QuickBooks for Restaurants
Many restaurants can use QuickBooks very effectively for their back office work and for purchasing, bill paying, and payroll. Let’s take a look at how you might set up QuickBooks in a situation where the restaurant has cash registers or a Point of Sale system that ring up sales by each server. Summary information will be posted at the end of each day.
Update 3/29/2013: The Sleeter Group has just released Restaurant Accounting with QuickBooks – an updated version of the information summarized here. This is an eBook by Doug Sleeter with a companion “toolkit” that provides you with a sample file with the templates, item lists and reports that you need to use QuickBooks in a restaurant.
Restaurant Chart of Accounts
Here is a sample Chart of Accounts, showing a few accounts that will be critical in tracking and handling your restaurant setup.
The Tips Holding account will be used to hold cash paid out to servers each night after the end of their shift. It will not be a true bank account, but instead a drawer or safe on the premises with enough cash to pay out tips collected from customers that pay by credit card. Periodically, the manager of the restaurant should replenish the cash in this drawer so that is always enough cash on hand to pay tips to the servers.
The Gift Certificatesaccount is used to track gift certificates sold, and redeemed.
We recommend breaking down the income and Cost of Goods Sold accounts as shown above. You could add additional subaccounts if you want more detail, but this chart should be sufficient for most restaurants.
Items for Restaurants
Here is an item list for a typical restaurant.
- Set up Discount items for each discount or complimentary service that you track.
- You will want Service items for each different type of sale that is tracked on your cash register. If the register has more buttons to track more detail, you can add service items to track each of those items.
- Create Other Charge items for Cash Over/Short and for tips paid out to servers each day. The Tips Paid Out item is used to track payments to servers from the Tips Holding account.
- Payment items should be set up for each method of payment you accept. This includes credit cards and cash.
- Include two Sales Tax items – one for your local sales tax and one that has a zero tax rate for non-taxable sales.
- You should also include one Subtotal item.
In most cases, restaurants should not use QuickBooks to track inventory. We recommend taking periodic physical Inventory and using Journal Entries to manually adjust the value of Inventory, offsetting the appropriate COGS account.
Setting up the Sales Rep list for each Server
Create an entry in the Sales Rep list for each of your servers (or other tip-earning employee). They should be set up as Employees.
Setting up Customers and Custom Fields
For our recommended restaurant setup you’ll only need to add one customer, but you’ll add several custom fields to help you track more information about each day’s sales.
Add a customer named All Customers. Select N/A as the Tax Item.
Select the Additional Info tab and click on the Define Fields button to add three custom fields:
- Count
- ToGo
- Avg
You will be adding these fields to the sales receipt form.
Restaurant Sales Receipt Form
You will enter your daily sales from the cash register or POS system each day using a sales receipt.
Create a new template for sales receipts and name it Restaurant Daily Sales, and include the fields as shown below.
Payroll for Restaurants
QuickBooks is very well suited for most of the needs of small restaurants with fewer than 50 employees. We have some recommendations on how to set up some special payroll items needed in restaurants. In addition to these setup steps, you should go through the complete payroll setup as discussed in The Sleeter Group’s QuickBooks Consultant’s Reference Guide.
Payroll Items
Create the following Payroll Items:
- Hourly Wage items forChef, Cook, Host, Manager, Serverand Prep/Dishwasher. You can add other wage types that fit your particular situation.
- An Addition item called Tips Addition, with the account set to Gross Wages and a tax tracking type of Reported Tips.
- A Deduction item called Tips Deduction, with the liability account set to Gross Wages, the tax tracking type to None, and Gross vs Net to Net Pay.
Employees
Create a record in the Employee List for each employee. If you plan to track hours and pay employees based on hours worked, mark the Use time data to create paychecks field on each employee record.
Record Daily Sales
At the end of each business day, zero out the cash register, and record the z-totals on a QuickBooks sales receipt using the template you created earlier. In order to track sales and tips separately for each server, create a separate sales receipt for each server’s daily totals.
Note the following about the daily sales receipt:
- Enter a different sales receipt for the total sales for each server, each day.
- Enter the server name, the weekday, the total count (number of guests), the number of To Go orders, and the average ticket at the top of the column section.
- Enter the total sales of each service item, followed by a subtotal, then the sales tax collected (per the cash register) and another subtotal.
- Enter each of the payment types.
- The sales receipt must always total to zero at the bottom. This provides a proof that total sales balances with the total collections. If there is a balance at the bottom, use the Over/Short item to force the transaction to zero out.
- Notice that sales tax is entered directly on the face of the sales receipt, and the Tax field at the bottom is set to N/A.
