Removing roadblocks to restaurant efficiency can be an ongoing process. Whether it is improving tracking measures, investing in a POS, modernizing vendor payments, or something else, taking away the inefficiencies can help owners and managers exceed industry benchmarks, free up focus for customers and growth, and create an easier path to sell when it’s time.

The greatest roadblock to restaurant efficiency is lack of tracking. We know this can seem daunting to owners who prefer to focus on food and customers, not numbers. Also, many successful restaurant owners and managers are rightly focused on sales and may feel they don’t have the time or budget to set up a tracking system.

Another roadblock used to be the cost of point of sale (POS) systems, which could run hundreds of thousands of dollars. Now these solutions cost a fraction of that and can often be implemented for a monthly subscription cost. However, owners and managers are often unclear about the hidden costs in the current systems they use and can’t see the justification for a POS system.

Just consider: anyone who is still paying bills by writing checks by hand may not realize this can cost $5-8 per check. Frequently, people forget to factor in some of these elements:

• Time to write each check
• Time to process it
• Paying for a stamp and envelope
• Time to file the record

Check writing and more can be done in seconds with an online solution. A tool like Bill.com allows owners and managers to quickly see the status of their books and pay bills from any location. Time spent with a cumbersome bill paying system could be better spent optimizing processes, creating new dishes or delighting customers with personal attention.

We also see restaurant owners who have a good POS system, but are not leveraging the report capabilities of that system — or have not integrated with an accounting solution. Working with a restaurant accountant can give you access to people who know the kinds of restaurant accounting software that easily integrate with popular POS systems. Some firms will even set it up for you.

Lastly for startups, a major roadblock to efficiency is the potential debt to bling out the restaurant and make it attractive to potential customers. It looks great, but monthly rent or depreciation can go through the roof. Instead, project sales per square foot in order to select a right-sized location and budget for build-out, fixtures and décor.

Advances in computing support efficient restaurants

These days it’s easy for restaurants to be set up with cloud computing solutions that support paperless reporting. Historically, owners and managers couldn’t see the whole inventory at any point in time, but this is now possible. With cloud solutions and current POS systems, you can know exactly how much inventory has been used and what should be on hand. In addition to reducing food waste, this can be a key indicator for spotting theft. (See our article “Protect Your Restaurant from Employee Embezzlement” if this is a concern for you.)

A powerful accounting software solution promotes a streamlined back office, which enables owners and managers to be customer facing. This takes away the worry about end-of-shift backlogs of paperwork. You can check in with staff and customers and get a pulse for satisfaction or improvements. Restaurant accounting systems should be designed to help improve, not hinder success. They should make it easy to review the entire financial picture every month.

Multiple locations and selling a restaurant

The better the accounting and corporate governance of any restaurant, the stronger position it’s in for expansion or selling. For restaurant owners using a system in which POS and accounting are linked and automated, they’ll find accounting to be much more timely and therefore cost-effective. When there are many locations and different investors for each location, this kind of system can easily produce K-1 forms and other necessary information for each investor.

A restaurant is worth what the buyer is willing to pay for it. If records are being kept on paper and must be pieced together to provide information to a buyer, this bogs down the sales process and makes it hard to show the real value of the restaurant. If there is an automated system in place, however, it’s a much quicker process to show potential buyers the numbers in ways that are clear and easy to understand. This helps tremendously with all steps in a sale, from getting a buyer interested to the final transfer of the restaurant to new ownership.

Restaurant accountants know the techniques that help restaurants be more efficient. We know the benchmarks discussed here and we’ve helped other restaurants reach them. If you have a serious interest in making your restaurant more efficient, talk to the accounting team at Cornwell Jackson. You’ll be surprised what a difference it can make in your efficiency, bottom line and peace of mind.

Restaurant accountants know the techniques that help restaurants be more efficient. We know the benchmarks discussed here and we’ve helped other restaurants reach them. If you have a serious interest in making your restaurant more efficient, talk to the accounting team at Cornwell Jackson. You’ll be surprised what a difference it can make in your efficiency, bottom line and peace of mind.

