If you’re reviewing or managing money within a restaurant business and don’t have a background in the finance industry, there’s a good chance you’ve wondered this at some point:
What’s the difference between accounting and bookkeeping?
It’s a common question. Both restaurant accounting and bookkeeping deal with financial data, but there are key differences between the two services, and they ultimately serve different functions. In this article, we’ll unpack both accounting and bookkeeping in more detail to help you identify their differences – and to give you clarity around which services you need in your own restaurant business. We’ll cover:
- The definition of restaurant bookkeeping.
- The definition of restaurant accounting.
- How to determine which service you need.
Let’s dive in.
The definition of restaurant bookkeeping.
The definition of bookkeeping follows from the term itself. It involves “keeping the books”: recording financial transactions, or records, for every “book” – or, more commonly, account.
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Here’s how Business Dictionary defines it: Bookkeeping is the “systematic recording of financial aspects of business transactions in appropriate books of account.”
Bookkeepers compile every transaction within a ledger. Usually, this activity includes keeping records of invoice details, payments to suppliers or vendors, and, of course, payments from customers. The whole idea and purpose of bookkeeping is to accurately track the money a business receives and the money a business spends.
In this way, bookkeeping lays the groundwork for accounting services.
The definition of restaurant accounting.
Bookkeeping is recording and tracking financial data. Accounting, on the other hand, is analyzing, interpreting, and summarizing financial data. This service encompasses bookkeeping – bookkeeping is a part of accounting – but it goes beyond it.
As Quaderno notes, “Accounting dictates how your business processes cash flow, revenue, payroll, loans, leases, and losses. Intangible assets, insurance, and income taxes.”
Accounting activity is required to adhere to generally accepted accounting principles (GAAP) – a set of strict community standards designed to ensure that data can be commonly understood. These standards allow for compliance.
At a functional level, some of the most critical accounting services include the production of financial statements (like the Statement of Cash Flows, the Balance Sheet, the Income Statement, and the Statement of Owner’s Equity). Each of these statements takes financial data and summarizes it so that it can be used for better decision-making.
Ultimately, that’s the purpose of accounting: to empower better decisions. If bookkeeping is the collection of data, accounting is the use of data to inform strategy.
Finally, it’s worth noting that restaurant accounting is (as we’ve written before) unique in a few areas. Most notably, restaurants operate within 4-week accounting periods.
Generally, other industries use a month-long accounting period, meaning that transactions are grouped by, reported on by, and analyzed by month. Restaurants, though, have transactional trends that are closely correlated to the days of the week. Fridays and Saturdays, for example, are nearly always the busiest restaurant days. This makes month-by-month reporting less helpful – a month with more weekends will always look better than a month with fewer weekends, making data more difficult to decipher.
Do you need restaurant accounting or bookkeeping?
So, with a better understanding of the differences between these two services, which does your restaurant business need?
The obvious answer is that, at the end of the day, you need both. After all, without good bookkeeping, your accounting will be useless; reports based on bad data will inherently be bad reports.
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More specifically, though, if your restaurant business is small – say, one or two locations – you may be able to focus on bookkeeping and pay for more advanced accounting services on an ad-hoc basis (say, during tax preparation). However, if your business operates at scale, you’ll do well to focus on finding an expert accounting solution.
Many restaurant accounting solutions can streamline data flows, making bookkeeping easier and increasing the accuracy of data. The best can also help to clarify strategy for high-stakes financial decisions.
If you need restaurant accounting, let’s talk.
At Global Shared Services, we provide restaurant accounting services for multi-location businesses around the United States. While we can provide bookkeeping as a service, most often, we work with firms to automate data input and management so that fewer bookkeeping resources are needed.
Our main services are in accounting functions including:
- Accounts payable processing
- Bank reconciliations
- Business tax processing
- Cash deposit and credit card verification
- Expense and loan accounting validation
- Financial statement processing
- Fixed asset accounting
- Full CFO services
- Operations reporting
We provide all of these accounting solutions with a focus on clear and proactive communication.
Are you looking to set a firm financial foundation that’ll empower you to strategically build your restaurant business with a finance and accounting team you can trust?
If you’re ready to get started, schedule a free consultation today.
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With GSS, we meet our franchisor requirements on time and with accuracy. The local CPA could not handle our volume. We are so happy to have made the change. GSS knows our business and our franchisor requirements.Multi-unit fast sandwich Owner