Accounting for Restaurants: Top Requirements Business Owners Must Know
Being a hot melting pot of diverse ethnicities, Dubai serves as a profitable destination for restaurant businesses. However, a major share of the profit-making strategy depends upon how much focus you are putting on implementing a robust accounting procedure within the organisation. Even though restaurants have to follow the same accounting standards and methods, the business owners need to understand that accounting may vary quite a bit from industry to industry.
Restaurant accounting finds the use of the same methods, profit & loss statements, and cash flow reports, just like all other businesses. Yet, it has unique expenses, and therefore, restaurant accounting also has unique requirements. The easiest way to have a robust accounting procedure in your organisation is outsourcing to the best accounting firms in Dubai, UAE.
Here are some of the major accounting things a food business owner need to know regarding restaurant accounting.
Keep Track of Restaurant Expenses
Just like every other industry, you need to keep an eye on both fixed and fluctuating expenses of your restaurant business. Here you need to understand that the fixed expenses cover the cost of operations such as rent, utilities, insurance, loan payments, and employee salaries. Fluctuating expenses, on the other hand, is a bit hard to budget as it may vary constantly. Hourly wages of employees and food costs are more identifiable examples of fluctuating expenses in a restaurant business.
Implement Effective Inventory Management
Inventory management is one area where the unique aspects of restaurant accounting manifest itself. Most other businesses, including the retail stores, need not take stock of the inventory frequently, but the restaurant owners should track the inventory on a weekly basis. Food constitutes the restaurant inventory and its perishable. Since food will perish before the month ends, you need to keep track of the inventory frequently. Managing the cost of goods sold (COGS), categorising food items, and minimising waste are also important factors that you need to take into account for restaurant inventory management.
Cash Flow and Profit & Loss statements
Just like inventory, some businesses make profit & loss statements on a monthly or quarterly basis. Although it is not the only way, tracking profit & loss statements on a weekly basis is advisable to ease the efforts required for inventory management. Making frequent cash flow reports are also recommended for the same reason. For better management of cash flow and profit & loss statement, seek the advice of the best accounting firms in Dubai.
Consider the Best Accounting Methods
Restaurants can use both cash and accrual methods to do the accounting in the organisation. However, the cash accounting method or cash basis is commonly used by most restaurants. Restaurant accountants in Dubai prefer the cash basis as it allows the business owners to record the income upon receiving cash from services or paid for expenses. The cash method has become an ideal accounting choice as most restaurants require the customers to pay for food, beverage and services.
In the accrual method, the restaurant owners can record the transaction as they occur irrespective of when the payment is received. With this method, the business owners get a more accurate view of how the business incurs expenses and income is generated. It also allows them to have a clear understanding of how income compares to expenses.
Give Top Priority to Taxes
Tax is one important accounting aspect for restaurants as nearly all such businesses need to register for Value Added Tax (VAT). Restaurants should register for VAT if their taxable supplies exceed AED 375,00 and a voluntary registration can be made if taxable supplies are between AED 187500 and AED 375,000. Restaurants either display the process inclusive of VAT on the menu or display the prices in the menu with a footnote that specifies 5% VAT applicability on food items. You need to consider the following general scenarios where restaurants are allowed to claim input tax credit:
- Purchase of Food items
- Restaurant Rent
- Packing Materials
- Delivery Vehicles
- Equipment used in Kitchen for cooking
- Furniture and Fixtures
- Office equipment
The restaurants that are registered for VAT must issue tax invoices to their customers to ensure compliance with VAT laws. Also, you need to ensure that your accountant is taking care to maintain all the business records and documents as specified in the UAE VAT Law. Outsource to the best accounting firms in Dubai to ensure your restaurant is complying with the VAT Law.
Why Should You Hire the Best Accounting Firms in Dubai?
There is an old saying “Know Your Strengths, Outsource Your Weakness”. As a business owner, it is vital for you to determine when to outsource your restaurant accounting requirements. If you have realised your organisation’s weakness, hire the best accounting firms in Dubai, such as Jitendra Chartered Accountants (JCA) to rejuvenate the accounting practices within your organisation.
Being one of the most experienced accounting firms in Dubai, JCA frees the business owners from the burden of intricate financial analysis that would distract them from focusing on their core competencies. JCA has a team of highly qualified Chartered Accountants in Dubai, who are well-versed in the nuances of the restaurant industry. JCA’s seasoned accountants effectively monitor the financial health of the company, apart from assisting in the budgeting, VAT Return filing etc. Their experience and competence are enough to propel your business to success.