Scott Bates, CPA, is a partner in Cornwell Jackson’s audit practice and leads the Cornwell Jackson business services practice, including outsourced accounting, bookkeeping, and payroll services. He is an expert for clients in restaurants, healthcare, real estate, auto and transportation, technology, service, construction, retail, and manufacturing and distribution industries.

Improving restaurant efficiency through policies and restaurant benchmarking can become an ongoing part of your point of sale and accounting systems, allowing you to make continuous improvements to the key factors that drive your restaurant’s efficiency. This can help owners and managers exceed industry benchmarks, free up focus for customers and growth, and create an easier path to sell when it’s time.

If a restaurant doesn’t have effective policies in place for all of the small daily actions taking place, it’s easy to lose money through inconsistencies. Policies for the following daily tasks and restaurant care will help restaurants be more efficient even during times of staff turnover.

• How drinks are made
• How cleaning is handled
• How sales are entered into POS
• Customer service techniques
• Tasks specific to staff roles throughout service times
• Delivery of meals
• Closing duties including paperwork
• Vendor interaction

Policies should also cover preferred vendor relationships. Picking different vendors month to month can create inconsistent costing. The more consistent numbers are across all areas of the restaurant, the faster owners and managers can see weak points and correct them.

For example, payroll is the most up-to-date KPI in a business — and the most expensive. A well-managed payroll and benefits system takes time and strategy, and the opportunity to address payroll complexity first lies with your CPA. This relationship can either simplify or increase complexity. Restaurant owners must account for federal income tax, federal and state unemployment tax, Social Security and Medicare. Many companies have run into trouble in the areas of paying unemployment taxes, making late payroll deposits, incorrectly classifying employees as independent contractors on 1099s and assuming that depositing payroll is the same as reporting.

In addition, The Department of Labor’s impending changes to overtime exemption rules are creating even more angst in the area of wage and hour compliance. Employees previously exempt from overtime rules may now be considered non-exempt, leading to the need to track overtime hours and communicate possible changes in benefits. It may even require employers to dictate how employees can take time off or how they work outside of normal business hours. These changes tie directly into payroll administration and tax planning.

On the benefits side, employers can offer a variety of things to compete for talent as well as help employees work efficiently. Properly classifying these benefits and properly withholding for pre-tax or taxable benefits simply adds to the complexity. Handle something wrong, and you will have compliance problems as well as upset employees.

It is fair to say that payroll administration and compliance is a big deal. While some CPA firms offer payroll administration as part of basic or strategic accounting services, the level of administration and services vary widely. The potential benefit of having your CPA firm handle payroll administration, however, is that the team understands the world of taxes and accounting. They can streamline payroll reporting, deposits and filing schedules into the audit or tax deadlines they already handle for the business.

However, not every CPA firm offers payroll administration. Due to its complexity, it’s also important that the firm has a staff of professionals dedicated to this area of your business.

Restaurant Benchmarking

Industry benchmarks are a key indicator of how well a restaurant is performing against industry standards within a certain time period. You can gauge performance against restaurants of similar size and revenue by comparing your assets, liabilities and net worth. The 2016 restaurant benchmarks below are provided by BKR International, a top global accounting association, in conjunction with First Research. They show benchmark ratios based on 2014 data from more than 500,000 restaurants, and detailed out by restaurant size and revenue.

As you can see, benchmarks can provide a quick snapshot of how a restaurant is performing by just looking at quarterly financial statements against what analysts are reporting from the industry as a whole. Once you understand where your restaurant is performing well and where it misses the mark, you can focus time and resources in the right areas.

Restaurant accountants know the techniques that help restaurants be more efficient. We know the benchmarks discussed here and we’ve helped other restaurants reach them. If you have a serious interest in making your restaurant more efficient, talk to the accounting team at Cornwell Jackson. You’ll be surprised what a difference it can make in your efficiency, bottom line and peace of mind.

