New Approaches to Restaurant Accounting
The long ago summer when I was a cashier at a Cape Cod restaurant, the only number that seemed important was the one on my cash register tape at the end of each shift, which had to match the amount of cash in my drawer. When the owner was out of town, the bartender would snag bottles of vodka and beer for our beach parties; when the owner was around, he’d often take stacks of bills from my drawer himself.
How things have changed! Today, every number from the POS system goes straight to a database, every bottle of liquor is counted, and counted again, and every cent of revenue is vital to the bottom line.
“In the restaurant business everything changes so quickly, you have to have numbers on a frequent basis and you have to get them with accuracy,” said Giovanna Koning during a panel discussion during last November’s Restaurant Finance & Development Conference.
The paper ledgers that the Cape Cod restaurant owner used have given way to technology that’s so complicated that some restaurant operators have turned their books over to outsourced accounting providers.
Koning knows outsourcing from all sides because she is CFO of Friday’s, the Texas-based casual dining concept with about 1,000 restaurants across the world, and CFO of Falcon Holdings, a multi-unit franchisee that also provides services, including accounting, to other multi-unit operators.
Outsourcing can free CFOs from supervising back-office chores, allowing them to focus on improving the restaurant company’s overall business. There is no perfect time to consider outsourcing, but most Falcon clients start when they have five to 25 stores. Koning advises, “Begin with a needs analysis—what are your pain points?” The easiest starting point is Accounts Payable (AP), she says, then payroll, tasks that can transition to an outsourcing firm in less than three weeks. Shifting over more complex areas, like treasury and financial reporting, can take six to 12 weeks.
Providing outsourced accounting services is a growing field and it’s important to find the right partner. Dana Zukofsky, a director in the National Restaurant Practice of BDO, USA, says she advises clients to set their expectations first, then search for firms that are already serving similar restaurant clients.
“Set up initial scoping meetings with several vendors,” advises Koning, “and look beyond their expertise. You must have a comfort level that they will serve your needs, because a relationship can go south quickly if the provider starts making mistakes.” When Koning followed Falcon Holdings founder Aslam Khan onto the executive team at Friday’s two years ago, she discovered that the previous outsourced accounting provider “did not have proper quality control,” she says.
“Journal entries were not correct and bills had not been paid.” Koning has since replaced that provider with Falcon personnel that now provide outsourced accounting services to Friday’s corporate office and its 65 company stores.
Lina O’Connor had more confidence in the outsourced accounting team at Tender Greens when she became CFO because she had been part of it. O’Connor moved over when the California-based healthy eating chain had seven locations; it now has 28 and most accounting tasks, except for AP, are done in-house with a small staff. “In-house for us was more economical,” she says.
Jeff Tonidandel and his wife and partner, Jamie Brown, began opening restaurants in the arts district of Charlotte, N.C. 10 years ago and now have four—Haberdish, Crepe Cellar Kitchen and Pub, Growlers Pourhouse and Reigning Donuts—with a fifth under construction. Both have MBAs, but prefer to use their skills for fund-raising and marketing.
For accounting, Tonidandel says they chose a ‘hybrid, an accounting software provider that also provides a system of rules you must adhere to. If my team misses a deadline for entering payroll or completing bank reconciliations, they will start calling me.”
The provider, Restaurant Solutions, Inc. (RSI) in Littleton, Colo., “provides everything between POS and IRS in one proprietary platform,” says Dan Jacobs, the 19-year-old company’s director of partnerships and acquisitions. RSI, he adds, has about 700 clients with one to 40 locations, and teams of financial specialists that answer questions and help train their clients’ managers to use the RSI system.
Despite the options available, some restaurant companies, like Punch Bowl Social, with 16 large events spaces across the country, prefer to keep close control of all accounting functions. Robert LeBoeuf, president of organizational development and strategic projects says, “Our establishments each take in $6 million to $10 million a year, from dining, arcade games, bar tabs and private events and we want all our managers to understand each line on every P&L statement.”
Punch Bowl Social has its own accounting department, with staff accountants at headquarters assigned to oversee the financials of five stores each.
One exception, LeBoeuf says, is a service that provides an extra set of checks and balances on their liquor inventory, keeping a scorecard based on usage at all locations. “There can be a high theft issue in this area,” he explains.
Sorry, Punch Bowl Social workers. No beach parties for you!