Taking the Time to Understand Restaurant Accounting Basics
As a restaurateur, you may know very little about accounting. Many food service business have an accountant to handle the business details. This allows you the time to focus on the task of running the business without having to worry about the accounting. However, even if you do not take care of the accounting, you will want to understand a few basic things. It will ensure that you know what is going on with your business and help you make the best decisions.
Understanding Financial Statements
Every business owner should utilize and understand financial statements. When you own a food service business, you will need to track everything from what you are spending each day to how much cash you are bringing in each day. This can be done through using the right financial statements. The most common are the balance sheet, the income statement and the cash flow statement. If you take a look at these statements, you will see how your business is doing in its daily operations. This lets you know whether you need to make any changes.
Understanding Your Assets
Beyond the day to day sales and expenses, there are a few things about your business that you should be aware of. The first of these is what assets your business owns. Your assets will be anything of value that you own in full. Your inventory is considered an asset. If you own the building it is an asset. The same is true for any equipment, furniture and of course cash.
Understanding Your Liabilities
Your business will also have liabilities. Anything that you owe money for is considered a liability to your business. It is just as important to know what your liabilities are as it is to understand what your assets are. When you make a decision about your business, you will do so based on what you have and what you owe. There are things that you will owe money for as long as your business is in operation. On the other hand, there are things that can be paid off almost immediately, which will help your business in the long term.
Understanding Your Inventory Worth
Even though inventory is considered an asset, it is something that should also be accounted for separately. As a business owner, you will want to keep track of what inventory your business has in stock. This way, you know what needs to be ordered and whether you are overspending on items that are not being used. Since your inventory is an asset, it should be taken into consideration whenever you are establishing the worth of the business.
Understanding Accounts Payable and Notes Payable
Many times you will work with vendors on a credit system. They will provide you with the supplies you need and you will pay them later. These accounts are known as accounts payable and are vital to your business accounting. Notes payable refers to any loans that you have taken out that still need to be paid back. Understanding what both of these terms refer to is something that any business owner should understand even with an accountant on hand.
You do not have to be an accountant to run your business. You do, however, have to understand some accounting basics if you want to make the right decisions. Understanding these different concepts will also enable you to keep up with your accountant and ensure that the business aspect of your restaurant is being handled correctly.