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4 Things That All Restaurants Should Consider: Part One

 

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The hospitality industry leader at bgr CPAs explains four practices that all restaurant owners should consider implementing to help combat financial challenges that are common within the hospitality industry.

The hospitality industry can be particularly demanding on managers and business owners—posing many financial challenges atypical of other industries. For restaurateurs, these challenges must be mitigated while also managing the fast-paced operational environment that is inherent to the business.

Restaurateurs often base financial reporting and comparative analysis on a monthly cycle. This typically involves comparing key performance indicators against those of the previous month, and/or the same month of a previous year. Issues often arise from this type of reporting, as the data in each month will be skewed depending on the number of total days and the number of weekend days in that month. Thus, comparing financial data from one month to the next may not provide an accurate depiction of restaurant performance.

Implementing a system wherein key performance indicators are monitored over four week (28-day) periods allows restaurant managers to gauge performance more accurately, and provides a truer comparative analysis between periods. For example, consider a restaurant that utilizes a month-to-month system of comparative analysis. In any given period, that restaurant’s reported performance could fluctuate significantly, solely due to the change in the duration for which the reporting took place. Conversely, when utilizing a four-week period of analysis, each report will accurately depict the expenses and revenues from four weekends, four Mondays, four Tuesdays, etc.

Further, this system of reporting can also help simplify payroll accruals. When restaurants employ a monthly financial reporting system, but pay their employees biweekly, accountants have to accrue payroll for the unpaid days in the month. In applying a four-week reporting period, managers can align biweekly pay with the middle and end date of each period, allowing them to accrue an entire pay period and eliminate pro rata accruals.

Another common issue that can be alleviated through establishing four-week periods is the accuracy in inventory reporting.  When abiding by a monthly schedule, restaurants run the risk of having inventory day fall on one of the busiest days of the week. As a result, typical human error combined with exhausted employees can easily affect the accuracy of inventory data. In applying a four-week system, managers have the ability to set an inventory day each period for a historically slow day of the week. This will again provide for more accurate reporting, and as a bonus, may even improve the morale of your managers. No more New Year’s Eve inventory counts!

Stay tuned: Next month, the hospitality industry experts at bgr CPAs will discuss how restaurateurs can benefit from regular menu costing.

bgr CPAs professionals have helped clients within the hospitality industry throughout the Mid-Atlantic region. We have assisted restaurants with their tax, accounting, and business needs. To learn, please contact Stephen Wolf, CPA at swolf@bgrcpas.com or (410) 418-4400.