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How Restaurant Bookkeeping Is Different Than Most Businesses

The restaurant industry presents many challenges on both the business and bookkeeping fronts. Newcomers to the industry might assume that bookkeeping at a restaurant is just the same as any other business, but it is definitely different! Here are some things to keep in mind when evaluating your bookkeeping process.

The restaurant industry requires a lot of quick decision making. Menu items, staffing plans, and special promotions can be created and pulled with a moment’s notice based on their popularity and how it affects the bottom line. Restaurant bookkeeping requires a quicker turnaround on updates of profits and loss statements since things can change so quickly. Unlike other businesses with products that can last for long periods of time, restaurants deal with a lot of inventory turnover. Restaurant employees must take inventory frequently and itemize the menu items that have sold to show which inventory has been used. Inventory must take account for any food items that have both been used or have spoiled.

Another point for consideration with restaurants is that inventory costs can change drastically depending on the market. If there’s a sudden flash flood raising the cost of strawberries through the roof, the restaurant has to decide whether to keep any menu items associated with strawberries at the same price and assume the cost difference until the strawberry crisis is over. Or the restaurant can raise the price of the menu item, letting the customer assume the cost difference to continue to make profit.

While the use of credit and debit cards are extremely popular right now, restaurants deal with a high volume of cash exchanges. With the added intricacies of tips for service, it’s extremely important to reconcile every single penny that comes in. Restaurants are also required to account for all sales and tips received.

Most restaurant employees are paid hourly with timesheets. You must double check reported time sheet hours compared to scheduled hours, taking into consideration schedule swapping, calling in sick, or other changes. Also, if employees reported hours add up to a full-time status, additional compensation is required, so restaurant owners must watch these hours closely to take that into consideration.

It takes a highly trained bookkeeper to understand the nuances of restaurant bookkeeping. With years of experience, the knowledgeable staff at Count ‘Em Beans will assess and improve your bookkeeping process. Schedule an appointment with us today!

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5 Payroll Mistakes You're Probably Making

Anytime you have employees (including yourself!), you’re going to have to deal with processing a payroll. While it may seem like a simple matter of numbers, payroll also involves picking the right designations for employees and for certain types of wages. Making the following mistakes may not create problems in the short term, but at tax time, your company could have more serious problems with the IRS. Here are 5 common payroll mistakes and simple ways to avoid them.

 

1.  Processing payroll late. Your time is precious! As a small business owner, there are so many tasks that you need to accomplish on a day to day basis to keep your business running that you may forget about the payroll. Set up a task calendar which will give you a rotating “to do” list every day to make sure payroll doesn’t get overlooked. Also consider using a payroll processing service that will automatically process payroll on a timeline you schedule. Count ‘Em Beans will be happy to help you out with this!

 

2.  Misclassifying employees. The IRS mandates that you are required to pay social security and Medicare for employees, but not for contractors. Make sure that each of the people who does work for your business are classified appropriately on your payroll to get the most advantage for your company.

 

3.  Not getting contractor information up front. It may be tempting to pay contractors without completing the appropriate 1099-MISC form because you’re not sure whether they will do the required $600 of work for you during the tax year. It’s wiser to fill out the appropriate form right away, to cover your bases in case your contractor does do over $600 of work but you’re unable to contact them for the required information needed on the 1099-MISC

 

4.   Not including bonuses as gifts. Don’t forget to document any gifts, bonuses, or prizes as wages on your employees W-2. These gifts are taxable! If they go undocumented, that means you are “paying them under the table,” which could lead the IRS right to your doorstep.

 

5. Overlooking bank holidays.  Payroll processing does not include any bank holidays as “business days.” Therefore, check with your particular bank to find out what days they observe as bank holidays. Then alter your payroll processing schedule accordingly so that you don’t have any mistakes. Also, inform you employees of these bank holidays so that they are aware!

          

There are so many things to remember when it comes to processing payroll for your company. The IRS keeps a close eye on businesses to make sure that everyone is getting paid appropriately and that taxes are filed appropriately. Know the laws for your particular area and follow these simple steps to prevent payroll mistakes. If you’ve still got questions, we’d be happy to review your payroll process with you!

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Profit vs Profitability: What They Are and Why They Are Important

Two of the biggest goals in making a business successful is to increase revenue, and to reduce costs. By subtracting costs from revenue at the end of the month, this will show the business’ profit. But this can’t be the only indicator of a business’ success. Instead of only looking at the short term monthly profits, it’s important to understand the profitability of the business for long term financial decision making.

 

In order to understand the difference between profit and profitability, let’s first define profit. Profit is the absolute number which can be determined by subtracting expenses from income. For example, if a company makes $1000 in a day, but has $500 in expenses, the company’s profit is $500.

 

On the other hand, profitability measures the success of your business through the ratio between profit and revenue. There are many different ratios that you can use to compute this, but in the long run, profitability provides a better picture of the potential for success and growth in your business.

