QuickBooks… How to Get Up and
Running
Using QuickBooks to Manage
Your Restaurants Finances
or...If
You Can’t Count It, You Can’t Manage It!
By John
Nessel
President, Restaurant Resource Group
I often feel like a Pied Piper,
singing the praises of QuickBooks to every independent restaurant
owner and operator that I meet. I have good reasons for being so
unabashedly supportive of this product. As a consultant and former
restaurant owner and operator who has used just about every
accounting product on the market at one time or another; I know
what I am talking about! QuickBooks is inexpensive, powerful enough
to handle every financial task that you will face, exceptionally
easy to use, well known to your accountant, and far and away the
most popular small business accounting software in the universe
(this is important because you will always be able to find someone
to help you if you need support). I liked the product so much I even
wrote a book to help restaurant owners like you to take complete
control of the “business” side of their restaurant.
|
"I’m going to
share a little secret with you. You don’t have to know much,
if anything, about accounting or bookkeeping to take control
of the finances of your restaurant. What you do need is
discipline, some guidance, common sense, and a real desire to
make your restaurant successful" |
Like most small
businesses, the typical restaurant owner/operator must wear lots of
different hats, usually all at the same time. Some hats fit better
than others. Most likely you have come into this venture with some
experience in one particular area of the restaurant business.
Perhaps it’s from the kitchen end as a Chef or maybe it’s from the
front of the house as a Manager. As you will learn quickly (if you
have not already done so), the responsibilities of running a
restaurant business are much more demanding than of being
responsible for a specific job or position within the business. In
my experience working with many restaurant startups, the “hat” that
is most “ill fitting” is that of your restaurant’s Financial
Manager. Moreover, as the saying goes: “If you can’t count it you
can’t manage it”. That’s why it’s so important to make sure that
implementing a well organized and easy to use accounting system
should be one of your highest priorities. It’s equally important to
have that system in place well before you open the doors, as once
you get open you will have little or no time to focus on anything
other than getting through each day.
To get you in the
right frame of mind I’m going to share a little secret with you. You
don’t have to know much, if anything, about accounting or
bookkeeping to take control of the finances of your restaurant. What
you do need is discipline, some guidance, common sense, and a real
desire to make your restaurant successful (which means more than
offering great food, service, and value to your customers). I am
living proof having never had an accounting course, or any financial
training or background prior to opening any of my restaurants!
What
Version to Use?
QuickBooks has
constantly upgraded its offering with regular annual releases since
1999. The most current release, QuickBooks 2010 is no exception. It
used to be that QuickBooks had just two products in the line, the
Basic version (formerly just called QuickBooks) and QuickBooks Pro.
Well they got rid of the Basic version a few years back and there are
presently a variety of new product variations, called Editions,
including QuickBooks Pro, QuickBooks Premier, QuickBooks Accountant, QuickBooks
On-Line Edition, and a even a version for Mac users.
You don’t need any of these (unless of course you are a Mac user).
Just stick to QuickBooks Pro and you will be good to go. I should mention that QuickBooks Pro (and
all “higher” editions) offer multi-user versions that allow up to
five users to access the file at the same time. I do not often see
independent restaurants that use the multi-user version, but under
some circumstances this can be a very helpful feature.
If you are now
using, or have access to, a recent version of QuickBooks there is no
real need to upgrade. Just beware that QuickBooks has a “Sunset
Policy”. Under this policy only the most current annual version of
the software, plus the prior two versions, will be supported (by
support I mean live technical support and business services relating
to that version). Therefore, if you are using QuickBooks 2008 or
earlier I would highly recommend upgrading to the most current version so as
to avoid putting your financial data at risk.
Installation and Setup
Unlike most
software applications that can be used immediately “out of the box”,
QuickBooks (this goes for all accounting software products) requires
that you create a file that is “configured” or setup specifically
for your business (restaurant, in this case). This file should also
include all your “account” balances as of the date that you begin
using it (e.g. checking account, fixed assets, vendor payables, and
year-to-date income and expenses).
