Outsourcing of accounting and bookkeeping support services is an increasing trend among many businesses and is growing quickly in the restaurant industry. It’s a solution that addresses a confluence of factors affecting restaurants these days, especially restaurant businesses that are smaller and mid-sized operations.
For restaurants, the challenge of finding qualified employees is affecting the back of the house as well as the front, including finance personnel such accounts payable clerks, bookkeepers and controllers. At the same time, restaurants of all sizes have in recent years adopted industry-specific technology to streamline their financial management. The emergence of these tech solutions – such as Toast, one of the most widely used in the restaurant industry – signifies a broader transition to cloud-based platforms used for financial management throughout the industry. As a result, finance personnel must be familiar with these solutions and able to work with them.
Outsourcing of finance functions from bookkeeping up to the controller level means working with an outside provider – such as an accounting firm – that provides fractional services at a level that is customized to your organization. It’s difficult to find bookkeepers, AP clerks and controllers, and if you only need them for 25 hours a week, it’s even harder. But an outsourced provider can dedicate 25 hours a week of personnel time – at the right staff level – to meet your needs.
Moreover, outsourced finance professionals are well versed in all the major platforms, such as QuickBooks Online and Bill.com, and can help you keep current as new technology solutions come to market. Integration of accounting and bookkeeping functions has helped increase demand for cloud-based accounting services such as bank account linkage, automatic payments and merchant services, as well as integrated apps like Bill.com, Expensify, Square, Tsheets and PayPal.
One factor fueling the adoption of cloud-based accounting platforms is the restaurant industry’s ability to automate quickly given that restaurants engage in the same types of transactions over and over. As platforms and integrations such as QuickBooks Online and Bill.com become more sophisticated, they have the ability to recognize repeated transactions and automatically code them to the right accounts. This helps reduce mistakes.
Moreover, the immediacy of cloud-based financial management gives you real-time actionable information to help run your restaurant. Did your cash flow take a hit last month because the wholesale price of steak increased dramatically? Realizing that after one month is a lot better than finding it out after an entire quarter of operations. It gives you time to ask your meat supplier if there’s a comparable product at a lower price point you could sub out on your menu, before too much financial damage is done.
An outsourced accounting provider can spot these trends and advise you on how to deal with challenges based on what they are seeing among their other restaurant clients. For instance, here are some tips based on what we have seen recently among our clients:
- Keep on top of your financial health given rising labor costs. Growing inflation and the difficulty in finding people creates problems for small margin businesses like locally owned restaurants.
- Pay close attention to cash flow, sales and cost of goods. If you’re not on top of your pricing and financial data, it can get out of control quickly.
- Look at what what’s on your menu and promote items that have the lowest cost within your quality standards. Reassess the profitability of all your menu items. With rapidly rising wholesale prices, menu items that were profitable a year ago may not be now.
- On the labor side, do what you can to make sure you’re maintaining a good work environment where people feel appreciated. This may include paying referral bonuses or retention bonuses. They don’t have to be high-cost measures, but they’ll make employees feel appreciated.
- Consider investing in technology that can help you keep your workers happy, such as Kickfin, a cloud-based solution that enables credit card tips to be immediately uploaded to servers’ bank accounts.
- To keep cash flow healthy, create a budget and compare it to actual results. Identify where you’re not on target and where changes need to be made. You may find you need to add or swap out menu items, or tinker with employee schedules.
- Carefully examine your relationship with third-party delivery services, which exploded during the pandemic. Takeout is still a big piece of restaurant revenue, but it’s not very profitable since the GrubHubs and Door Dashes take a big chunk of your sales dollar – 20% to 30% typically. While it’s good to have that business, the extra staff and the extra goods such as takeout containers eat into your revenue. Figure out how to do it without expanding costs exponentially.
Most importantly, remember that timely financial information enables you to address problems quickly – while they’re still manageable – and improve profitability. When you work with an outsourced accounting provider, you should have at least monthly meetings and receive reports with understandable key performance indicators and dashboards that indicate the health of your business. Above all, your provider should listen to your concerns and find solutions that fit your business.
Contact your Rea advisor if you would like to have a conversation about our outsourced accounting services for restaurant companies.
By Mike Lewis (Dublin Office)