Bank Deposits
After recording the daily sales receipts for each server, the Undeposited Funds account will have a balance. The balance must be transferred into the bank account so that the bank reconciliation will match with each day’s transactions.
When you select the Record Deposits function, the deposits will show all of the payment details that you entered in the sales receipts.
Use the View payment method type dropdown box to select just the Cash and Check payments.
Deposit the cash to your Checking account. If you hold cash out of the deposit, such as for the Tips Holding account, you can enter that account in the Cash back goes to field and enter the amount you held back.
Use a similar approach to make deposits to each of the credit card accounts. You can enter your merchant fee in the deposit window by selecting an expense account called Credit Card Discount Fees and entering the appropriate amount as a negative number.
Tracking and Reporting Tips Received by Credit Cards
When tips are received on credit cards, and paid out of cash on hand directly to the servers, you will record this on the daily sales receipt transaction. On pay day, add the tips information onto the employee’s paychecks.
Create a Sales by Rep report, and add an Item filter to select only the Tips Paid item.
When you pay employees (through the Pay Employees option of the Employees menu) you will add the amount of tips paid onto each employee’s paycheck. Enter the same amount in two places on the paychecks:
- In the addition item called Tips Addition.
- On the deduction item called Tips Deduction.
This ensures that the tips paid to employees will be taxed, and that the tips will be reported on their W-2.
Reports for Restaurants
We recommend the following reports:
Sales by Item Report: This shows you the total sales for each item. Use the Sales by Item Summary report.
Sales Detail by Server Report: To see a report of all the sales details by server, create a Sales by Rep detail report, and add the custom field columns as shown below.
Tips Paid Reports: To see how much was paid out for tips to each server by day, create a Sales by Rep Detail report, filtered for the Tips Paid Out item as shown earlier. To create the same report, but with totals only, create a Sales by Rep Summary report, filtered for the Tips Paid Out item.
Of course, there are many different ways to use QuickBooks, and every restaurant has it’s own “flavor”. We are providing you with an overview as a starting point. If you have any other tips that you have used for YOUR restaurant, let us know!
Did you find this helpful? A more comprehensive process for using QuickBooks in a restaurant is available in the Restaurant Accounting with QuickBooks eBook by Doug Sleeter. The eBook contains chapters on QuickBooks setups, payroll setup, bank deposits, reports for restaurants, and more.
Category: Industry Solutions, QuickBooks Tips/Tricks, Restaurants, Working with QuickBooks
About the Author (Author Profile)
Doug Sleeter is a passionate leader of innovation and change in the small business accounting technology world. As a CPA firm veteran and former Apple Computer Evangelist, Doug has melded his two great passions (accounting and technology) to guide developers in the innovation of new products and to educate and lead accounting professionals who serve small businesses. Doug is best known for his expertise in QuickBooks as well as driving the adoption of online accounting and small business process solutions. In the early 1990s, Doug was a pioneer in developing the first QuickBooks seminars in the country and has since built the largest group of accounting software consultants in the small business accounting profession. Doug serves on several advisory boards for technology companies and has consulted with numerous industry leaders including Intuit, Sage, Apple, and Adobe Systems. The CPA Practice Advisor has recognized Doug as one of the "Top 25 Thought Leaders" in the accounting profession for the past several years and he has been named to Accounting Today's "Top 100 Most Influential People in Accounting" each year since 2008. Highly sought for his ability to engage and educate accounting professionals, Doug presents at various accounting events throughout the year including those held by the AICPA and numerous State CPA societies. Doug also hosts an Accounting Solutions Conference and Tradeshow attended by hundreds of accounting professionals, industry leaders and technology developers.Subscribe
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Oh how I wish I’d found this article about 6 weeks ago……..while I was setting up Quick Books for our new restaurant. Now the only problem is staying up all night to figure out how to go back and redo everything so that it’s all consistent. Having used QB’s for other businesses I felt fairly confident using it for my restaurant only to find out that it’s worlds apart in the accounting world, especially regarding payrolls and credit card tip disbursements and cash tips declared.
Although I have a wonderful lady who is QB’s certified guiding me along it didn’t take long to realize that she is as lost as I am with utilizing quickbooks for a restaurant. I’m now seeking help through my state restaurant association. They have so many more resources which are available than would be just as an individual business owner.
The part I do not understand is that my first pre-requisite for buying my POS was that it be Quickbooks compatible. It’s anything but. Now this P.O.S.(literally) sales rep is trying to tell me that I have to download stuff from the POS to a USB drive, create specific excel templetes to upload to and then transfer the information to QB’s. Has anyone else ever heard of this? Your long hand method above sounds less time consuming than what this sales rep is telling me.