QuickBooks makes
this task simple with its Easy Step Interview. The software
prompts you with step-by-step questions about your company, the way
you want to set it up, and even prompts you to enter all your
beginning account balances. These questions include the type of
business that you are in with the option to create a Chart of
Accounts that QuickBooks deems is appropriate for the business
that you select. Other questions involve the collection and payment
of Sales tax, use of QuickBooks Payroll, Inventory, Class, and Item
features, how you want to use Bill payment options, and whether you
will be using Cash or Accrual accounting. Context sensitive help is
always available throughout the interview to provide the needed
support to help you answer each one of these questions.
Let’s go back to
the Chart of Accounts because it is truly the “heart” of your
accounting system. It defines exactly how every financial
transaction that occurs in your restaurant can be recorded and used
to help you manage your business. Unfortunately the Chart of
Accounts that QuickBooks utilizes for restaurants is less than
desirable (though I’ve got to cut them some slack here as they
maintain a database for hundred’s of business types). You should use
the
Uniform System of Accounts for Restaurants as your guide. The Uniform Systems of
Accounts for Restaurants provides all restaurants with an industry
standard accounting classification system, one that not only will
allow you to make common sense of your sales and expenses, but will
also permit you to compare your restaurant’s performance against
industry standards.
|
"The Chart of
Accounts is truly the heart of your accounting system. It
defines exactly how every financial transaction that occurs in
your restaurant can be recorded and used to help you manage
your business." |
If you are using
the QuickBooks Easy Step Interview to setup your company file you
have two options as it relates to the Chart of Accounts: 1) select
the account list for Restaurants that QuickBooks recommends, or 2)
select the alternate option to create no accounts at the
current time. If you let QuickBooks create accounts, you can always
edit the list later (though the process will be tedious and time
consuming). If you choose to have no accounts setup at this time you
have the opportunity to either manually create your own accounts,
“import” a more appropriate chart of accounts list from another
restaurant file, a process that is simple so long as you have such a
list. The best option is importing ("Restoring" is the technical
term) a complete QuickBooks company file that has already
configured, one that already has an appropriate Chart of Accounts
(e.g. that mirrors the Uniform System of Accounts for Restaurants),
and perhaps other preconfigured features appropriate for restaurant
use. As a reward for getting this far in the article I will send
you this file. Just email me at and let me know which year's release you
are using. I will forward it to you via email. Better yet,
purchase my book
The Restaurant Operators Complete Guide to QuickBooks 2nd Edition
and get a fully configured company file with many additional
features included. It will have you up and running in a few minutes.
Select
a Start Date
The interview
will also ask you to select a Start Date. This is the date
after which you will be recording every financial transaction that
occurs in your restaurant. If you are a new restaurant then this
choice is simple. You will start on the day that your first
financial transaction was made (most likely the day you opened your
bank account). You will record every single financial transaction
from that day forward.
If on the other
hand you are switching to QuickBooks from another program, or you
have been not using any accounting software to run the restaurant or
perhaps you are transitioning your accounting “in-house” from an
outside vendor, then you have a choice to make. The ideal situation
in this case is for your Start Date to be the first day of the new
year (January 1) so that you will have complete financials for the
entire year ahead. If you are already into the new year then going
back to January 1, and recording all your transactions, may or may
not be practical. In this case start on the first day of the current
month, but never mid-month, and begin recording all your
transactions from this point forward.
If you are using
the Easy Step Interview then QuickBooks will walk you through the
process of entering all the beginning account balances based on the
start date that you select. This process can also be performed at a
later date either manually or by going back to the Interview.
Entering and Paying
Your Bills
Entering and
paying your restaurant’s bills represents at least 80% of the total
time you will spend using QuickBooks, and QuickBooks is designed to
make this process easy. Most restaurants have established “terms”
with their vendors from Net 7 days for the small “mom and pop”
suppliers to the more typical Net 14 to Net 30 days for the larger
commercial vendors. In Massachusetts, our alcoholic beverage vendors
are on Net 60 day terms. You should therefore be entering your bills
at one time and paying them at a later date. This is called Accrual
Accounting because the expense is recognized when the product is
received and not the date it is paid. This has important
implications for your Profit and Loss Statement because you want all
your business expenses to precisely match the period that the
corresponding revenue is recorded (the date that the meals are
sold). If you need to pay a bill immediately upon receipt, then
simply use the Write Check feature to record the payment
(there is no need to enter the bill when you use this feature).
