Restaurant Accounting: Fixing Your Finances and Boosting Margins with Marta Grumberg
Understanding the intricacies of restaurant accounting is paramount for any owner looking to thrive in today's competitive market. In this episode, we dive into the crucial world of restaurant accounting and finances with Marta Grumberg of Grumberg Accounting. Jaime Oikle sits down with Marta to explore the biggest financial challenges restaurant owners face—shrinking margins, rising food costs, and the common accounting pitfalls that can make or break a business. Get ready for a fast-paced, no-nonsense guide to help you stay on top of your numbers and run a smarter, more successful restaurant. Stay tuned!
Find out more at https://grumbergaccounting.com/
---
Watch the episode here...
Listen to the podcast here
Read the episode here
Restaurant Accounting: Fixing Your Finances and Boosting Margins with Marta Grumberg
Coming up on this episode of the Running Restaurants podcast, we get into some of the nitty-gritty of restaurant accounting and finances with Marta Grumberg of Grumberg Accounting. This is a key topic area that can lead to stronger margins and profits at your restaurant. Thank you for joining me during what I'm sure is a busy time. How's business?
Business is great. Thank you for having me. It's good timing to talk about the finance and everything. Put everything in order and be ready for the tax season and for filing.
Lessons From Restaurant Ownership to Accounting Expertise
Let's get into a few topics here because in one of the notes you sent me, you hit it on the head that restaurant business margins are just obviously decreasing and shrinking. It is a tough business with so many details. Let's start with your accounting and restaurant background. Give me some backstory.
We have been in the business for more than ten years. We started in different fields and then decided to shrink and concentrate on the food industry. Probably the passion to the food industry comes from our past when young people, we own a small restaurant, and all the mistakes that we have done and how we recover from it. I wish somebody was there for us to help us and say what to do, the do's and the don't do's. That's the background. After selling the restaurant, we went through college, we built some careers, and then decided to open Grumberg accounting.
It's funny you mentioned mistakes, do's, and don'ts. Anything jump right top of center to mine? What was one of the mistakes or lessons you learned early on?
Many. I don't know where to start. The marketing was off from the financial point of view, the pricing, the menu was off in the beginning and took it took us time to adjust it. We did not have any financial cushion. How to take loans? How to make sure that you have enough. The seasons of the restaurant. Some seasons are great, but then you go slow. If you don't have a cushion within two years, you're out of business.
All of that, I wish I had the knowledge. We did the research. We did everything by the book. If you have somebody, a partner that walks you through, it's much easier to be there for you when you're busy with your operation, to be there to raise the red flags and say, “Hold on, watch this. Look at that. Pay attention to this. That's so important.? That would have been different.
You help clients where you're located, but also around the country, and focus on hospitality, correct? Do you span all the different bars, restaurants, catering? What does a typical client look like?
If you don’t have a financial cushion, within two years, you’re out of business.
The food industry. I do restaurants, bars with you, and also catering. Everything that's within the food industry with the full cycle of bookkeeping consulting, analysis for the industry, and everything about it.
Tracking Inventory and Accounting for Success
A lot of restaurants fly by the seat of their pants, and don't do all the homework that they should for tracking inventory, tracking accounting, invoices, and all that stuff. A lot of restaurants get behind and don't have active numbers. Do you find that to be true? How do you encourage folks to really stay on top of it?
That's true. You can see it before the season at the end of the year and at the beginning before the tax season. Everybody calls to say, “Do the catch up. Would you do a cleanup? Can you help me? I did not do my books for the past year.” The answer is to hire somebody, get a partner to a business, and do it on a monthly basis. It won't help only with the taxes. It will help you with the day-to-day management. It would help you with analogies, with building your strategy for the future, to see your high seasons, to see your slow seasons.
How do you adjust and make a change during the empty hours? Many other things will help. It helps to margin. It helps to the management. It just puts you in order. I know that the food industry and the managers and the owners, they hate it. They don't like to deal with the papers, to look through bills. They only want to operate the restaurant, be creative, do customer service, do great dishes. That's the moment and the point when you have to hire a good partner that will be there for you and will help you and minimize your paperwork and maximize the results and the benefits you get from that.
