Are you looking for a month-end close accounting checklist for your growing restaurant, bar, or café? You are in the right spot, as this post offers a free excel download of this checklist and an in-depth overview.
What separates a successful restaurant business from a failing one? I get this question all the time, restaurant owners, and operators. The answer is surprisingly simple – systems—for example, a great checklist for your month-end accounting procedures.
A successful restaurant business needs systems for on-boarding staff, allocating marketing spend, launching new products, and, most importantly – generating proper financials.
Table of Contents
Generating Month End Financials
Those outside the world of accounting believe that generating financials is a simple click of a button within the accounting software on your computer. Yes, it can be a very trivial task. However, the steps before this simple ‘one-click’ are certainly more challenging, dense, and time-consuming. Those more complicated points are what this article focuses on.
To get to the one-click, a quick and easy financial reporting preparation, a restaurant must have a checklist to ensure their financials are correct. Some small restaurants have relatively simple lists, while others are more much complicated (think large restaurant groups with multiple entities on a per-store basis with management companies). Some require an accounting team, and others simply require the restaurant owner to go through the list.
Below we will dive into all necessary items that need to be addressed for closing the monthly books for a restaurant business.
The month close checklist is extremely important, and for that precise reason, I spent a whole chapter of my restaurant book on this. For those who have yet to read my book and came here via different means, let’s take a look at the three main components of the checklist:
- Asset Account and Revenue Recognition (think assets)
- Accounts Payable and Liability Accounts (think liabilities)
- Reporting (think income statement)
Let’s take a deeper look at each individual section, the subsections and their associated tasks:
Asset Accounts and Revenue Recognition
What are asset accounts? Asset accounts are Assets, which are items that your company owns.
For example, you could own the money in your restaurant bank account, own the oven in the kitchen, or the tablet you are reading this blog post on.
What is revenue recognition?
First, we have to define revenue, which is the income your business gets from day-to-day business operations. These include but are not limited to food sales, beverage sales, catering sales, and service fees for those special events that you collect.
Secondly, the goal of proper accounting, you know, following the generally accepted accounting principles (GAAP), is to recognize revenue properly. Revenues are typically recognized when earned, not necessarily when received. Usually, this is not an issue for restaurants, as they get paid in advance or after the dining experience, but you can never be too safe.
- Reconcile Checking Accounts.
- Reconcile Savings Accounts.
- Reconcile Cash on Hand to ending amounts.
- Reconcile Credit Card receivable to ending amounts.
- Review uncleared checks and deposits to ensure accuracy.
Most restaurants do not have any accounts receivable, so this section likely does not apply. I included it for those who may have catering as a revenue generator.
- Accounts receivable aging total agrees with balance reflected on trial balance.
- Identify significant account balances past due and document collection status.
- Determine whether any past due balances need to be written off.
- Review accounts receivable aging for any unapplied credits.
- Establish and record pre-paid expenses (e.g., insurance, interest expense, etc.) to recognize the expense in proper month.
- Review new purchases made in the previous month to verify they have been recorded properly with the correct depreciation schedule.
- Review disposals of fixed assets and remove from fixed asset records.
- Record depreciation expense for the current month.
- Post interest and dividend income to General Ledger
- Reconcile any investment activities for the period
I recommend keeping inventory outside of your accounting software in excel or some other format. Making a handful of monthly adjustments to properly record inventory. Not sure what the difference is between purchases and cost of goods? We cover that in detail in…
- Review inventory reporting for reasonableness (high quantities, high dollars, etc.)
- Determine if any excess, obsolete or planned end-of-life (EOL) inventory exists that needs to be written off or fully reserved.
- Perform month ending inventory adjustment for both food and beverage.
- Ensure any other asset accounts are current and reconcile as necessary.
Accounts Payable and Liability Accounts
Liabilities (accounts payable included) are the money your company owes other people. Accounts Payable is specifically credit extended to your restaurant from vendors, whom you owe money to in the future.
Did you borrow $1,000 from your buddy to cover payroll on the week that sales were slow? Well, that would be a liability for your business. Do you collect sales tax that you need to remit to the government? That’s a liability because you owe that money—it’s not yours. Specifically, for restaurants, tip money that is collected for employees to be redistributed back to them is considered a liability, as well.
- Ensure all payroll journals are entered properly.
- Review all net checks to ensure a proper zero ending balance.
- Perform 3-way match (purchase order/receipt/invoice)
- Request Statement of Accounts (SOAs) from all applicable vendors.
- Verify vendor balances against the Statement of Accounts.
- Review AP aging for any unapplied credits.
- Close AP and post to General Ledger.
- Review AP and other payables for possible accrual.
- As applicable, analyze notes payable accounts (e.g., notes payable for mortgages or lines of credit) and post any unrecorded interest and principal outstanding; reconcile to statements received from source(s) of financing.
Sales Tax Payable
- Balances in accounts agree to respective sales tax reports filed the following month.
- Ensure any other liability accounts are current and reconcile as necessary.
Financial Reporting Activities
Financial reporting uses financial statements to disclose financial data that indicates the financial health of a company during and at a specific period of time. I believe proper financial reporting requires a few key steps that restaurants should take to ensure no missed items when generating these reports.
The information is vital for management and/or ownership to make decisions about the restaurant’s future. Additionally, it provides information to capital providers like creditors and investors about the profitability, performance, and financial stability of the company.
- Run preliminary budget-to-actual expense reports by department.
- Review and analyze month-end financial data with relevant department heads or stakeholder; record adjustments as necessary.
- Generate full final financial package and complete month-end financial statements for key stakeholders.
This is a great starting point for restaurant without an accounting month end closing checklist.