Are My Costs Uniform Report

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The Uniform System of Accounts For Restaurants A Trade Secrets Special

Report From Bill Main


The Uniform System Of Accounts For Restaurants For today's independent or chain restaurant, profitability rarely occurs by accident. Rather, making money in this most difficult of businesses is the result of a singular dedication to organization at every level of the restaurant. This is never easy, as restaurants are by definition complicated and irrational creatures requiring constant attention to detail. Further, managers must be prepared to solve problems by improvising on a moment's notice. That is the essence of serving the public in such a dynamic and fast paced environment as a restaurant, whose natural order is often disorder. O'Toole's corollary to Murphy's Law says it best: "Murphy was an optimist!" As a result, maintaining a reasonable level of organization in a restaurant requires a religious, almost fanatical commitment to the consistent execution of fundamental business principles. Such devotion must start with the recognition that "the numbers" are the ultimate measure of profitability, and as such must be organized and presented in a manner that allows for objective and detailed analysis and review. To be profitable, an owner or manager simply must have a reasonable grasp of the numbers and their implications for informed decision making. I call this phenomenon the "profitability mindset." First things first, however. Let's be clear that in any successful restaurant, the first two priorities are always the customer and the employee, in that order. If their needs are being met, profits are likely to follow. But profits also depend on maintaining an organizational climate conducive to profitability. The first step in this process always lies in the establishment of a sensible financial reporting format. Today's restaurateurs must be able to monitor the ebb and flow of revenue and expense as presented in their statement of profit and loss. They must be able to see where they stand in terms of controlling food, beverage and labor costs as well as other expenses attendant to the effective day-to-day operation of the restaurant. A Pro Active Step

To this end, I recommend adoption of the Uniform System of Accounts for Restaurants. It was first developed in 1930 by the National Restaurant Association in conjunction with Laventhol and Horwath, an international accounting firm specializing in the hospitality industry. At that time, it was recognized that there would be rapid growth in the restaurant industry through the development of new food products, improvements in supplies and equipment, as well as new methods of purchasing and packaging. The market was changing, too. Super highways, airports and suburban shopping areas suggested significant changes in spending patterns. Lastly, the growth of government regulatory policy in the areas of tax regulation and wage and hour laws suggested a need for a standardized financial reporting system sensitive to the


impact these various advances would have on operating characteristics and the presentation of operating results. It was also recognized that, to be universally accepted, such a system would require periodic review and modification so as to be responsive to the needs of an evolving industry. A Financial Reporting Blueprint The Uniform system of Accounts for Restaurants is akin to a reference textbook on the subject of restaurant accounting. It provides a common financial language to the industry, allowing restaurants large and small to more precisely interpret their operating results and financial position. It provides a comprehensive set of guidelines for financial reporting formats, offering a standardized, restaurant-specific chart of accounts with detailed instructions as to the proper classification of revenue, expense, asset, liability and equity items associated with the preparation of financial statements. Of specific interest, of course, is the Statement of Income and Expenses. Additionally, the structure of the Uniform System conforms readily to accounting disciplines set forth by generally accepted accounting principles (GAAP). It also contains a section on record keeping systems for a small restaurant as well as a helpful synopsis on food and beverage cost controls. Easy To Use From an operator's perspective, the Uniform System is easy to use. No longer must you rely on your accountant to explain the underlying rationale behind the presentation format of your financial statements. Classification of each monetary expense is simple. Based on the guidelines set forth in the Uniform System, each different operating cost is assigned to a specific expense account (e.g., linen rental, contract cleaning, china, etc.), which is part of a specific expense class or group (e.g., Employee Benefits or Direct Operating Expenses). It is a beautifully logical system, allowing each individual itemized cost to easily flow into its designated expense account and then be summarized in its appropriate expense group. Comparison To Industry Averages Typically, published restaurant industry averages follow the Uniform System. They are compiled using historical data contributed from restaurants representing a broad cross section of concepts, locations and volume ranges. Therefore, once the Uniform System is in place in an operation, restaurant owners and managers have the ability to compare their profit performance and cost ratios to industry standards on an "apples versus apples" basis. The best source of industry averages is the National Restaurant Association's "Restaurant Industry


Operations Report" published bi-annually in conjunction with Deloitte & Touche, Restaurant/Entertainment Advisors. Best Seller Not surprisingly, the Uniform System of Accounts for Restaurants is historically a top-selling publication in the National Restaurant Association's library. This continuing demand is evidence of the restaurant industry's need and acceptance of a publication that has had such a significant impact on the organizational climate of foodservice establishments across the country. The publications can be purchased from the National Restaurant Associations on-line store (www.restaurant.org/store). Adoption of the Uniform System of Accounts for Restaurants is a vitally important first step towards developing the "profitability mindset," and is recommended for all serious practitioners in the restaurant industry.