Entering a bill
is as easy as clicking an on-screen “icon” that reads Enter
Bills. A graphic image of a bill appears which makes the
process of entering the information effortless. QuickBooks
“remembers” Vendor’s names so that when you start typing the name
the software will automatically complete it. It can even be set to
remember which account the bill should be “coded to” so that you do
not have to search the account list every time you enter a bill from
the same vendor. QuickBooks makes it easy to enter each Vendor’s
“terms”, and uses this information to let you know when each bill is
due (or how many days it is overdue!)
QuickBooks Vendor
reports are also easy to access and the two that you will use most
often are the Open Balance detail (shows each un-paid bill
sorted by vendor with the due date for each and total owed) and the
Vendor Balance Detail (shows the history and running balance
of bills, credits and payments chronologically for each vendor).
Once you decide who and how much you are going to pay simply click
on the Pay Bills screen icon and a list of every unpaid bill
will appear, sorted by vendor and due date. All you need to do is
click on each bill you want to pay and then select the Pay &
Close button. This screen will also indicate the running total
of all the bills you select for payment to help you keep your
payments inline with available cash. Once you complete this task you
can use the software to either print your checks (recommended) or
write them manually and assign check numbers. I suggest you use a
standard three-part check (one check per sheet with two “stubs”, one
stays with the check and the other attaches to the bills that your
paying to make your record keeping easy).
Recording Daily
Sales and Deposits
QuickBooks was
not really designed for retail business (like a restaurant) that
uses a POS system or cash register to record and consolidate
individual sales and receipts. Fortunately, it is easily adapted to
do just that. There are two approaches to accomplish this task, 1)
use of a QuickBooks form called a Sales Receipt, or 2) making
a General Journal Entry. The information entered is
the same whichever method you choose.
Use your POS
report to identify your daily sales totals (e.g. food, beer, wine,
liquor), the tax you collect, other transactions that result in
either more or less cash being present than your recorded sales
indicate (e.g. house charges, gift certificates sold or redeemed,
discounts, complimentary meals, cash over/short etc), and finally
your cash and credit card receipts. Each of these categories should
correspond to an “account” in your Chart of Accounts, and combined
they create a single financial “entry” for each day of business
(whether it be a Sales Receipt or Journal Entry).
Some restaurants
create unique QuickBooks accounts for depositing credit card
receipts, and even set them up as Current Assets rather than
as Bank accounts (different categories on the Balance Sheet).
The logic is that these payments take a few days to be processed and
deposited into your checking account, and should therefore be
technically be viewed as “Receivables” rather than bank deposits.
The balances are then transferred into the checking account when the
funds are actually deposited. I recommend that you treat credit
cards as you do cash and simply use your Checking Account for all
deposits. Use your common sense to know that when you look at you
Checking Account balance you must take into account any credit card
receipts that might still be “in transit”. By the time a vendor
receives and deposits a payment based on this checking account
balance the credit cards will have surely been deposited.
Just make sure that you record your credit card receipts exactly as
they will appear on your bank statement. Visa, MC and Discover totals are
now processed together, and deposited into your bank account in a
single amount for each batch. You therefore need to record the total
of these three as a single line item in your QuickBooks sales entry.
Another example involves the way in which American Express (AMEX)
processes it’s receipts. In some cases AMEX deducts the discount fee
(typically 3.5%) from the batch total and then deposits the amount
“net of the discount” into your account. If you do not make your
QuickBooks entry in a way that mirrors this you will have a hard
time reconciling your bank statements when they arrive.
