|
|
|||
|
|||
ACCOUNTING FOR YOUR MONEY:
INCOME STATEMENTS: YOUR MONTHLY REPORT CARD
By Michael J. Rasmussen, CPA • Rassmussen Tax Group
How many times have you received monthly financial statements from your contracted accountant (CPA, bookkeeper, or in-house employee) and you immediately turn to the “Net Income” of the income statement for that month and immediately disagree with the results! In your gut you feel you did or did not make the amount of money reported and you instantly want to phone your accountant and vent.
A financial statement will include a balance sheet, income statement and, most times, a statement of cash flows. It’s a static picture of the operations of your restaurant at a specific time. This picture changes day by day and has many moving parts to assemble the puzzle.
For example, if you received your financial statements that are being reported on a cash basis dated for the period ended December 31, 2006 and you had not made your last week’s bank deposits averaging $1,000 per day, then both your revenue and net income would be understated at this period. You know this in your gut, so when you receive the financial statement from your accountant and see the revenue from operations lower than the normal seven days’ bank deposits, you understand why the net income number is also lower than expected. The deposits related to operations that occurred in December 2006 were not reported in the financial statements until January 2007 on a cash basis.
You’ll need to meet your accountant half way and help them understand all the moving parts that will make your monthly reported net income make sense each time you pay for and receive your financial statements.
I’ll walk through five steps that need to be agreed upon with your accountant and team on your side who participates in the monthly financial statement preparation. The overall most important piece of the puzzle is timeliness. Specifically, if you receive your last month’s financial reports more than 30 days past the end of the prior month, how useful are they to you? At a minimum, you need to agree on a date with your accountant and all reports need to be available to management/owner of the restaurant on a specific day. Any deviations need to be communicated prior to that date.
 |
| Doing something as simple as honestly grading yourself on your performance can have a beneficial effect upon your business. |
Who has the responsibility for closing your restaurant books? Does your accountant do it on a monthly basis? Sometimes it’s not easy to remember everything that needs to be done for a monthly report card. Having a checklist simplifies our thinking process and eliminates omissions.
Adjustments
The first thing I like the operator to do is make any necessary adjustments to their books. Look for adjustments and corrections that you might need to make in the following places:
- Automatic payments (bank drafts and adjustments): may need to be entered if you do not have online banking
- Transactions not yet entered: invoices, bills, royalties to Franchisor
- Transactions entered or coded incorrectly: invoices, bills, sales, payroll
- Infrequent transactions: returns, voided, corrected or reissued paychecks, tax payments, vendor refunds
- Inventory adjustments
- Payroll adjustments
- Adjustments for taxes: sales tax, payroll taxes, franchise taxes, etc.
- Fixed assets: depreciation entries
- Loan payments: allocating interest and principal
- Aged accounts receivable: any to be written off as uncollectible
- Any questions or issues the operator needs resolving
- Integration
Sometimes a restaurant has a separate system for payroll or sales and inventory. If this is the case, a summary entry may need to be posted so that the books are complete. Here are some entries that may need to be recorded:
- Revenue and cost of goods sold/inventory entry
- Payroll (here, you may have several weekly entries to post)
- POS daily sales reporting that exports to your accounting program
The operator needs to work with the accountant and designate what information is needed on a daily basis for the accountant to make these monthly entries. Avoid redundant data gathering between you and your accountant.
Reconcile
Account reconciliation is a large part of the monthly close process. The bank statement is the most obvious reconciliation, however just about all asset and liability accounts should be reconciled.
- Bank statement additions and corrections to cash accounts
- Petty cash
- Credit card statements
- Equity accounts
- Loans
- Accounts payable
- Inventory
- Fixed assets
Review
Review the check register for the following:
- Coding consistency: is the transaction coded completely and to the right account?
- If class is used, is it complete for all transactions?
- Is the backup documentation in order?
- Are authorizations complete?
- Do the transactions look reasonable?
Payroll requires special consideration. It should be reviewed each cycle, between time sheet entry and check processing.
- Is documentation for new hires complete? (If this is your first time, you might want to review existing employee files.)
- Is the hourly rate or salary amount correct?
- Are hours accurate for hourly employees?
- Is overtime paid at the agreed-upon rate?
- Are deductions taken?
- Are taxes figured correctly?
- Are payroll deposits made on time?
- Are there any court orders (garnishments, child support payments, IRS payments) that need to be followed?
- Is tax taken out of bonus checks?
- Are there any checks that are paid directly to employees?
- Are employee loans accounted for and collected?
- Are expense reports in order and coded properly?
- Are payroll reports filed on time (quarterly)?
- Are state unemployment payments and reports handled accurately?
- Are there any cash payroll transactions (illegal in many states)?
- Are all transactions booked correctly?
- If payroll is charged to classes or jobs, are classes/jobs charged appropriately?
Run the following reports:
- Monthly profit and loss
- Sales reports
- Balance sheet as of month end
- Reports by job or class for multiple restaurant locations
Backup
I always recommend that you back up the current file twice: one at the restaurant and one for your accountant. You can purchase a flash drive which should store at least ten backup files at a time which can provide you a continuous current backup.
Most restaurants do a lousy job of backing up their data (not just their accounting data). So this should be an area of priority to set up a good backup system for all of your restaurant data.
Summary
This checklist should give you a great start in meeting your restaurant’s monthly close requirements. Timeliness and meeting your accountant half way in preparation of your monthly financial report cards are important. At www.rasmussentaxgroup.com we have a Monthly Close Checklist available as a free download to help you get started.