SAMPLE CHART OF ACCOUNTS

BALANCE SHEET ACCOUNTS

ASSETS LIABILITIES & EQUITY

Current Assets Current Liabilities

1010 Cash on Hand 2010 Accounts Payable - Trade

1015 Cash in Bank - General Checking 2020 Accounts Payable - Other

1020 Cash in Bank - High-Yield Checking 2030 Gift Certificates Outstanding

1110 Accounts Receivable - Trade 2040 Deposits Held

1115 Accounts Receivable - Owner/Employee 2110 Sales Tax Payable

1120 Accounts Receivable - Credit Cards 2115 Payroll Taxes Payable

1210 Food Inventory 2120 Other Taxes Payable

1250 Beverage Inventory 2130 Accrued Insurance

1310 Prepaid Taxes 2135 Accrued Payroll

1320 Prepaid Insurance 2140 Accrued Rent

1330 Prepaid Miscellaneous Expenses 2145 Accrued Miscellaneous Expenses

1410 Note Receivable - Current Portion 2210 Note/Loan Payable - Current Portion

2215 Note/Loan Payable - Current Portion

Fixed Assets

1510 Leasehold Improvements Long Term Liabilities

1511 Accumulated Amortization - L/H Imp 2310 Note/Loan Payable - Long Term Portion

1610 Furniture, Fixtures & Equipment 2315 Note/Loan Payable - Long Term Portion

1611 Accumulated Depreciation - FF&E

1660 China, Glass, Flatware Par Other Liabilities

1670 Small Equipment Par 2410 Other Notes

2420 Shareholder Notes

Other Assets

1910 Deposits Paid

1920 Liquor License Shareholders' Equity

1930 Organizational Expenses 3100 Capital Stock

1940 Logo/Artwork 3899 Retained Earnings - Prior Years

1950 Note Receivable - Long Term Portion 3900 Current Profit/Loss(-)


INCOME & EXPENSE ACCOUNTS

Revenue Occupancy Costs

4010 Food Sales 5510 Rent/Lease (Premises)

4020 Liquor/Beer /Misc. Bar Sales 5520 Equipment Lease

4030 Wine Sales 5530 Property Taxes

5540 Insurance - Property

Cost of Sales 5550 Other Taxes

5010 Food Cost

5020 Liquor/Beer /Misc. Bar Cost Repairs & Maintenance

5030 Wine Cost 5610 Grounds/Gardening

5620 Maintenance Contracts-Equipment

Salaries & Wages 5630 Repairs & Maintenance-Equipment

5110 Administrative Wages 5640 Repairs & Maintenance-Premises

5120 Bar Wages 5650 Miscellaneous Repairs & Maintenance

5130 Kitchen Wages

5140 Restaurant Wages Depreciation & Amortization

5150 Bonuses & Incentives 5710 Depreciation Expense

5155 Vacation Pay 5720 Amortization Expense

Employee Benefits Other (Income)/Expense

5165 Employer Payroll Tax Expense 5810 Interest Income

5170 Workers' Compensation Insurance 5820 Room Rental Fees

5175 Medical & Dental Insurance 5830 Gifts/Novelties Sales

5180 Employee Meals (cost) 5831 Gifts/Novelties Costs

5185 Miscellaneous Employee Benefits 5840 Telephone Coin Box Commissions

5841 Discounts Taken

Direct Operating Expenses 5850 Miscellaneous Income

5210 Auto/Gas Expense - Operations

5215 China/Glass/Flatware Replacement Administrative & General

5220 Contract Cleaning/Janitorial Service 5910 Auto/Mileage Allowance

5225 Decorations 5913 Bad Debt Expense

5230 Laundry/Linen 5916 Bank Charges

5235 Licenses/Permits 5919 Cash Over/Short

5240 Menus and Wine Lists 5922 Computer Supplies

5245 Supplies - Banquet/Catering 5925 Credit Card Discounts

5250 Supplies - Bar 5928 Dues and Subscriptions

5255 Supplies - Cleaning/Janitorial 5931 Educational Materials

5260 Supplies - Kitchen 5934 Entertainment (Business Operation)

5265 Supplies - Restaurant 5937 Forms/Paper Products/Printing (A&G)

5270 Uniforms 5940 Insurance-Liability/Umbrella

5943 Insurance-Miscellaneous

Music & Entertainment 5946 Legal/Accounting Professional Services

5300 (see detail list) 5949 Management Fees

5952 Miscellaneous Expenses

Marketing 5955 Office Supplies

5320 Complimentary Food & Beverage (cost) 5958 Outside Services

5325 Donations/Charities 5961 Personnel Expenses

5330 Media Advertising 5964 Postage/Delivery (A&G)

5335 Other Promotional Expenses 5967 Security/Alarm

5340 Postage/Delivery (promo) 5970 Seminars/Conventions

5345 Photo/Printing/Graphics 5973 Telephone/Communications

5350 Programs & Directories 5976 Travel Expenses

5355 Restaurant Research & Development

5360 Signature Souvenirs Interest & Non-Operating Exp.

5365 Telephone (promo) 6100 Interest Expense

6300 Officers' Salaries & Benefits

