Q: My CPA never seems to be working with the correct net sales figures. How can we solve this problem?
A: At tax time, there’s one daily number on which the owner and the accountant must always agree: net sales. This figure, usually generated through the POS system, serves as a measurement tool for daily food costs, labor costs and other metrics. The problem is, the POS system is usually configured to generate the net sales calculation without any input from the accountant. This needs to change!
I’ve witnessed technicians from POS companies give rather dubious tax advice to owners, which can result in problems later. When it comes to understanding how certain transactions on your POS system—such as voids, employee meals and coupons—affect your taxes and net sales, don’t listen to anyone but your accountant. You need an accurate net sales figure to make important decisions every day, and your CPA needs it to keep the restaurant in good standing with the IRS.
A reliable net sales calculation method needs to be worked out between the owner and the CPA. Meet with your CPA as soon as possible and reach an agreement on how your net sales will be calculated. The number given to your accountant should match the number generated by your POS system so that, when you receive your monthly/annual financial statement, there won’t be a penny’s difference. Make sure your accountant has the ability to receive electronically, on a secure, uninterrupted basis, the net sales figures directly from your POS system. Explain any of your store’s unique nonpayment methods, such as house accounts, discounts, voids and special promotions, and make sure you understand how these are taxed in your state. Every state has different rules!
Finally, be aware that taxing agencies have gotten wise to operators’ efforts to manipulate their POS systems and fudge the numbers. In some states, the courts have even allowed taxing agencies to subpoena electronic data from POS systems to uncover inconsistencies.
Bottom line: The net sales calculation is used in most decisions a restaurant owner has to make, and it’s also a crucial piece of information for the accountant. The owner and accountant need to work together—it can be an unusual and possibly uncomfortable left brain/right brain encounter, but it’s necessary.