Scott Bates, CPA, is a partner in Cornwell Jackson’s audit practice and leads the Cornwell Jackson business services practice, including outsourced accounting, bookkeeping, and payroll services. He is an expert for clients in restaurants, healthcare, real estate, auto and transportation, technology, service, construction, retail, and manufacturing and distribution industries.

Improving restaurant efficiency can become an ongoing part of your point of sale and accounting systems, allowing you to make continuous improvements. This can help owners and managers exceed industry benchmarks, free up focus for customers and growth, and create an easier path to sell when it’s time.

What are the best ways to improve restaurant efficiency and create peace of mind to free up attention for restaurant growth and customer service? Restaurant owners and managers want to be as effective as they can, but often don’t know where to start to have the greatest impact.

Some of the elements of restaurant efficiency that help owners and managers to continuously identify improvements include:

• Tracking key measures
• Policies and procedures that create consistency
• The point of sale (POS) system and other restaurant inventory software
• The accounting system

Owners and managers can supercharge this journey to restaurant efficiency by working with professionals who know the industry benchmarks and the tactics that will help restaurants reach or exceed them. We’ll mention some key measures and benchmarks, but working with a restaurant accountant will also help you stay on top of industry trends and tools.

Key measures to track

Tracking and measurement are essential because they help uncover areas of weakness where a small change can create a great improvement.

Key measures of restaurant efficiency that should be tracked include:

• Food cost/inventory turnover
• Beverage cost (both alcoholic and non-alcoholic)
• Payroll and employee benefits
• Paper cost
• Management salaries
• Rent and occupancy

Food cost percentage is found by taking each dollar you make in sales and determining how much was spent on food, beverage and paper. Restaurants also need to account for any rebates received from vendors. Food cost will usually be a little lower in full service restaurants.

Payroll percentage is also calculated from sales dollars. This will be higher for full service restaurants.

The combined total of food cost and payroll percentage should be at or below 60 percent. The other 40 percent is not all profits. There is also rent, occupancy, taxes and other costs.

Controlling food costs

The National Restaurant Association reports that controlling food costs is a top concern of most restaurant operators; 67% of quick-service restaurants and 77% of fine dining restaurants named it as a moderate to significant challenge.

Improving food efficiency through better inventory turnover and lower food costs is one of the most important areas to track and manage when pursuing restaurant efficiency. This helps in ordering the correct amount of food to avoid spoilage, but food should also be used efficiently in the cooking process. This means having standards in place. Cooks shouldn’t use different amounts of ground beef in the burgers, for example.

Owners and managers can track food much like a manufacturer tracks product. What is the theoretical cost of goods sold and how many were sold of each recipe? How much is each dish costing compared to the standard for that recipe? For each meal consumed, what was the variance from the standard recipe?

If a restaurant serves a meal of steak and fries and had the food to make 100 meals, but only made 80 meals, you can track backwards through the process to find where the missing food went:

• Is someone making non-standard meals?
• Are meals being comped and not recorded?
• Are meals being made wrong and have to be made over?

Some restaurant owners will have a costing system that integrates with their suppliers. Those without such a system can start with a simple spreadsheet and track item cost by month. Owners with multiple restaurants or a single large location should talk to their vendors and find out if there is a preferred tracking system to use.

Tracking food costs and meals can also highlight profitability by food segment, which allows each restaurant to promote and create more of the dishes that keep it profitable. And isn’t that one great reason to be in business?

From choosing the right restaurant software to finding areas where owners and managers can improve the bottom line, an experienced restaurant accountant has the inside knowledge you need.

Restaurant accountants know the techniques that help restaurants be more efficient. We know the benchmarks discussed here and we’ve helped other restaurants reach them. If you have a serious interest in making your restaurant more efficient, talk to the accounting team at Cornwell Jackson. You’ll be surprised what a difference it can make in your efficiency, bottom line and peace of mind.

Scott Bates, CPA, is a partner in Cornwell Jackson’s audit practice and leads the Cornwell Jackson business services practice, including outsourced accounting, bookkeeping, and payroll services. He is an expert for clients in restaurants, healthcare, real estate, auto and transportation, technology, service, construction, retail, and manufacturing and distribution industries.