7 Common Restaurant Accounting Mistakes One Should Avoid

• Reading Time: 4 Minutes
• Published: February 1, 2021
• Last Updated: February 11, 2025

The hospitality industry is an attractive industry and restaurants businesses enjoy a fair share of this popularity. As much as attractive restaurant business might look like but running a restaurant business is not a piece of cake. Many new restaurants fail in the first few years of its operation due to financial shortcoming which the business owners were unable to anticipate. We all know that not all restaurateurs are bookkeeping experts, nor do they have the financial expertise to manage the same, but accounting is a vital business process if you want to see your business grow. Restaurant accounting does not have to be difficult; you just need to know what can go wrong and how to avoid such situations.

Accounting mistakes could lead to more significant financial issues, and in case you survive through the first few years, you still might have to struggle harder to achieve your business’s full potential. Hire a bookkeeper or outsource accounting services to a reliable outsourcing partner that fits in your budget. It will help you identify and fix errors while making sure you did not commit such mistakes in the first place.

Let us now discuss in detail all the common accounting mistakes that one may commit –

• Wrong Accounting Method

The first mistake that restaurateurs may commit from the start of the accounting process is not knowing which accounting method to follow. There are two accounting methods, and one must use a single method consistently to avoid any unwanted confusion later on.

• Misleading or Vague Chart of Accounts

It is vital to have a clear idea of what your business is dealing with and how all the items that have a monetary value or can be interpreted in financial terms can be categorised. Precise and specific chart of accounts will make sure that money is parked in the right accounts and you have accurate information about each account.

• Not Conducting Cost Accounting

Not conducting cost accounting could be another reason why your business is not earning reasonable profits compared to its peers. Restaurant businesses differ from one business to another, and there are different type of restaurant and each type has their own average profit margin. It is essential to conduct cost accounting for your products and services then assign menu price. Few factors to consider while conducting cost accounting are – industry average, food cost, competitors and type of restaurant.

• Committing Bookkeeping Errors

It is quite common to have a few bookkeeping errors, especially if you are conducting your restaurant bookkeeping on your own or doing it manually. You can detect most of these errors in the trial balance, but few errors might not reflect in the trial balance. One such example is the error of commission, where you record a debit or credit to the correct account but record it in the wrong subsidiary account or ledger.

• POS System and Accounting Software Integration

Point of Sale (POS) system has become a foundation for most restaurants with different features like – accepting orders, processing payment, printing invoices inventory management, cash management, staff management, customer relationship management and much more. If your POS system does not integrate with your accounting software, you will end up investing a lot of time in integrating the data from the POS system to your accounting software.

• Not preparing and analysing reports regularly

Your accounting software and POS system are packed with reports and information about your business, but most restaurateurs fail to generate these reports and analyse them regularly. A monthly analysis of the financial figures and other important factors that would directly or indirectly affect your sales will take you a long way. These reports help you compare your performance in regards to the industry and your target, thus analysing these will help you understand the reason for success and shortcomings (if any).

• Negligence in Inventory Management

Inventories of the restaurant are majorly perishable in nature additionally the price of these inventories is not fixed and might fluctuate due to various reasons, which makes inventory management a must and regular process.

• Accounts Payable Dues

Your suppliers are your inventory lifeline, and while it might be hectic to pay vendors and review their invoice, you must not neglect your accounts payable dues. These amounts can increase drastically, making it harder for you to pay off on time, and it could lead to disagreement or even discontinuation of supply, spoiling your business relations with your supplier. You can make use of accounting software with automated accounts payable services

These are a few common mistakes you may make in your restaurant accounting. It is always best to hire a competent accountant with prior experience in the same field because restaurant bookkeeping is slightly different from other industries, and only a qualified accountant can guide you with an error-free accounting system. You can consult our expert restaurant accountant to have a better understanding of the overall process.



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