 

Despite having the same profit, if two companies have the same amount of profit, but one had much higher expenses, this leaves the company vulnerable. The more expenses that a company takes on, the more vulnerable they are for failure, because it doesn’t leave as much room for error or changes in the budget lines. A company is more profitable with lower expenses, and higher revenue. This leads to the importance of analyzing expenses, and increasing revenue through either increasing the cost for the services your business offers, or cutting expenses to increase your profitability.

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Do You Know The Difference Between a Charge Card and a Credit Card?

While some people may use the terms charge card and credit card interchangeably, there is a actually difference between them! Let’s take a look at what makes each type of card different and how they could benefit your wallet.

Credit cards are in everyone’s wallets. These cards allow you to borrow from a financial institution, essentially a mini loan, to make purchases. When you open the credit card, your credit score will determine your credit limit. This limit will mostly stay fixed, with minimal change. When you make purchases, it’s best to pay off your balance at the end of the month. But if you don’t pay off the balance, it is rolled over to the next month and will accrue an interest charge. A great benefit of credit cards is that it allows you more time to pay off higher priced purchases. Many credit cards do not require annual fees, and there are tons of available choices of credit card companies, which can tailor your credit line specifically to you.

While there are many benefits to credit cards, there are negative effects of credit cards, especially if you’re unable to manage your payments. Your credit score can be negatively affected by credit cards if you are paying for a high-priced item. If you purchase an item that is close to your credit limit and maxes out your line of credit, this can have a negative impact on your credit score. In recent years, many credit cards offer perks and rewards, such as travel points or cash back.

Charge cards are similar to credit cards but have one huge difference. Charge cards require you to pay off your balance every month. If you are unable to pay off your whole balance every month, a late fee will be charged. Additionally, they usually don’t have a preset spending amount. The amount you can spend on your charge card will vary depending on many factors, including your spending, payment history, credit record, and financial resources. Charge cards will affect your credit score differently because of the requirement to pay them off every month. Also, some of the rewards and perks are better than credit cards, so compare your choices carefully.

There are drawbacks to charge cards, though, including the high annual fees due to receiving some great rewards and perks that offset the annual fees. Late fees on charge cards can be pretty steep, so it’s very important to pay off your balance every month. In order to be eligible for a charge card, you must have good to excellent credit. Finally, there are limited choices when picking the charge card that is right for you. American Express is the most widely known company offering charge cards, and their selection is not as varied as credit cards. American Express is not as commonly accepted by businesses, especially when travelling abroad.

It’s always best to pay your credit card off every month. So, depending on whether you’re able to pay off your balance every month, you may have even greater spending power with a charge card. Each option gives you a great way to build your credit score, so consider the charge and credit card options available before picking the one that is right for you!

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5 Tips on Why You Should Pay Yourself

Most businesses start with one person; the launcher, the entrepreneur, the one that has the ideas and pulls everything together. From there, the business will grow to adding managers and assistants, along with employees and possibly even outsourcing miscellaneous tasks. During this 'growth' phase, many business owners fall into the 'fight or flight' focus where they make sure everyone is paid-except for them. At the end of the day, your business is a separate entity from you, the business owner, and paying yourself is important to the future health of your business, and to your own future financial wellbeing, too. As bookkeepers, we know how important paying yourself is to the overall financial picture of your business. Here are some of the reasons why you should be paying yourself:

1.      Create a Positive Work and Reward Cycle

If you’ve ever felt like your daily life is a constant cycle of work, pay bills, and then repeat, the best way out of that negative cycle is to pay yourself. By consistently paying yourself first, your hard work will increase your net worth which will result in financial freedom and opportunities to afford bigger rewards, like that vacation you’ve been dreaming about!

2.      Curb Spending

 

The demands of running a business are high. There will always be new wants and needs that pop up, such as new office furniture or advertising. Instead of paying for all the wants and needs first and then paying yourself what is leftover, the best way to set up an environment of growth is to pay yourself, and then immediately invest in a savings or retirement plan. Having a set amount saved every month will ultimately curb your spending on things that may not even be necessary.

 

3.      Set Healthy Priorities

With all the million things on the “to do” list, we can often put our own savings and personal needs on hold. Your financial future is important. By paying yourself first, you’re investing in yourself and your future. Wealth-building happens through intention, consistency, discipline, and a long-term mindset.

4.      It’s Easy

 

Modern technology affords many luxuries and conveniences. One of the best financial conveniences is automatic payment. Use your bank’s automatic transaction functions to pay yourself a set amount every month. It reduces the temptation to reduce the amount you pay yourself and will ultimately set up the building blocks for financial success

 

5.      Build Discipline

 

Paying yourself first and regularly contributing to retirement or savings will build financial discipline. By getting into this positive habit, you pave the way for financial growth and rewards. Building on the positive work and reward cycle, the rewards will inspire you to find more ways to increase savings, which ultimately increases rewards.

Paying yourself paves the way for the success of your business and for yourself. Contact your accountant today with questions about setting yourself up for future financial success.

 

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