Running a restaurant is one of the most rewarding — and demanding — businesses there is. But when the last customer leaves, another challenge begins: the finances. In an industry known for thin margins, financial health is not a back-office detail; it is a core ingredient of success. This guide explains what makes restaurant accounting different and how to get it right.
Why is restaurant accounting different?
- Thin margins: one percentage point on food cost can decide whether you make or lose money.
- Perishable stock: your main asset can spoil within days.
- Many sales channels: card machines, cash and several delivery apps, each with its own fees.
- High labour costs: staffing has to match demand every single day.
- High transaction volumes: hundreds of individual sales a day.
The key ingredients of restaurant accounting
Cost of goods sold and stock control
This is the cost of the food and drink used to make what you sell. Good accounting tracks both what you spend and what you use:
- Regular stock counts — weekly or fortnightly — to spot discrepancies.
- Theoretical versus actual food cost: what food should have cost based on sales and recipes, compared with what it actually cost. A large gap is a warning sign of waste, theft or portioning problems.
- Supplier price tracking, so menu prices can be updated when ingredient costs rise.
Prime cost
Prime cost is your total cost of goods sold plus your total labour cost (wages, employer National Insurance, pension contributions and benefits). It is the single most important number for a restaurant; as a rule of thumb, many restaurants aim to keep it at or below about 60% of sales. If it creeps up, your profit is being squeezed.
Sales and payment reconciliation
Every day, compare your till (EPOS) sales report with what actually reaches your bank from card machines, cash takings and delivery platforms. Clear cash-handling procedures reduce errors and the risk of loss.
Labour cost
Track labour as a percentage of sales so you can see immediately whether you are over- or under-staffed. Remember National Minimum Wage rises each April, and payroll must be reported to HMRC in real time.
VAT and compliance
VAT is particularly complex for food businesses. Food and drink served for eating on your premises, and hot takeaway food, is standard-rated at 20%, while much cold takeaway food is zero-rated. Getting this wrong is one of the most common reasons restaurants face HMRC assessments. Limited companies also need to file statutory accounts with Companies House and a Corporation Tax return with HMRC, and you must plan for fixed costs such as business rates.
Common financial pitfalls
- Not tracking prime cost, so rising food or labour costs go unnoticed.
- Irregular stock counts, which hide waste and theft.
- Not knowing the profit on each dish — a best-seller can still lose money.
- Loose cash procedures that lead to small but regular losses.
- Lumping delivery-app sales together, which hides how much commission you really pay.
How Ola Accountancy helps restaurants
The right system from day one
We set up cloud bookkeeping software linked to your EPOS and bank, so daily sales flow into your accounts automatically — no late nights typing figures or chasing lost receipts.
A simple weekly or monthly report
Instead of complex year-end reports, you get a short report on what matters: prime cost, food cost and labour percentage, so you can make decisions week by week.
Compliance handled
We check your VAT treatment, run your payroll accurately and prepare and file your year-end accounts and tax returns with Companies House and HMRC.
Advice for growth
- Forecasts and budgets for a new site or concept.
- The true profitability of delivery versus dine-in.
- Cash-flow planning for quiet seasons.
Ready for the next step?
Your time is best spent in the kitchen and the dining room, not buried in spreadsheets. Book a first consultation (£100 + VAT) and we will show you how clearer numbers can make your restaurant more profitable.
This article is general information based on the rules in force on 30 September 2026. It is not personal tax advice — tax rules change and the right answer depends on your circumstances, so please speak to us before acting on it.
