Tapping Into the Expertise of Restaurant Accountants to Manage Overheads

The hospitality accountants and specialists in the restaurant and service sector within our teams work with countless clients of every size. For many, the rising costs of personnel, raw materials and ingredients, electricity and gas to power appliances and everyday overheads like interest and rent have created a uniquely pressured environment for their finances.

Our advice for any restaurant owner or investor concerned about soaring outgoings is to consult with an accomplished, experienced restaurant accounting team before making knee-jerk decisions or hoping that by ignoring costs that continue to creep higher, they will eventually go away.

In some scenarios, overheads can be reduced or restructured by negotiating contracts or switching suppliers, but in others, these long-term outgoings are part and parcel of running a restaurant and need to be carefully monitored and managed to contribute to ongoing sustainability and profitability.

The Importance of Cost Optimisation for Restaurants

The key principle in cost management is always to make informed decisions, which is why so many restaurants and other hospitality businesses opt to outsource their accountancy services. This ensures they don’t overlook the value of monitoring bookings, takings, and profits due to a lack of time to invest in administrative functions.

Put simply, if you don’t know what your overheads are, what they’re likely to be in the year ahead, and how well your revenues will cover them – including outside of peak periods – you cannot make sound judgements about where and how to make any positive changes.

Optimising your long-term outgoings, such as energy bills and staffing, doesn’t necessarily mean making cutbacks or paring your personnel back to impossibly low levels. Instead, it means having an accurate real-time understanding of where your larger outgoings lie and looking at strategic ways to manage them well.

As a brief idea, some easily implemented changes could include investing in staff training to reduce costly errors, coordinating shifts to schedule more staff during busier times to turnover tables faster, and, correspondingly, fewer staff on quieter days when you may be able to manage easily without a full workforce.

Monitoring energy usage, considering more energy-efficient appliances or lighting, and ensuring that units that use the most energy, like commercial fridge freezers, are set to accurate, calibrated temperatures according to food safety regulations without being unnecessarily low could all make a difference.

Managing Inventory Spending to Reduce Restaurant Overheads

The next area to look at is your inventory. If, like most restaurants, you depend primarily on raw and locally sourced ingredients or have a steady supply of high-usage elements for your meals or drinks, wastage is one of the biggest issues, and it is also one you can resolve.

Depending on the nature of your restaurant, the types of catering you provide, and whether there are opportunities to use more efficient production processes like pre-preparing certain elements or ingredients, straightforward planning may cut wastage and spending by a noticeable margin.

Regular, reliable inventory counts are a great starting point because:

• Knowing the stock you have of every regularly used item is essential, with the ideal to conduct counts at least every week, if not every day. This avoids keeping ingredients in stores that have become unsafe to serve or cook or ordering excess quantities that may not be used within their sell-by date.
• Introducing stock ordering systems similar to just-in-time inventory policies for retail and manufacturing businesses can work well, minimising the time any ingredient spends in storage or on the shelves and delaying re-orders until they are necessary.

Once you have a streamlined inventory management system up and running, it contributes to more accurate budgeting. You can plan ahead, know the cost of forthcoming stock orders, and adjust your menus or procurement accordingly.

It’s worth adding that a focus on lean stock levels and local sourcing is commonly associated with high-quality dining. Modern consumers often prioritise restaurants that use sustainable and local ingredient sourcing in favour of processed alternatives.

Maintaining Regulatory and Tax Compliance

While many hospitality business owners may not immediately think of taxation when they look at ways to manage soaring overheads, there are two elements we’d point out that can make a marked impact on your outgoings and revenues:

• Non-compliance, such as late filings or non-submission of returns, can be a costly error, with the potential for added interest charges and penalty fees.
• Concentrating on tax compliance and consulting an experienced restaurant accountant may mean you uncover tax reliefs, allowances or other efficiencies you haven’t taken advantage of before – and would be well advised to do so.

There are multiple potential ways forward, but strategically timing major investments such as replacing appliances or furniture could improve your access to capital allowances, especially when buying energy-efficient appliances that could have a lower tax charge alongside reducing long-term operating costs.

Others include looking at the structure and formation of your restaurant business, particularly if you operate as a sole proprietor or haven’t considered incorporating your restaurant as a limited company or partnership where tax advantages may be available.

The Advantages of Consulting Accredited Restaurant Accountants

We’ve touched on a few suggestions and concepts here, but the starting point for any improvements to your financial management and reductions or optimisations to your overheads begins with up-to-date, dependable financial reporting and timely management accounts that show you precisely where your finances are at any point in time.

Restaurant and hospitality accountants are specialists in the sector and can provide tailored advice to ensure you make clear and strategic decisions about any actions you are considering – whether you require support with general bookkeeping admin to tidy up your accounting figures, want to review your tax position to identify efficiencies, or simply need independent advice about keeping your overheads in check.

For further information about any of the points discussed within this guide or to arrange a convenient time to meet with one of our accountancy team with a specialism in hospitality, please get in touch with the James Todd & Co team.