Essential Monthly Tasks for Restaurant Owners
I think you hit what happens in a lot of operations right there. We like all those other parts of you could call the sexy parts of the businesses, the customers, the menu, the food, the entertainment, the music, the vibe, but not the numbers. We like to off-source that. To do it at the end of the year can really put you in a bind in a lot of ways because you've missed a lot of opportunities along the way, for one thing. If you're just finding out now in March that you've missed numbers in June, July, August, and September, you've missed a lot of opportunities to correct yourself. What are things that restaurants should be doing on a monthly basis at a minimum? What do you think?
In my opinion, everything. Manage the books. If you do it on a monthly basis, you are in a better point. Do your accounts payable, of course. You know how important it is, especially for bars and restaurants. If you have an alcohol license, it can be crucial for your business. In some states, if you miss one bill, your license is suspended. It's very important to stay on top of your accounts payable.
Also, remember the cashflow around that because you receive your money immediately, but you have net 30 and net 60 payments, so you need to plan accordingly and understand the seasons. What else? It's important to get your books done by the tenth of the month then you can look back and analyze your month to see where you have all the changes. You can realize that you had a big change in your costs, for example, and review your vendors' contracts. It would be too late, as you said, if it's seven months later.
Let me ask you a question. The food costs have gone up tremendously in the last year. Hopefully, things will level off to be more stable. It is important that you look at monthly and what's going on because your costs are going to fluctuate dramatically, and you may say, “Where'd the money go?” We haven't been looking at it closely enough. What advice are you giving folks around food costs? Should we increase our menu prices? Should we change portion sizes? What are some of the things that you've seen operators do to combat what is happening on the price side?
I start with trying to negotiate better prices with your vendors. Sometimes, when you're not big enough and you're not McDonald's, you cannot do that with bigger suppliers. I say go to local suppliers, go to the local farmers, try to negotiate a better deal. If you cannot do it anymore and you are stuck, look outside, think outside of the box, and check wholesale. You're wasting your time going there, but sometimes the hotel will be locked in better prices and they can sell you as a customer.
Get a partner in your business. Do your books every month. It won’t just help with the taxes but also with daily management and future strategy.
A good customer with a better price than buy directly from the supplier. That's a surprising point. Many of my clients say, “What, really? I didn't even think about it.” Yes, a hotel, they have those huge contracts for ten years, and they can love the price better than you can as a local restaurant. After that, I say, “Adjust your menu.” If you're at a point where you've tried everything you can with your suppliers, and there's nothing you can do, and it still bites into your margin, adjust your menu.
Try to promote the dishes that have lower cost. Last but not least important solution, at some point, you have to make a decision that you're raising the price. If it bites into your quality and bites into your image, you cannot serve a person three small tomatoes and say that's a dish. At some point, you have to raise prices. The most important part that I say the most important advice is don't be too late with that. Make it on time.
How to Handle Customer Resistance to Price Changes
We did a webinar recently where we talked about some of these topics and raising prices and something that comes up for everybody, and it's that obstacle of, “My customer is resistant to price change.” I'll flip the hat, and I'll be the customer and I go into a place and I'm used to paying $18.50, and now I see it's $21.50 and I'm like, “Man.” Anything you've learned from your clients on changing prices? Have you seen anybody be successful in terms of communicating that, “We're increasing prices, but it's to give you better value.” What are your thoughts on it?
The bottom line, it is what it is. You're right. The bottom line, when you go to the grocery store, they raise their prices too. There's nothing that you can do that. If the whole industry does that, it's something that people adjust and get used to it. To make a smooth transition, I don't know, maybe to add some value, which is very hard to do with the high cost today. Nothing special. You cannot invent the wheel again. It's the hardest thing that restaurant owners and managers do, to raise the price and try to explain it to your customer.
What Should Your Food Cost Percentage Be
It is. Listen, I echo what you said just the other day. “I'm at the grocery store and I'm looking at a couple things.” I'm like, “That used to be $3.49, and now it's $6.49.” I'm like, “Wow.” It's one of those things that's hitting everybody. Let's go to food costs. One question that I'm sure your clients ask you and everyone always asks around this topic is what should my food cost percentage be? What should my margin be? What are some target numbers that folks can think of to say, “I'm doing okay if I'm in this range?” What do you think?