Ellen,
Glad the article helped. I would not go with any POS system that involves “downloading to a USB drive.”
A good restaurant POS that connects to QuickBooks is AccuPOS (www.accupos.com).
Just found your website. Good info. Have you given any thought to the service charge vs tips issue recently published in Rev Rule 2012-18 and the related IRS announcements? I’m trying to decide the best way to set this up.
This is an excellent article. Thanks so much Sleeter Group. What I haven’t found the answer to yet is what type of Quickbooks would be best for a new restaurant client. Would Quickbooks Pro be sufficient? Or should we go with the Premier edition? Do either have a Chart of Accounts specifically for a restaurant.
Thanks.
Hi Lisa, QuickBooks Pro is sufficient for Restaurants. Re: the Chart of Accounts, QB doesn’t have a specific COA for restaurants, but you can use the COA from my sample restaurant file in the “Restaurant for QuickBooks” toolkit (http://store.sleeter.com/restaurant-accounting-with-quickbooks-e-book-toolkit/?utm_source=Beyond&utm_medium=Post&utm_campaign=Restaurant).
Thanks so much Doug. Your blog/website are extremely helpful. I am so happy to find this info before setting up my new client. Lisa
Doug – What do you mean by restore the file. Do I need to open the file into Quickbooks. My computer is not recognizing the file (I don’t have QB installed yet). Confused here.
Lisa
Hi Lisa,
Yes, you do need to have QB installed first because this file is our sample QB company file, used to create the screenshots above. After downloading, use the “Restore” function in QuickBooks to open it. If you’re completely new to QuickBooks, it’s probably best to get a consultant involved to help you get everything set up. Search our web site to find someone in your area. Many can also help you remotely if you don’t find someone close to you.
http://www.sleeter.com/user/consultant/search
Doug – I’m up and running. I’m going through the set-up now as describe in your blog and when you changed the “Ship Via” field on the Sales Receipt to “Wkday” how do you delete the old values like “UPS”, etc?
Thanks again,
Lisa
Lisa,
Since we use the “Ship Via” list to track the days of the week, you’ll need to edit the Ship Via list. It’s under the Lists menu, then Customer and Vendor Profile lists. You can just delete all the items in that list and enter new entries for each day of the week.
Note that if you have used any of the Ship Via entries in a transaction, you can’t delete them, but you can mark them as “inactive” to hide them.
I set up a restaurant as described in your article, but am having trouble with the Tips Holding Account. I’ve set the company up after many months of business, so records were not kept as I would have liked. The restaurant has an outside payroll provider. From the cash register Z report, I entered the Tips Paid Out into the Tips Holding Account as described. I now need to reflect those amounts in the Payroll Expense Account, but no matter how I look at it, I am unable to make the proper entries. Please help
p.s. The tips were not recorded by employee – only two employees received tips.
FYI, In Texas you are instructed to not back the tax out of bar sales. The sales have to be reported entirely then the tax owed on bar is calculated added to that total, but not passed on to the customer. How would that be set up? Should the The mixed beverage tax be a company expense? The rate here is 14% if you have a full bar license.
Great article. What are you thoughts on the fact I/we do not have a POS system. We are owners and we run the deli, with two part time people. We have knowledge on everything that goes in and out; but again will not having a POS matter? Thank you .
Hi Gina,
These methods assume you have a POS and are using the daily totals (z-tape) as the source of the entries in QuickBooks. So, if you do NOT use a POS, you’ll either have to enter each sale directly into QB, or do some type of daily totaling of your sales so that you end up with the same information that would come from a POS z-tape.
I hope that helps…
This is a perfect article, as I am just about to start working on a QB file for a new restaurant. However, I do not see any mention of the product that the restaurant purchases for preparing the food & beverages served.
What item type would you suggest that would point to the COGS accounts? Is it necessary to use Units of Measure or OK to keep it simple by doing a periodic JE to account for inventory-on-hand?
Thanks, I appreciate you guys!
Beautiful breakdown – especially the tip reporting set-up and the customization of the the sales receipt form.
Setting up a “bank account” for Cash in Register allows cash to be tracked if it’s not all going directly to the bank. Create a separate payment type for Checks and then the Cash payment type can be directly routed into the Cash in Register account instead of flowing through the undeposited funds. Whatever cash is deposited would then be added as a separate line on the deposit slip at the end.
This makes it easy to verify and reconcile the balance in Cash in Register – including cash being paid to vendors (use the Write Check function to record expenses paid via cash).
Great tip Gina!
Doug – Do you know if the Focus POS system can be integrated into Quickbooks for the purpose of inventory management?
