The restaurant industry is an exciting sector to operate in, and it brings a lot of pleasure to its customers. The demands of this sector, selling food and drinks, places restaurants under specific pressures. These pressures dictate the best accounting practices for the restaurant industry.

With flexible labour costs, the costs of goods sold, and meeting the fluctuating needs of customers; it is vital restaurants select a bookkeeper or accountancy specialist, and accounting method, which best fits their business needs.

At Auditox Accountancy, we are specialist accountants offering serviced aimed at helping clients like you.

What is the best accounting method for a restaurant?

There is no single answer as to the best accountancy method for a restaurant. The answer depends on the size and nature of the business.

Accountants for restaurants

Cash accounting is popular with many restaurants

Many restaurants use the cash accounting method, and this is accepted as an intelligent choice for firms that deal in cash for supplies and see money coming in from customers as the service is provided.

In most cases, these companies do not have money coming in at a later date from customers, which makes recording payments and revenues simpler.

The simplicity of this method appeals to many businesses, allowing them or their professional to manage their books with little fuss.

Crucial components of the cash accounting method

A quick overview of this accounting methods shows:

  • Revenue is acknowledged when the customer pays their bill
  • Expenses are acknowledged when the restaurant spends money
  • Tax is paid when money has been received
  • This is a popular method with modest kitchens

The accrual accounting method is better for some eateries

An alternative accounting option for cafes and diners is the accrual method. With the accrual system, transactions are recorded at the time, not when money is paid or received. This method provides a more accurate overview of how a restaurant is performing financially.

If the restaurant holds a lot of inventory, the cash accounting method might be too limiting for its needs.

Similarly, a restaurant that pays suppliers after 30 or 60 days might find the cash accounting method too austere for their needs.

Cash accounting is popular with many restaurants

Crucial components of the accrual accounting method

A brief summary of this accounting methods shows:

  • Revenue is acknowledged when it is earned, upon the completion of the service
  • Expenses are acknowledged when the bill is presented
  • Tax is paid on money received by the restaurant and on money owed to the restaurant
  • Firms enjoying significant revenue are more likely to use this style of accounting

There is a drawback with the accrual method, though, in that it doesn’t highlight cash flow problems. Given this is an issue for many businesses, owners must be aware of this shortcoming.

Using a qualified professional can help minimise these risks, as an expert will also analyse financial records as they are listed.

Crucial components of the accrual accounting method

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What option should a restaurant choose?

The reality is both of these systems have strong points to consider for food outlets and firms in the hospitality industry. The best choice for a firm depends on its size, stock level, and cash flow.

Hiring a professional accountant to oversee the financial part makes sense. Initially, it is worthwhile to discuss the matter with a professional. Accountants who offer this service make your life easier.

Clients get peace of mind when hiring accountants

Chartered accountants will examine a restaurant's activity and offer tailored insight into which system best fits their needs.

If the same chartered accountants takes responsibility for the management accounts, the restaurant is confident they are assisted by experienced accountants.

An accountants expertise helps on compliance matters

At Auditox Accountancy, we offer tailored leisure businesses, hospitality industry and restaurant accounting services. We provide bespoke finance services aimed at supporting your business.

Please get in touch if you would like to discuss your accountancy options.

What option should a restaurant choose?

Tax planning for restaurants

While tax matters are a concern for restaurants in the UK, there are opportunities to save money and lower costs. The benefits on offer differ depending on the type of business and industry, so get personalised advice for your organisation.

Good accountants help many clients manage their business

Every company should maintain a good standard of taxation records and management accounts. You should consider how you pay employees and whether you have retirement and health insurance plans in place.

Other UK tax matters for eateries include:

  • The cost of running an office on the premises, and whether there are deductions available
  • Start-up costs, which might allow for deductions or depreciation
  • Employee benefits
  • Savings related to the business
  • Utilising tax credits to support the firm
  • Payment deferral options
  • General taxation advice, if required
  • Arrange a VAT number if required
  • Arrange and manage a company number if required
  • Understanding on capital allowances
  • Capitalising on capital allowances to save money
  • Undertaking and submitting tax returns
Tax planning for restaurants

Get help with tax returns

The issue of tax returns is pressing for most people and businesses. A professional can provide advice for a small business, helping them avoid problems, and future audit work.

 These tax matters are bewildering to most people, but they can have a massive impact on a restaurant’s success or failure. This is why working closely with chartered accountants is an investment which can pay off.

Get help with tax returns

Common tax mistakes for restaurants

With most business owners not being taxation specialists, it is no surprise to see some mistakes occur when it comes to tax planning.

Not every refurbishment cost, capital expense or repair task can be deducted for taxation purposes. Similarly, not everyone is comfortable determining the depreciation of assets in their business.

Managed accounts help with compliance matters

Compliance issues are a concern for all firms, but trusted advice makes a big difference. An external audit of your books can save a lot of trouble later.

Stay up to date with tax issues

Restaurants also need to deal with various taxes, and it can be time-consuming to stay up to date with changes. For peace of mind, restaurant owners should defer tax planning to restaurant accountants.

Common tax mistakes for restaurants

Do restaurants need to worry about capital gains tax?

The number of things diners or gastro pubs owners must contend with concerns for many people and food, customer service, hygiene, and staffing. You might have capital gains tax (CGT) aspects to consider.

CGT refers to a charge applied to any gain you make from selling something you own. CGT applies to many things, but for a restaurant, it can include property, the business itself, valuables held by the restaurant or assets transferred at a price below market value.

Get tax advice that helps your business

Many restaurants sell or transfer old equipment, and CGT might be a factor to consider here. It is always best to call on a qualified professional for these matters. At Auditox Accountancy, we are capable of assisting restaurants in managing any CGT issues which arise.

CGT is a tax charge applied to the gain from selling something you own. It’s calculated from the profit made, the increase in value of the sale price compared to the purchase price, for an asset held for more than one year.

Do restaurants need to worry about capital gains tax?

Benefits of chartered accountants for restaurants

There are many tangible benefits to using a restaurant to manage your accounts. You have more time to focus on running the restaurant or enjoy your free time. There is less temptation or opportunity for staff to manipulate your financial records by deferring to an external source.

Taxation services lower your stress levels

With professional help, you reduce the stress associated with financial matters and tax. You will receive reminders when tax and payment deadlines are looming. By hiring a qualified accountant, you have fewer things to worry about.

You can also better understand and capitalise on investment business activities. You might be better placed to welcome corporate finance, if your tax affairs are in order.

Contact us for taxation advice and services for your company

At Auditox Accountancy, we are qualified accountants who provide specialist accounting services and tax advice for restaurants. We know you have high standards, and our services show so do we.

If you want to focus your time and energy on your business, leave us with the accountancy and tax matters.

Benefits of chartered accountants for restaurants

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Restaurants FAQs

What is the best accounting method for a restaurant?

Where are accountants most in demand?

Do restaurants need accountants?

Restaurants FAQs

What is the best accounting method for a restaurant?

Where are accountants most in demand?

Do restaurants need accountants?

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