By Jim Laube, President of RestaurantOwner.com. RestaurantOwner.com works with independent operators who want to turn their good restaurant into a great business. For more information visit www.RestaurantOwner.com.In 1985, I opened my restaurant consulting practice. Having practiced as a CPA, I would offer to prospective clients, as one of my first services, to prepare their monthly financial statements. Within the first year I found myself involved in the ongoing accounting and financial statement preparation for 10 independent restaurants.
While many of the restaurant’s P&L (profit-and-loss statement) formats were similar, all had unique characteristics. I began noticing it was common to get telephone calls from a bookkeeper or general manager with questions like, “Our ice machine went down last week and we had to buy ice. Where do we cost code ice?” or “We had a private party and bought decorations and ornaments. Where should we charge these costs?” Particularly when I was pressed for time, my standard reply was “sounds like a Miscellaneous Expense to me.” While being a fairly expedient way of handling a phone call, I discovered that one of the biggest expense categories for some restaurants became “Miscellaneous.”Most of these restaurants’ expense categories did not reflect the types of costs found in a foodservice environment. As a result many of their operating expenses were getting lost in “Miscellaneous.”
Obviously it’s difficult to control a specific cost if you don’t even know what it is.
|The Uniform System of Accounts for Restaurants|
has been the industry standard for more than 50 years.
The recent 2012 edition was edited by Jim Laube.
Among the advantages:
- It gives restaurant operators a common language based on a well-thought-out and “industry specific” means of understanding and analyzing their operating results and financial position.
- Allows for the easy comparison of one restaurant’s operating numbers to other restaurants.
- Provides detailed instructions for accurately classifying (cost coding) the many expenses associated with operating a restaurant and guidance in accounting for many “unique” restaurant industry transactions.
- Allows for easy comparison with industry averages that are published annually in the NRA’s “Restaurant Industry Operations Report.”
- When used to format your projections in business plans and financing packages, the Uniform Systems makes you and your numbers appear more credible because you’re using the industry “standard,” an accepted way to present this information.
This is very important, so I’ll emphasize this point again: When making presentations to bankers and investment professionals to raise money, “always” format your financial projections using the Uniform System. It tells bankers, lenders and investment professionals you’ve done your homework, you know what’s going on in your industry, and I’ve found it even lends more believability to the numbers.For even more credibility, compare your projections with industry averages in the NRA’s Restaurant Industry Operations Report. I’ve found that this usually impresses bankers and investor types more than anything else in a business plan or financial package.
The Uniform System of Accounts for Restaurants has been in use for more than 50 years and has been updated and revised several times. It is the NRA’s largest-selling publication. The latest edition was published in 2012 and includes a comprehensive expense dictionary to help you in classifying the many types of expenses you run into operating a restaurant. You can order the Uniform System of Accounts for Restaurants on the NRA’s website. Louisiana Restaurant Association members can purchase the book for $79.95 and non-members for $159.95. The book is also available for purchase at restaurantowner.com.Over the years, I have converted many restaurants from their own proprietary chart of accounts to the NRA’s Uniform System. While I must admit that it takes some time and can be a little disruptive, once the dust settled, no operator ever regretted it. The Uniform System proved to have many advantages over their previous one and, most importantly, it gives them a better understanding of what their numbers tell them and how their restaurants perform.
Jim Laube works with independent restaurant operators who want practical advice to improve their business management practices to build a more profitable restaurant and valuable business.