Thanks for the great article. I am a bar owner who taught myself to use QB after realizing that my bookkeeper could not do the job. I wish this article had been available to me when I was first setting things up. I made soooo many mistakes and am still tweaking and reworking things.
One thing that I did that has worked well was to set up SEVEN customers, one for each day of the week. As a result my favorite report is the Sales Summary by customer. I run it with columns by week. This allows me to compare business on particular days so I can tell if Karaoke on Wednesday is working, or how our Monday Night Football crowd is. I can easily see how business has trended up for that weekday.
Week1 Week2 Week3 Week4 Total
MONDAY $$$ $$$ $$$ $$$ $$$$
TUESDAY $$$ $$$ $$$ $$$ $$$$
WEDNESDAY $$$ $$$ $$$ $$$ $$$$
THURSDAY $$$ $$$ $$$ $$$ $$$$
FRIDAY $$$ $$$ $$$ $$$ $$$$
SATURDAY $$$ $$$ $$$ $$$ $$$$
SUNDAY $$$ $$$ $$$ $$$ $$$$
I love this report! I would love to modify it to give me averages as well, but I haven’t yet figured out if that’s possible.
Another issue that I have encountered is sales tax. Your guide didn’t go into that. In the bar all our sales include sales tax, but I need to back out the tax to get the gross sales for reporting to the tax authorities. I came up with a solution for now, but I am sure it could be improved. Thanks again!
Hi Barbara,
I think the seven customers would work well, and as long as you don’t otherwise use the customer list, go for it. But if you ever have an AR customer, it would complicate things. We used the “Ship Via” field, and renamed it to WkDay, so we could record sales by day. Then do a report totaled by Ship Via, and you get pretty much the same thing that you get with your Sales Summary by Customer.
For sales tax that gets included in the bar total, you can divide the z-tape total by 1+tax rate (e.g. if it’s 8%, then divide by 1.08) to arrive at the Net Sales (excluding the tax). Enter that amount on the Bar Sales line of the sales receipt. Then subtract that amount from the total to calculate the tax. Then enter the tax as shown in the screenshot above.
Doug
I am glad someone is out there helping the little guy. Is there a step by step out there for handling charged tips being paid nightly? This has become a headache for me from both my accountant and employees. I seem to lose either way. I want to continue to pay nightly, but apparently the way I am tracking it in QB is not right according to my accountant, but she is clear as mud when it comes to providing a step by step. I hate asking for free advice, but I am doing it for the sake of my employees. Thanks.
Hi Pete,
If you’re having trouble with your current system, it could be that you’ll need to clean up past data as well as set up new procedures. For that, I recommend engaging a consultant who can come in and directly consult with you to assess the current situation, make recommendations, and either teach you, or do the work for you. We have consultants throughout the US and Canada, so look for someone here http://www.sleeter.com/user/consultant/search
Hello Doug
Thanks fr ths article, I am in Canada.
My question is that. the clients paid the tips ( included with the his bil) via credit card. Then the tips credited to the checking account by the credit card company. In your article you did not mentioned how to record this part.
I beleive the missing journal is…”….Dr bank checking…Cr tips liability?!
Would you please explain hw ths got handled in quickbooks?
Hassan,
Thanks for your note. You should set up a Tips Collected item and point it to the Tips Holding liability. I should have shown that item in the item list above.
Then, assuming the Z-tape can separately show tips collected, the sales receipt would have the tips collected amount on line 3 in the screenshot above. You would also have a line for Tips Paid Out towards the bottom of the sales receipt, and that should be a negative number equal the the amount of Tips Collected.
You should do this for tips received by Cash or Credit Card
hi, i’m new to qb and have a question about the tip holding account. we use aloha pos and the credit card tips are accounted for and subtracted by aloha from the server’s check-out “cash owed” at the end of each shift. if their cc tips are more than the cash that they owe, then the “cash owed” is a negative, but this $ is taken from the total of server’s “cash owed”, and the total of all the “cash owed” from the servers is our cash deposit from the night. it has happened a couple of times over the last two years that the total “cash owed” of all servers was negative, is this what the tip holding account is for? trying to wrap my brain around this one.
hi again…after thinking some more about it, i’m wondering if i can just make one “server sales rep” and use the totals from the night. sales-cash&credit (divided into food and bev), sales tax, cc tips, comps, etc.
Mike,
We’re just about to post an update to this post that goes deeper into the handling tips. Should be live next week. Also, we will be releasing a “toolkit” that comes with an eBook and sample QB file with all of the setup and reports. So if you are interested and still need help getting it all set up, check back next week (week of 2/18/13) for an update to the post and a link to purchase the system.