Whichever method
you choose, Sales Receipt or Journal Entry, QuickBooks has a feature
that will make the process more efficient, the Memorized
Transaction. It allows you to create a “template” that you can
use for each entry with all the accounts that you will be using
already set up, and ready for your daily dollar inputs. Not only can
you create a Memorized Sales Receipt or a Memorized
Journal Entry for your daily sales and deposits, but you can
also create Memorized Bills, Invoices, and even
Reports for transactions or information that you use and/or
repeat on a regular basis.
Accounting for Your
Payroll Expenses
Restaurant
payroll, including employer paid taxes and benefits, is currently
the highest single expense category in the restaurant industry. For
this reason an accurate accounting of your monthly payroll (assuming
that you use monthly accounting periods) is absolutely essential.
The topic of restaurant payroll cannot possibly be covered in an
article like this. For now I will simply summarize the most
important issues that you need to be aware of. This will insure that
you handle your payroll recording in QuickBooks in a way that will
not only provide you with high quality accounting information, but
also in a way that allows you to pro-actively manage your
restaurant’s payroll expenses.
1)
Outsource your
restaurant’s payroll to a qualified Payroll Processing Service.
While QuickBooks does have
robust features to process payroll I strongly urge you to hire an
outside vendor for this task. The cost is very reasonable and the
headaches and time that you will avoid are worth every last nickel
spent.
2)
Create Payroll
Departments to get more detail from your payroll reports.
Instead of simply recording
your wages and salaries in one or perhaps two general categories
(e.g. Gross Wages or Salaries and Hourly Wages), create detailed
payroll accounts based on the functions that each category performs
in the restaurant. At a minimum create an account for Kitchen Wages,
Front of the House Wages and Manager Wages. From there you can
create sub-accounts for more detail. Remember, what you cannot count
you cannot manage!
3)
If possible process your
payroll twice per month (not the same as bi-weekly).
Weekly or bi-weekly payroll processing
will typically result in monthly Profit and Loss statements with 28
days of payroll expenses (with 35 or 42 days in some months), but
will never match the number of days of income or other expenses
(typically 30 or 31 days). This will result in the understating or
overstating of your payroll expenses. Ask your payroll company to
process your payroll twice per month, from the 1st to the
15th and then from the 16th to either the 30th
or 31st.
4)
If you already operate
with weekly or bi-weekly payroll periods, then make a monthly
“accrual” entry into QuickBooks to account for the disparity between
the number of payroll days and days in the month.
For a description of this
process with detailed examples read the article located on my
website:
www.rrgconsulting.com/payroll_accrual_article
5)
Use a QuickBooks
Memorized Journal Entry to record the payroll totals summarized in
the Report provided by your Payroll Service.
Your payroll company will provide you
with a detailed report that summarizes the gross wages and payroll
taxes and expenses that you pay as the employer. It will also
indicate any employee deductions or advances that are made, and
indicate the details as to the disbursement of all cash based on
your employee payroll checks as well as the combined taxes that are
withheld from these checks and your employer related tax expenses.
All this information can be combined into a single QuickBooks
Journal Entry that takes no more than a few minutes to make (no
exaggeration!). This process is made even easier if you create a
Memorized transaction with all the accounts setup and waiting for
your dollar entries.
There are many
other periodic bookkeeping tasks that you will need to make that I
cannot possibly cover in this article. Loan payments, inventory
adjustments, allocating insurance premiums evenly during the year,
creating customer invoices, paying your sales tax, dealing with
charged tips, handling employee meals, bartered services, and the
list goes on. The good news is that QuickBooks offers easy
procedures for each. In addition, QuickBooks has the easiest Bank
Reconciliation procedure I have seen in any comparable software
program. This is extremely important as paperless cash transactions
are occurring with increasing frequency, and you need to be able to
have confidence in the balance of your QuickBooks cash account.
Use the
Restaurant
Operators Complete Guide to QuickBooks to help you through
the maze, or seek guidance from your accountant if you have any
problems getting these procedures straight. Remember, all it takes
is discipline and common sense. The effort is not only well worth
it, but essential to your long-term success!
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