Generally, it would be a rule of thumb 30/30/30. The lower it is, the better for the margin. That would be the minimum. 30/30/30, 30% cogs, 30% general expense, and 30% payroll. In my experience, with this set of numbers as a minimum, with a small margin and more or less, you would be fine.
What about food and beverages? How are you breaking out those two? Talk about how those two work together.
It depends if you serve alcohol. If you serve drinks, the margin on drinks would be great. It also depends on the vision of your business and what type of restaurant or bar you're running. If you run this chef restaurant and it's all about the special dishes, obviously that would be your main dish. You have those bars that serve some food as a marketing tool. They don't have a large margin on the food, but they drive clients into their places serving food and some appetizers to sell drinks, and the main profit will come from drinks.
The Importance of Restaurant Inventory Management
I want to talk about inventory for a second. No one loves to do it. Same thing. It's nitty, it's gritty. I just keep referencing it because we just did a recent webinar that talked about it. Sure, if you got it dialed in, maybe you can do it once a month. We talked about even doing it once a week for a while to really make sure you have it done. I know folks don't hardly do it at all. What do you recommend? Why is it important? How do you talk about inventory?
Technology and software are great. Just pick what actually benefits your business. If you put garbage in, you’ll get garbage out.
To do inventory is very important, and we hear about it a lot. You will see all the software, everybody will talk about inventory. I want to talk about something else for a second. I want to talk about the cost to do inventory because it's not obvious. We all concentrate on the cost of the inventory that we lose to see where we stand and to make it accurate. You have all the software in the market that say, “We're going to help you with inventory. You're going to save so much money on the products.”
They forget to mention, and it's something that I'm pointing to my clients also, look at the cost of making inventory. How much it will cost you to do a weekly inventory. You need to bring a person, and it's supposed to be a particular person that spent X time on calculating and doing your inventory. Would the cost of this person will be more or less on what you're losing on not doing the inventory weekly? I do understand to do the inventory weekly when you're in a transition or making some change or doing some analysis or crunching some reports.
I don't think it's necessary on a regular basis, in most cases, of course. I also want to talk about the software around it that is so hot in the market now because I hear my clients setting all those meetings that I sit in the meetings for owners approaching them and trying to sell them inventory software. Software generally is a great accounting tool. It's a great managerial tool. With AI, we have so many options. It's very important to pick and choose what’s good for your business. What will bring you a return on investment, and what is doable?
In most cases, particularly with the inventory, I sit in those meetings, and I ask one simple question. What do you need to do to get all those great reports, analyses, and conclusions? You need to input the information correctly. You find yourself and the owners and the managers debating if it's possible for their business. If it's possible for the chef to rush over to input all this data right away, how long will it take the person to do that later?
In a lot of cases, you find, and I'm kidding, but it's a lot of hours, a full-time person that has to input all this information. If you put garbage in, you will get garbage out. I've seen already situations when owners and managers got those reports, and the data was just not accurate, which might lead you to the wrong decision and build a wrong strategy around that. Technology is great. The software is great. Just pick and choose what's good for you price-wise. What is going to really benefit your business?
Thank you. That was really good how you went through that because even as you were talking, I'm like, I was going to use the garbage in, garbage out analysis, but you beat me to it. If you don't put the data in, what you get out is going to be useless, and so forth. Keeping up to date with getting that data in there as you run a business restaurant can be a challenge. Yes, there's just one tech company after another trying to knock on your door. My solution is the answer to everything. It's great. Technology has come so far, and I love it. It's a tool, but only if you use it to its full extent.
You know how the chefs and the managers how they like to deal with that during rush hour when they have everything going hot and interesting and sexy, like you said? The last thing that they want to do is deal with the app and enter how many tomatoes they threw away.
