Restaurant Financial Basics
Raymond S. Schmidgall, David K. Hayes, Jack D. Ninemeier
A complete, practical guide to managing restaurant business finances
One of the keys to a successful restaurant business is strong financial management. This book equips readers with the tools needed to manage the finances of foodservice establishments effectively. Written by expert authors with extensive experience in the field, this accessible resource is filled with valuable information that can be applied to day-to-day operations. It offers concise, down-to-earth coverage of basic accounting topics-including pricing, budgeting, cost control, and cash flow-as well as more specialized information, such as how to establish menu prices.
labor. Employee meal costs should be subtracted from the cost of food consumed when determining cost of food sold and should then be charged to a separate account titled "employee meals." The process for calculating the cost of employee meals differs among restaurants. In theory, one could determine the actual food, labor, and overhead costs of preparing each employee meal. Few, if any, restaurant managers are willing to make this calculation, since the time and cost involved exceeds the value
Restaurant the debtequity ratios for 20X1 and 20X2 follow: 20X1 Total liabilities $405,000 = 117.4% Total equity $345,000 20X2 $430,000 = 119.4% $360,000 The restaurant's creditors have loaned it $1.17 and $1.19 for 20X1 and 20X2, respectively, for each dollar the owners have invested. This ratio also suggests the creditworthiness has decreased slightly from 20X1 to 20X2. FINANCIAL LEVERAGING Debt financing used to improve operating results to increase the return on the owners' investment.
CURRENT FAIR VALUE The market value of the asset at the date of the financial statements. For example, assume a building (structure and land) cost $5,000,000. At the time of purchase, the cost would equal the fair value. Two years later the current fair value may be $6,000,000, yet the financial statements would reflect the historical cost of $5,000,000. 3. Going concern. An accountant assumes-unless there is reason to believe otherwise-that the restaurant will exist in the indefinite future.
employees. Cash is a major target for dishonest employees. Cash-handling personnel do not generally remove large sums of cash at one time. Rather, they typically use a variety of techniques to steal a small amount at a time. One common server theft technique involves an omission on the guest's order. If, in our Pie Parlor example, a guest ordered pie and coffee, but the pie sale is not recorded, a piece of pie will be missing, but no record of sale will be made. The server might have chosen to
total the check disbursements periodically; compare the total to the bookkeeper's cash credit and prepare the bank reconciliation. Revenue control: Keep all cash registers locked; remove cash register tapes when not in use; compare cash register tape totals with daily cash debits and cash deposits. Payroll: Examine the payroll worksheet (or payroll journal) to note employees' names, gross pay, hours worked, deductions, and net pay; add the payroll and compare the net pay with the cash