Restaurant Catering Series: Part 3: Tips on Accounting for Catering

The accounting and tracking for catering can be a challenge. But, by establishing proper policies and reporting procedures, you can make better decisions on pricing and labor and more easily manage cash flow – giving your catering business a better chance at success. Here are four things to consider when it comes to accounting and tracking for catering:

  • Revenue recognitionIn our last catering post, we discussed the importance of establishing your customer’s expectations with a contract. But a contract also establishes your expectations of the customer. For example, it should include payment terms and the required down payment or deposit for the event. These are recorded as deferred revenue until the event has occurred – then, it is recognized as revenue. It is important to account for the revenue in the correct period to properly match to expense. Remember, if there are deposits that have not been claimed or used, you must consider the escheatment rules for your state on unclaimed funds. Amounts due – It is vital to track the amount your customers owe – and review the information often to ensure proper collections are adhered to. Some customers prefer not to deal with payment the day of the event. And allowing customers to order catering on credit can be a disaster if not managed properly. Does your general ledger have the ability to provide invoices? Some systems may have an accounts receivable sub-ledger to enter amounts due from customers.
  • Proper reporting and analysis – Consider catering as a division of your business. Any business would want to know how each division is performing to determine if the time and investment is worth the returns received. The only way to do that is to track it separately. Catering services should be kept separate in your point of sale and general ledger so you can determine the costs and your profitability. These services should also be a separate profit center in your general ledger’s chart of account. You should be able to print a profit and loss statement for this service and make decisions based on the information.
  • Allocation of costs – If existing staff is used for catering, consider allocating a portion of those costs to that profit center. If a central manager is hired for multi-unit businesses, consider charging back the locations for his or her salary as the location’s staff is not providing this service. By allocating costs properly, you will be able to get a better sense as to how much it costs the restaurant to cater events.