The Month-End Close: Making It Work for Your Restaurant Business
Running a restaurant is no small feat. Between managing the front of house, ensuring food quality, and keeping your team motivated, it’s easy to overlook some of the back-end tasks that ensure your financial health. But here’s the thing—you need a smooth month-end close process in your restaurant accounting. It’s not just about numbers; it’s about setting up your business for the next month, taking stock of your financial health, and avoiding surprises that can derail your business. So, how do you pull off a successful month-end close without it feeling like an overwhelming chore? Let’s break it down.
First Things First: Why Month-End Close Matters
Before we get into the nitty-gritty of how to actually do the month-end close, let’s take a minute to talk about why it matters so much. For many restaurant owners, bookkeeping can feel like an afterthought. You might push it to the backburner as long as everything feels alright. But here’s the problem: if you’re not keeping a sharp eye on your financials, it can be easy to miss things that could cause problems down the line—like cash flow issues or inventory discrepancies.
When you close your books each month, you’re getting a snapshot of your restaurant’s financial health. You’re not just counting the money in the cash register; you’re looking at all your expenses, sales, and inventory to understand where you stand. And honestly, if you aren’t regularly tracking your financial performance, you could be setting yourself up for failure without even realizing it. So yeah, it’s important.
Step 1: Get Your Financials in Order
This one seems like a no-brainer, but it’s easy to let certain things slide. Start by gathering all your key financial documents. That means:
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Sales reports: From your POS system (like Square, Toast, or Lightspeed).
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Purchase invoices: From your food suppliers and other vendors.
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Payroll data: For the hours worked by your staff.
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Credit card and bank statements: To reconcile transactions.
Once you’ve got everything in one place, it’s time to start reconciling. Don’t let this scare you—yes, it can feel like a daunting task, but it’s key to keeping everything in line. Be sure that your sales totals match up with what’s showing on your bank statements. Double-check the payroll costs and any other expenses that might have slipped through the cracks. It’s all about accuracy here.
Step 2: Tackle Your Inventory
Ah, inventory. That tricky little beast. Depending on the size of your operation, tracking inventory can seem like an endless cycle of counting, measuring, and reporting. But here’s the thing—if you’re not on top of your inventory at month-end, it’s almost impossible to get a true picture of your restaurant’s financials.
Use your POS system to track what you sold over the month and compare it to your inventory count. Have your staff physically count the inventory and update the numbers in your system. It’s a tedious process, no doubt, but getting this right can prevent loss, waste, and ultimately, lost profits.
One pro tip: Conduct a spot check throughout the month, so you’re not hit with a massive task at the end. If you’re doing this regularly, month-end inventory should be a lot smoother.
Step 3: Review Your Expenses
Now that you’ve got a handle on your revenue and inventory, it’s time to dive into your expenses. These might include things like:
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Rent
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Utilities
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Marketing
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Insurance
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Staff wages
You might think you know where your money’s going, but a deep dive into these categories at the end of the month can reveal patterns or unnecessary expenses. Maybe you’re spending more on takeout supplies than you realized, or perhaps your utilities bill has spiked for no apparent reason. Tracking these costs regularly gives you the insight you need to make smart, strategic decisions for the next month.
Also, don’t forget about your accounts payable. Are there any outstanding invoices from vendors or suppliers? Catching these before they pile up will keep your cash flow from getting clogged.
Step 4: Analyze Your Financial Statements
Once you’ve gone through all the above, it’s time to pull together your financial statements. This is where the magic happens. You’ll want to generate:
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Income statement (P&L): This shows your restaurant’s revenue, costs, and profits for the month.
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Balance sheet: This provides an overview of your assets, liabilities, and equity.
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Cash flow statement: This tracks the cash that’s coming in and going out.
Now, here’s the thing—analyzing these statements might not be as exciting as trying out a new menu item, but it’s essential. How else can you identify trends, pinpoint inefficiencies, and figure out where to make adjustments? Look for areas where you’re overspending or not making as much revenue as you thought you would. Are your labor costs too high? Is your food cost where it should be? Don’t just glance at these reports—take the time to really understand what they’re telling you about your business.
Step 5: Plan for the Future
The month-end close process isn’t just about wrapping up the past month. It’s also about setting yourself up for the next one. Based on what you learned from your financial statements, start planning ahead. Are there any areas where you can cut costs? Maybe you need to rework your menu pricing or adjust staff scheduling during peak hours. Having this information at your fingertips will help you run a smarter, more efficient restaurant going forward.
Also, if you’re looking to grow, make sure you’ve set aside funds for future expenses, whether it’s a marketing campaign, staff training, or kitchen upgrades. Keeping a forward-looking mindset during your month-end close will help you stay ahead of the curve.
Final Thoughts: It Doesn’t Have to Be Scary
Listen, I know the idea of month-end close in restaurant accounting can feel intimidating. But once you get into a rhythm, it’s actually a lot less painful than it sounds. And the payoff? A better understanding of your restaurant’s financial health, fewer surprises, and more time to focus on the things you really love—like creating delicious food and making your customers happy.
So, how about it? Are you ready to take control of your finances and start feeling more confident about your restaurant’s numbers? You’ve got this.