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 10/30/2015: The information in this article as been updated in the latest edition of our eBook,“Restaurant Accounting w/QuickBooks.” We recommend that you reference the more up to date information in that publication.
Become a Restaurant Accounting Specialist (RAS) with our Certificate Program and gain the knowledge you need to understand the unique back office accounting needs of restaurants. Earn your Certificate of Achievement through our new program.
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 Certificates account 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:
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.
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.
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.
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 for restaurants, 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!