Restaurants like any other business, succeed or fail based on what happens in the “back office.” I know from personal experience that a restaurant can have fantastic food, friendly staff, and an excellent location, but if the restaurant owners and operators don’t have good financial metrics or even understand these numbers, the restaurants run will be short-lived.
At first glance, tracking everything that is going on in multiple cash registers or point of sale (point of sale) kiosks can seem complicated.
Then add in the gift certificates, tips payable, revenue classification, profit centers, and more. Taking all that into account, properly accounting for all these complex interworking can seem daunting if not, completely overwhelming.
Recording restaurant sales using my ‘daily sales’ method is actually straightforward. The key is to set up the basics correctly from day one. For those that already have an operational restaurant, simply modify based on the forthcoming information.
Understand why it’s time to change!
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For those who are currently recording sales, sales receipts are a popular way of recording when money has been received. Unfortunately, sales receipts only record a sale in one type of payment denomination. Journal entries, on the other hand, record all payment types and transactions—it’s basically a sales receipt on steroids.
Your restaurant could currently be entering sales a million different ways.
For example, clearing net deposits, creating sales receipts, creating invoices, creating multiple journal entries, and much more. Most of these methods fail to record sales in the correct period or fail to capture the numerous ways money is received. Additionally, they are often not configured to display sales by different profit centers.
The method I introduce below works for a multitude of reasons. Sales recorded under the accrual accounting method. Deposits are tracked as a receivable, ensuring that all money that is supposed to be received is actually received. Additionally, sales are classified by revenue type. All these items can be handled efficiently and accurately with one simple entry instead of multiple.
Lets dive into recording daily sales for your restaurant using my ‘daily sales’ method.
In most POS systems, every day, or every shift, ends with what is typically called a z-report (different POS systems might call it the day-close report, the shift report, or something else).
Properly closing out at the end of the day with a z-report ensures that sales from Tuesday’s big event don’t accidentally show up on Friday’s sales report.
Essentially, this report ensures that the cash in the drawer at the end of the day matches the cash in the drawer from the beginning of the day, or, for server-specific restaurants, that the waitstaff started with $0 and ended with $0. At the end of the day, depending on how your operation is run, your report will show that your staff will either owe you money or, if they cash out tips daily, you will owe them money.
The z-report should show all sales, including types, sales tax payable, credit card sales versus cash sales, and so on. Sometimes this information is found by combining two separate reports from your POS; this just depends on what POS is being used.
Once you have the daily sales summary closed out and at your disposal, you can enter the daily sales within your accounting software as outlined later on in this blog post.
Unfortunately, recording sales from your POS is not as easy as it seems. Yes, you do enter the numbers in front of you, but you need to make sure you enter them correctly and that your sales journals balance. Remember, the total of debits must match your total for credits.
Again, I find sales journal entries the best tool to enter sales as they allow for you to quickly and efficiently find an incorrect transaction.
I cover all the specific components of restaurant sales in this article: Understanding your Restaurant Sales Components. I recommend you read that article in conjunction with this.
| Account | Debit | Credit |
|---|---|---|
| 4110 – Lunch Sales | $200 | |
| 4120 – Dinner Sales | $200 | |
| 4130 – Food Comps | $50 | |
| 4140 – Food Discounts | $50 | |
| 4310 – N/A Beverages | $100 | |
| 4320 – Liquor Sales | $100 | |
| 4330 – Beer Sales | $100 | |
| 4350 – Wine Sales | $100 | |
| 4360 – Beverage Comps | $50 | |
| 4370 – Beverage Discounts | $50 | |
| 2210 – Sales Tax Payable | $100 | |
| 2300 – Gift Cards | $100 | |
| 2280 – Tips Payable | $200 | |
| 1000 – Cash on Hand | $1,000 | |
| 1150 – Credit Card Receivable | $700 | |
| Total | $1,100 | $1,100 |
Not clear on the numbers on this journal entry? Don’t fear dear reader, my article A Restaurant Chart of Accounts that any Restaurant Bookkeeper or Accountant Can Use will answer all your questions about configuring a proper restaurant chart of accounts.
At first, the sales journal may seem overwhelming, but don’t fret, it is straightforward. The 4000s are all your income accounts: They record revenue or sales. The debits located in the 4000s are your comps or discounts: They reduce revenue and are important to track because out-of-control discounts and comps can quickly sink a healthy restaurant.
The other vital items in the sales journal are balance sheet items, like sales tax payable (money you owe the state or local government), gift cards payable receivables (cash you should have received), and credit card deposits you will receive in the future. The 4000s are all your income accounts; they record revenue or sales. The debits located in the 4000s are merely those comps or discounts that reduce revenue (and are therefore essential to track and keep a close eye on).
The main difference between recording a daily sales journal and other types of sales recordings is that sales are recorded on the day they occur.
If you want to dive deep into the financials, have accurate books, or simply just run a great restaurant, the restaurant sales journal provides an important blueprint.
Still not clear on what the numbers in the above journal entry mean? Or perhaps your chart of accounts just needs a simple revamp. I cover all chart of accounts related items in A Restaurant Chart of Accounts that any Restaurant Owner, Bookkeeper or Accountant Can Use.
Since you’re using the accrual accounting method, each day should get its own journal entry. That means that expenses and revenues for the month will align.
How do you know you have all the right sales in the correct month? You will label each daily sales by the date—something like “sls 02-01-20” for February 1, 2020.
When using receivable accounts, along with sales journals, these accounts must be reconciled monthly. Sales journals allow you to quickly dive into an issue on specific days and resolve them.
For example, if you notice that your credit card receivable account says you are owed an extra $5,000 a the end of the month, but you reconcile, and this is not true, you need to pinpoint which days an error occurred in your sales journal. This error is likely that you overstated revenue and that you overstated your credit card receivable, other potential scenarios are understating cash receivable instead of the correct amount, so on and so forth.
Either way, make it a good habit to reconcile these accounts monthly to track any issues before the balances get huge, and the financials are incorrect for an extended period.
If you want to be a real pro, you could reconcile weekly!
In this article, I covered the main components of recording sales and inputting sales journal entries. Though journal entries may seem overwhelming at first, the sales journal entries for restaurants ensure that you are capturing all your revenue types from all your different revenue streams.
No longer will you be unsure about the food and beverage portions of your sales; no longer will you simply record cash as it is deposited (yikes, what was your cash shortfall?). My daily sales method utilizing sales journal entries will help you become a better restaurant manager and owner.
Written by Zachary Weiner Leave a Comment
This Post May Contain Affiliate Links (What's This?)
Zachary Weiner is a seasoned restaurant operator, CFO, consultant, and author of QuickBooks for Restaurants. He previously served as the CFO of an NYC-based restaurant group with 20+ locations, as well as several $50M+ annual revenue CPG companies.
Along with his work here at The Restaurant CFO™, Zachary's writing has been featured in Business News Daily, Reader's Digest, Apartment Therapy, and Yahoo! Finance. He has a passion for helping restaurant owners better understand their finances and accounting.
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