Beginner’s guide to restaurant accounting and bookkeeping

Table of Contents

• Why accounting matters for restaurants
• Setting up your bookkeeping system
• Daily and weekly bookkeeping practices
• Managing tax, payroll and VAT
• Using accounting reports to drive decisions
• Choosing an accounting provider or software

Why accounting matters for restaurants

Restaurants face unique financial challenges in the UK market: fluctuating customer numbers, slim profit margins, high waste potential and regulatory demands for tax and payroll compliance. HMRC expects correct VAT on dine‑in versus takeaway sales, accurate payroll and tips records, and adherence to Making Tax Digital rules.

Without proper accounting, you risk hidden cost leaks, compliance penalties and operational blind spots that can quickly erode your bottom line. Good accounting means you know which dishes are genuinely profitable, whether staffing levels are efficient and if you have the reserves to handle slow periods or equipment failures.

Setting up your bookkeeping system

Begin by selecting the right accounting method: small single‑site takeaways might start with simpler cash‑basis bookkeeping, while multi‑location operations should move to accrual accounting for clarity. Choose cloud‑based software that integrates with your point‑of‑sale (POS) system to automatically pull in sales data and reduce manual entry.

Define your chart of accounts: sales (dine‑in, takeaway, delivery), cost of goods sold (food, drink, packaging), wages, rent, utilities and so on. Set up vendor and supplier tracking, inventory tracking and bank feeds. Ensure you keep business and personal banking separate, a common bookkeeping mistake in hospitality. Finally, assign roles: who checks daily sales, who posts supplier invoices, who reviews bank reconciliations. Clarity here avoids untracked errors and surprises at year‑end.

Daily and weekly bookkeeping practices

Consistent routines keep the financial lungs of your restaurant healthy. At the end of each shift reconcile your POS batches (cash, card, digital) with actual intake and banking records, discrepancies should be flagged and resolved promptly.

Track inventory levels weekly; in a restaurant, food and drink stock move fast and losses from waste or theft add up. Weekly creditor analysis helps you foresee supplier commitments and maintain smooth relationships. Automate repeat supplier invoices where possible and ensure you set a minimum buffer for slow weeks (e.g., quieter Monday or Tuesday). Avoid letting receipts pile up. In the UK you must keep records for six years and missing receipts complicate expense claims.

Managing tax, payroll and VAT

Tax compliance in a restaurant context is complex. VAT treatment differs for dine‑in (standard rate) versus takeaway (often reduced rate) and errors lead to costly HMRC penalties. Payroll involves wages, shift premiums, overtime and tip or tronc management. Correctly classifying employees, submitting PAYE and National Insurance via Real Time Information (RTI) and ensuring auto‑enrolment pensions are in place are essential.

Use specialist hospitality accounting advice if you handle multiple revenue streams. VAT returns, payroll filing, service charge reporting and tax compliance all tie into your bookkeeping system and must be scheduled correctly to forecast cash‑flow and avoid surprises.

Using an all‑in‑one restaurant system that integrates your POS, accounting and payroll can make these processes far simpler and help you stay compliant with less manual effort.

Using accounting reports to drive decisions

Bookkeeping is no longer just about compliance, it becomes a decision‑making tool. Monthly management accounts should include sales by channel (dine‑in vs online), cost of goods sold percentages (food, drink), labour cost as a percent of turnover, and comparison of actuals versus budget. Analyse your menu: which dishes sell well and make high margin, which ones under‑perform?

Use this data to streamline your menu and change slow‑moving items. Seasonal forecasts help you schedule staffing, stock levels and promotions proactively. If you spot labour cost creeping over 35% of turnover one month, you can act early. As one UK accounting specialist noted, understanding these metrics lets you treat your business like a living entity rather than reactive firefighting.

Choosing an accounting provider or software

If you lack in‑house financial expertise, engaging an accountant or bookkeeper experienced in hospitality can be a smart move. Unlike general accountants, specialists understand hospitality quirks: kitchen waste, drink pour cost, POS integration, tronc schemes and hospitality VAT issues. When comparing providers ask: which software platforms do they support?

Do they provide weekly flash reports? Can they integrate with your POS and online ordering system? Is their fee fixed or hourly? Also assess turn‑around time for management reports and how proactive the advice is. Whether you choose to outsource or manage in‑house with cloud software, ensure your system is scalable, automated where possible and delivers timely insight.