Boosting Profits by Optimizing Menu Plate Costs
It's true. Let's just maybe cover 1 or 2 more topics. Like menu plate cost you hinted at it. If you're struggling with profits, let's suggest selling more of our higher profit items. To know what your high-profit items are, you have to do a lot of homework ahead of time to know your plate costs, your inventory costs, and so forth, your recipe cards, etc. A menu can have things that sell like crazy and yet don't make any money. That's the worst scenario you can have is I'm selling a lot of it, but I'm not making any money. Meanwhile, you may have an appetizer that kicks off at $8 a profit because it doesn't cost you anything. How do you talk about those dilemmas with your clients?
When I analyze the books at the end of the month, I can see that the costs are too high. I start to suggest all those things that I see work for others and don't work for this client, particularly. I also have my personal experience. Unfortunately, from the past, when I also did the wrong calculations on my menu. I always say, “Don't be afraid to change and think outside of the box. If you don't have enough margins and enough profit inside your restaurant, think about taking it out. Do deliveries do a customized menu for the deliveries. You don't have to deliver the same dishes that you serve inside your restaurant.
Always choose your lawyer, doctor, and accountant wisely. They will keep you safe and successful.
You can adjust and build something special. Keep thinking outside of the box. Think to expand to some catering services.” Also, one more thing that is important that I found out is that during the day, you have different hours, rush hours in your restaurant. Make sure you fill your slow hours with low-cost, mean payroll wise, and that you have a customized menu. If you see that in the morning, there's nobody in your restaurant, you have four local people that stop by to grab a breakfast, adjust your menu, adjust your expenses. Don't serve those high-cost dishes that push you to keep all this inventory with a high cost that expires and puts you in the low margin.
It's a very good point about the delivery aspect in particular. The other part was very good as well. I think I'm going to come back to it. With delivery, you don't have to offer every single thing that's on your menu. A lot of things don't transfer well, anyway. Especially work with a lot of the apps and third parties in your own website to, in essence, create a different menu. You can have different price points as well on the platforms. I know this is standard stuff that I'm talking about, but if you're not doing it, just remember that there are alternatives. You don't have to completely replicate what you're doing with your delivery and your takeout.
Finding Hidden Costs and Saving Money
Of course, expanding to catering can be very successful as well. Sometimes, your menu is just too big. You got too much stuff. It's not profitable. Get rid of it. Cut it out. Know what's working. We joke about everyone. You go in a cheesecake factory and there's this page after page and you go, “How the heck do they do this? I have no idea.” You go to an upscale restaurant, and they may have ten dishes, and they're maximizing what they work with for those reasons. I was looking at one more note, and you actually hinted on something in your last talk about cutting labor, but what are some other spots you've seen owners uncover some hidden costs where they can find savings?
Labor. It's funny because it's a big chunk of a restaurant's expense of the labor, but there is a hidden cost there. The turnover with employees in the restaurant business is high. There's a struggle to hire people sometimes because the high season is a high season for everybody. The low season is the low season for everybody. Owners and managers don't rush to downsize the team, and it bites them. It eats the caution that I was talking before about. It eats all the cash reserves because they remember the struggle. How hard is that to build a team? They get attached to the team. They have this strong belief that things will be better next weekend, and they are slow to downsize. That's a big problem.
Choosing the Right Accountant for Business Success
It's true that is a very difficult part of the business. As we start to wrap, anything we didn't hit on that you'd like to make sure we touch on, parting thoughts as well as where to find you guys on the web and how to get in touch with you? If you can, put a bow on it.
As I say, always choose wisely your lawyer, doctor, and accountant. Those people will keep you safe and successful. Make sure you choose a good partner. Make sure you get good customer service. Make sure you get a partner that understands you and your industry. It's very important. That's the key to success, and we'll be happy to help. Contact us on the website. It's GrumbergAccounting.com. We're all over social media, LinkedIn, Instagram, everywhere.
Good. It's a topic that we got to dig into. I appreciate you, Marta, for sharing some of these tips. Folks, Marta Grumberg of Grumberg Accounting. You can find them at GrumbergAccounting.com. We'll have that in the notes. If you're listening, type that in GrumbergAccounting.com. For more great restaurant marketing service and people operation tips, stay tuned to us here at RunningRestaurants.com. In the meantime, just do a favor, like the episode, share it, review it. All that stuff helps us. Appreciate it. We'll see you next time. Thanks, Marta.
Thank you.