It’s impossible to run an efficient kitchen without Gordon Ramsey-level organization.
From mise en place to immaculate refrigerators, knowing exactly what’s there and in what quantity is what chefs rely on.
Running a successful bar or restaurant is no different.
Like a chef, a restaurant operator or manager needs to operate in an organized environment. With so many moving parts to running a successful bar, it’s a recipe for disaster if you’re not.
An organized restaurant environment starts with restaurant and bar inventory software like BinWise Pro. But it’s ultimately reflected in a restaurant’s chart of accounts, which is a manager’s mise en place, immaculate refrigerator, and financial oracle.
Here’s the skinny on restaurant charts of accounts and how you can make a useful one.
Restaurant Chart of Accounts Overview
A restaurant chart of accounts is a financial and managerial tool that lists all the important financial information for your business. It allows companies to track specific financial information and provides a crystal-clear picture of where all the money is going.
“Lists all important financial information” may sound intimidating. But that’s why a restaurant chart of accounts exists.
It takes all the disparate financial information floating around about your restaurant, organizes it, and itemizes it.
What’s In a Restaurant Chart of Accounts?
You’ll have at least 7 categories in your restaurant chart of accounts. They are assets, liabilities, equity, revenue, COGS, expenses, and “other.”
Each one of these categories is associated with a four-digit number. We’ve followed best accounting practices for numbering the categories below. Assets are in the 1000s, liabilities in the 2000s, equity in the 3000s, and so on. The numbering scheme will become clearer as we go on.
Let’s look into each briefly, then see how they all come together in a restaurant chart of accounts.
Within the 1000s, you’ll list every asset account and specify whether they’re current or fixed.
Current assets are liquid assets that are either cash or expected to be converted to cash within a year. In the context of bars and restaurants, this is checking accounts, savings accounts, food inventory, bar inventory, accounts receivable, short-term investments, and more.
It’s helpful when compiling this part of a restaurant chart of accounts to have a bar inventory or wine cellar app that can immediately give you an accurate, real-time picture of your inventory. Otherwise you’re stuck taking physical inventory.
Liabilities are what your bar or restaurant owes. This includes all your accounts payable to suppliers, along with company credit cards, taxes owed, and more.
Equity accounts measure what’s left of a business after liabilities are subtracted from assets. It’s a measure of how valuable a company is to its owners.
Bar and restaurant equity accounts are based on how your business is legally structured. The majority of bars and restaurants are LLCs, so we’ll use that structure as an example.
A sole proprietorship, or LLC with a single member, should have two accounts: a capital account and an owner’s draw account.
The capital account keeps track of all the money invested since the inception of the business (plus or minus net annual profit or loss). That’s where a restaurant profit and loss statement comes in handy. The draw account records any money removed from the business for personal use.
An LLC with multiple members simply needs capital and draw accounts for each owner.
Restaurant equity accounts also include retained earnings. This is any net profit that’s not distributed as dividends to owners).
The 4000s is dedicated to the income your business generates from daily operations. It’s about what you’d expect for a bar or restaurant: beverage sales and food sales, for the most part. All broken down by type, e.g., wine sales, beer sales, etc. This includes comps and refunds. Some hospitality businesses also sell merchandise or other non-consumables, which would need their own revenue account.
Again, this information is easily pulled from a perpetual inventory system system from BinWise. By keeping a running tally of your inventory after every purchase and sale, it will always be up-to-date and accurate.
More complex businesses will break their revenue accounts up into subaccounts. If, for example, you have multiple revenue centers (a setup that’s easy to track with software like BinWise Pro), you may want to list them as multiple subaccounts. That allows for more granularity in tracking and analyzing your finances.
Though, ultimately, the power of the restaurant chart of accounts is in its brevity. It’s not meant to be a book of financial information. It’s meant to be a snapshot. Too many subaccounts may prevent it from being a useful one-page financial barometer.
Cost of Goods Sold (5000s)
The cost of goods sold, or COGS, is the cost of acquiring and preparing items for sale. In a restaurant chart of accounts, the COGS section will include the same accounts as the revenue section. That way you can eyeball the COGS and revenue for specific item types.
If your restaurant or bar inventory system integrates with your restaurant accounting (like BinWise Pro does), you can pull COGS at any time. That’s because BinWise lets you upload all supplier invoices right into your accounting platform.
To put it all together, a restaurant simply combs through the necessary reports from their bar and restaurant technology, such as bar POS system, bar inventory app, and restaurant accounting software. Then they itemize it in the correct section—choosing to create subaccounts if further specificity for recording is needed.
The 7000s and 8000s can be used for other income and other expenses, respectively. Like interest earned on investments or rental or temporary expenses.
How Do Restaurants Use a Chart of Accounts?
Here are some common ways bars and restaurants use their chart of accounts:
- Track incoming money. A good chart of accounts lets you see where your business’s money is coming from and going to. It also gives you a good idea of what you can liquidate if the going gets rough.
- Understand debt. Bars and restaurants can see the short-, medium-, and long-term loans and debts they have. Having a bird’s-eye-view of debt structure can help with strategic payment schedules that maximize cash flow and adhere to budgets.
- Track spending. You’ll know exactly where your money is going. And that’s very useful when compared to the incoming money in the revenue section. You’ll see at a glance all your recurring expenses and where you can cut spending or try renegotiating a contract.
- File taxes. Come April, your restaurant chart of accounts will be your best friend. It’ll have all the expenses and revenues you need to copy over to your IRS forms.
When all’s said and done, here’s what a sample restaurant chart of accounts looks like.
Sample Restaurant Chart of Accounts
Here’s what a restaurant chart of accounts template looks like:
Note that within each section, accounts typically skip ten digits. That’s so new, similar accounts can be inserted if needed.
You can also download our restaurant chart of accounts (xls) for free.
Once you download it, you can edit it to your heart's content.
If you don’t consistently create and consult a restaurant chart of accounts, it’s sad to say, but your chance of becoming a restaurant failure statistic skyrockets. You should use your chart of accounts to better understand your restaurant’s financial state and plan for its future.
Decision after decision can be made with this information.
And a big part of that process is using reliable bar inventory management software. A platform like BinWise Pro puts real-time inventory, sales, and purchasing data at your fingertips. It allows you to gather, in seconds, valuable data for a restaurant chart of accounts.
Without a system like BinWise to record and deliver historical data, creating a chart of accounts and planning for your business’s financial future isn’t easy.
BinWise makes it easy.