Hi Doug, love your articles! I have a new restaurant client, and noticed you said an update to this post was in the works for 2/18/13. Has it been published yet?
Frank, the update isn’t quite ready for publication yet (as editor, I always have to go over these things). It will be available in the near future. When it does, we’ll post a notice at the top of this article either to say that THIS copy is updated, or possibly to point to the location of the new article if that is the route we take. Sorry for the delay!
I have another question as well. our beverage distributors charge a $30 deposit on kegs. when they drop one off i get charged for the product and that deposit, but the total for the check is this total, minus any kegs they pick up. so i want to track these deposits and know i can make “keg deposits” a current asset, and each vendor’s keg dep a sub under it. my question how is this linked to the vendor in order to make everything balance, and thus the check amount correct? and is this even the best way to do this? thanks so much for your time…mike
This article was immensely helpful. However, I did need to clarify one thing: In setting up the items you mention creating a Cash Over/Short item, which in your screenshot is linked to Cash Over/Short Account. Can you clarify as to whether this is an expense or other type of account? Additionally, how should this account function (e.g. be balanced in ledger entries, etc.)?
Thanks again!
Hi Doug, I’m trying to understand how to handle credit card tips in QB. My business is a restaurant.
Is it an expense or part of COGS in QB? What about merchant cc fees, is it an expense or part of COGS?
Thank you,
Cindy
Hi Cindy,
Tracking Tips in restaurants is indeed a challenging part of managing, tracking, and complying with laws. This article covers some of the details you want to use, but there are more steps that you’ll also want to take to ensure full accounting for credit card tips, accruing a liability for tips received, recording reported tips on paychecks, and handling negative paychecks.
All of this and more is covered in my new book “Restaurant Accounting with QuickBooks.” Since it’s not quite released, it’s not available on our store yet, but if you call our office, you can order an advance copy. The book is in PDF format, and includes a “toolkit” with sample files that you can use to get set up right away. Call our office at 888-484-5484.
Thanks for your question!
Hi Doug,
Just purchased your e-book, and very much enjoying it. One thing that I don’t see, though, is how to accommodate for a beginning bank in the till.
For example, we have one primary till (our servers bank their own cash). At the beginning of every day, this till is filled with $X to use for change. Most of the time, cash is added to this from sales, and the tips are cashed out from a combination of cash received via sales and what was in the till for change.
Occasionally, cash may also be “removed” from the till to purchase miscellaneous emergency items.
All of this is tracked through our POS, but I’m not sure how to track it in QB.
Any thoughts?
Interesting blog post on another web site about tips and taxes: http://www.thecfo2go.com/blog.php?id=1
Hi Doug,
I see your note that you don’t typically recommend using QB to track inventory. Do you use it to any extent? For example, I’m debating setting up the different inventory purchases as “inventory parts” so that when we do a periodic physical count to adjust inventory against COGS we adjust on an inventory part basis. Do you do this or do you just put all purchases into either Food or Bar inventory account and do all calculations for inventory in another system? I’m using Premier 2013. Also – would you use the Retail version of Premier or just the General Business version?
Thanks!
Teresa, a side note (I’ll let Doug answer your main question). Personally, I don’t like recommending the “Retail” or “General Business” editions, because they tend to be the most limited in options. In a general sense I prefer either the wholesale/manufacturing edition, or perhaps QuickBooks Accountant, as they have more features. You may not want these features in a particular business, but it is nice to have the option. Thinks like multiple units of measure, for example.
Hi Teresa,
Yes, I recommend AGAINST inventory parts for your situation, and instead, just directly code your purchases to the Cost of Sales Accounts. Because as soon as you use Inventory Parts, you start dealing with the average cost of each “unit” you purchase. But in restaurants, there is so much waste, and unit-of-measure inaccuracies, that you’re really fighting a losing battle when trying to keep your inventory counts accurate.
I also agree with Charlie’s comment about NOT using the retail edition. The QB Accountant Edition is what I prefer because it has all the features of the others, plus some cool features like Client Data Review feature. Thanks for your post!
Charlie – thanks for your note.
Doug – Thanks you as well. Do you have any comment on using the Wholesale/Manufacturing edition? I’ve already purchased Premier for my client and am debating whether I should eat that cost and grab the accountant version. My client will be hands off with all of the QB stuff and I’m wondering how much I will really gain by switching to the Accountant version since I won’t be using features like client data review.
Teresa, No problem with staying with Premier. I think Charlie’s recommendation was assuming you had to choose for a new purchase.
You’ll be completely fine with Premier.