is added to the bill as a discretionary payment. Sometimes it's left for the serving person in cash. You'll have to consider how to handle tips, depending on the law in your country. Many restaurants distribute this money to all employees, since they’re all part of the team – but make sure you check with your accountant.
  • Turnover of employees: Some of your employees will choose to make a career in the restaurant business. Others will work for you temporarily before moving on. Restaurants often have high staff turnover, so you'll want a payroll system that's easy to use. Simple setup of new employees and processing of leavers is essential.

2. Keep your pricing competitive

Menu pricing is a balancing act. You need to take account of the cost of ingredients and overheads. You must also stay competitive with other local restaurants.

There's nothing wrong with pricing some menu items low to bring in new customers. Loss leaders like this are part of doing business. But there's no excuse for setting prices too low just because you haven't checked your costs.

The restaurant accounting software you choose can help make this task easier. You can create reports to estimate meal prices on a weekly or even daily basis. Armed with the numbers, you can check out the competition and make informed pricing decisions.

3. Get a POS system that ties in with your accounting software

Most restaurants receive money from customers in two different ways. Some diners pay with cash, others with credit or debit cards.

A good POS (Point of Sale) system will handle these payments for you, and connect to your accounting software. That will help you update your cash flow predictions daily. And it will make life easier for your employees.

It's not always practical to create an invoice for every meal in your accounting software. So how do you process all the payments you receive in a day? You could:

  • create daily sales invoices, then receive the money into a cash control bank account
  • use the receive money option in your accounting software to record all the day's takings in one go
  • create a sales invoice for the day's takings – then split the amount into separate petty cash and credit/debit card accounts

Other options are available. Talk to your bookkeeper or accountant to find out which one best suits your business.

4. Manage inventory well to avoid waste

A restaurant is one of the only types of business in which all the inventory is consumed on the premises. Your customers pay you money, but they don't take anything away with them.

Managing stocks of food and drink can be a challenge. It's expensive to hold too much, especially if it’s perishable. So restaurants rely on regular deliveries to keep the kitchen well supplied.

Restaurant accounting software can help you here. Detailed reports of past revenue will help you identify peak times of the week, month and year. This helps you plan your deliveries and inventory to match. That way you won't hold too much – or too little.

5. Account for all receipts

You'll have regular suppliers who bill you in the usual way. But sometimes you could still run short of ingredients. For example, imagine you get an unexpected booking for 16 people and they all order the same fish dish. That could exhaust your supplies of fish for the night.

Enterprising restaurant owners have local networks of late-night suppliers for situations like this. They might use trade suppliers or local supermarkets.

Ensure you make a record of everything you buy. That includes those extra bottles of milk to make closing-time coffees. Process every receipt, so you're not out of pocket when it's time to offset your expenses against tax.

Get the right restaurant accounting software and watch your business flourish

Not just surviving but thriving in the restaurant industry is tough – and like any other business, it all comes down to the numbers. Having the right restaurant accounting software means you’ll understand how those numbers affect the bottom line.

From revenue to payroll, and from inventory to expenses, having a great small business accounting system matters. Before you even open your new restaurant, it’s sensible to have a plan for your accounting system in place. Used wisely, it will help you manage and grow your restaurant business.


Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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