Utility Services 6400 Corporate Office Expenses

5410 Electricity

5420 Natural Gas/Fuel Income Taxes

5430 Scavenger/Waste Removal 6900 State Income Tax

5440 Water & Sewage 6950 Federal Income Tax


ACCOUNTS DETAIL

DIRECT OPERATING EXPENSES

Auto/Gas Expense - Operations Supplies-Cleaning/Janitorial

gas, oil, repairs & maintenance for vehicles Bleach, cleanser, degreaser

used for deliveries and operations' errands Brooms/Mops

mileage reimbursements (operations) Dishwashing Supplies

Paper Towels

China/Glass/Flatware Replacement Rubber Gloves

China serving and table ware Sponges/Scouring Pads

Glassware for both bar and dining room Toilet Paper, Toilet Seat Covers

[Table Linen and Napkins, if purchased] Trash Can Liners

Contract Cleaning/Janitorial Service Supplies-Kitchen

Can Openers

Decorations Coffee Filters

Decorative pillows, etc. Cooking Utensils, such as:

Flowers for tables (fresh and artificial) fry baskets

Holiday decorations ladles/skimmers

Wall hangings, pictures, etc mixing bowls, mixing/serving spoons

pans/pots

Equipment Rental - Operations Foil Wrap

Credit Card Authorization Terminals Grill Screens

Credit Card Imprinters Knives/Cleavers, Sharpening Steel

Equipment/Supplies Rental (short-term) Oven Mitts

Plastic Aprons

Laundry/Linen Plastic Bags, Plastic Wrap

Laundering costs of: Portion Cups

kitchen aprons/hats/shirts Waxed Paper

table linens, napkins

towels Supplies-Restaurant

Rental costs of the above Birthday Candles

Cork Trays

Licenses/Permits Doilies

Liquor license renewal fee Guest Checks

Health inspection fee, Scale inspection fee Light Bulbs (decorative)

Outdoor advertising permit Matches

Take-Out Containers

Menus and Wine Lists

Design/printing costs of: Uniforms

drink lists, table tents Aprons/Smocks

menus, wine lists Badges

Menu Covers Blouses/Shirts

Caps/Hats/Hairnets

Supplies-Banquet/Catering Dresses/Suits/Trousers

Any supply/decoration/expense used or Shoes

incurred solely for banquets/catering Ties

Uniform cleaning/repairs

Supplies-Bar

Ashtrays

CO2 (soft drink dispenser)

Corkscrews/Bottle Openers

Gratis snacks (nuts/pop corn/etc.)

Paper/Beverage Napkins

Shakers

Strainers/Fruit Squeezers

Straws/Swizzle Sticks/Toothpicks

Venetian Blue Candles


MUSIC & ENTERTAINMENT MARKETING

Orchestras and Musicians Complimentary Food & Beverage

Professional Entertainers Cost of gratis meals to customers

Mechanical Music Cost of gratis alcoholic beverages to

Muzak or Other Wire Services customers, plus sales tax (if applicable)

Piano Rental and Tuning

Films, Records, Sheet Music Donations/Charities

Programs Cash donations to:

Royalties (e.g., to ASCAP) Charities/Community Groups

Booking Agent's Fees Financial Sponsorship of activities such as

Meals Served (cost) to Entertainers Little League

Media Advertising

Newspapers/Magazines

UTILITY SERVICES RadioTelevision

Electricity

Natural Gas/Fuel Other Promotional Expenses

Scavenger/Waste Removal Civic and Community Projects/Involvement:

Water & Sewage Chamber of Commerce membership

Meetings of committees, etc

The Uniform System of Accounts for Restaurants Entertaining Costs in Promotion of Business

(USAR) states that kitchen usage of Electricity and Travel Expense on Solicitation

Natural Gas/Fuel should be metered separately and Other Misc. Promotional Expenses

charged to Direct Operating Expenses as "Kitchen

Fuel". If separate meters do not exist, ALL electri- Postage/Delivery (Promo)

city/natural gas/fuel costs should be expensed here. Bulk Mailing

Postage Meter usage

Normally, Electric Bulbs are expensed here. The Promo Mailing Supplies, such as labels

replacement bulbs in this sample are decorative;

therefore, they are charged to Restaurant Supplies. Photo/Printing/Graphics

Customer Survey Forms

Customer Post Cards

Customer Mailers/Direct Mail Ads

REPAIRS & MAINTENANCEPrograms & Directories

Grounds/Gardening Travel/Dining Guide Listings

Yellow Page Ad in phone directory

Maintenance Contracts - Equipment

Comupter Hardware and Software Restaurant Research & Development

Typewriters, Copy Machines "Sampling" at Other Restaurants:

Time Clock, Point-of-Sale Local Competition Research

Menu/Decor/Operation Ideas

Repairs & Maintenance - Equipment

Dining Room Furniture; Upholstering Signature Souvenirs

Dishwashing & Sanitation Equipment Gratis souvenirs given to customers

Kitchen, Bar, Office Equipment

Refrigeration Equipment Telephone (Promo)

Repairs & Maintenance - Premises

Air Conditioning, Plumbing, Heating, Electrical

Elevators and Lifts

Floors and Floor Coverings

Parking Lot Repairs

Buildings; Building Alterations not capitalized

Miscellaneous Repairs & Maintenance

Storage Containers

Pest Control

Small repair tools/supplies not capitalized


GENERAL & ADMINISTRATIVE

Auto/Mileage Allowance Insurance-Liability/Umbrella

Auto allowances paid to authorized management Liquor Liability coverage

personnel as part of compensation package General Liability coverage

Mileage reimbursements for use of employee Umbrella (Excess Liability) coverage

vehicles for administrative-related errands

Insurance-Miscellaneous

Bad Debt Expense Officers' Life Insurance

Customer and Trade "Uncollectibles": Miscellaneous Insurance

Checks

Credit Card Charges Legal/Accounting Professional Services

Receivables Legal Fees

Customer Walk-Outs Accounting Service Fees (e.g., CPA)

Bank Charges Miscellaneous Expenses

Account Service Charges/"Analyses"

NSF Fees/Returned Item Charges Office Supplies

Stop Payment Charges Pens/Pencils

[Credit Card Imprinters/Authorization Calculator/Cash Register Tape, Ribbon, etc.

Terminals are charged to Dir. Op. Exp.] Scotch Tape/Staples/Paper Clips

Typewriter Supplies

Cash Over/Short White Out, Post Its, Memo Pads

Petty Cash/Change Bank overages/shortages File Folders, Labels, etc.

Bartender/Waitron overages/shortages (incl. Small Equipment not capitalized

the reimbursement/paid-out of same)

Outside Services

Computer Supplies ADP Unemployment Insurance Cost control

Computer paper, ribbons, blank disks, etc. Consultant Fees

Program software "update" costs Payroll Service costs

Misc. software/hardware purchases which

are not capitalized Personnel Expenses

Help wanted advertising

Credit Card Discounts Personnel agency fees

All other recruitment costs

Dues and Subscriptions

CRA and/or NRA Membership fees Postage/Delivery (A&G only)

Other trade/business organization dues/fees Postage Meter refill, stamps

Trade Papers/Magazines Subscriptions Federal Express, Express Mail, U.P.S.

Educational Materials Rent-Other

Cookbooks (used for reference only) Postage Meter rental

Dictionary, Thesaurus, etc. Typewriter rental (short-term)

Instruction Books/Pamphlets (e.g., for computer

programs, or accounting procedures, etc.) Security/Alarm

Entertainment (Business Operation) Seminars/Conventions

Administrative Staff luncheons Fees (Entrance and Attendance)

Managers Dinner

Meals/Entertainment: Purveyors, Business Telephone/Communications

Contacts, Executive "meetings", etc. All telephone, facsimile, modem costs, except

those expensed to "Marketing"

Forms/Paper Products/Printing (A&G)

Check Printing Travel Expenses

Photocopy Supplies-paper, toner, dispersant Business travel expenses, with the exception

Printing costs-handbooks, manuals, forms of travel expenses on solicitation (which are

for both operations and accounting expensed to "Marketing"):

Stationery Supplies-envelopes/letterhead/etc. Mileage

Facsimile supplies Meals & Lodgings

Bridge Tolls, Car Fare, Parking


BALANCE SHEET FORMAT

ASSETS LIABILITIES & EQUITY

Current Assets Current Liabilities

Cash on Hand XXX Accounts Payable - Trade XXX

Cash in Bank - General Checking XXX Accounts Payable - Other XXX

Cash in Bank - High-Yield Checking XXX Gift Certificates Outstanding XXX

Accounts Receivable - Trade XXX Deposits Held XXX

Accounts Receivable - Owner/Employee XXX Sales Tax Payable XXX

Accounts Receivable - Credit Cards XXX Payroll Taxes Payable XXX

Food Inventory XXX Accrued Insurance XXX

Beverage Inventory XXX Accrued Payroll XXX

Prepaid Taxes XXX Accrued Rent XXX

Prepaid Insurance XXX Accrued Miscellaneous Expenses XXX

Prepaid Miscellaneous Expenses XXX Note/Loan Payable - Current Portion XXX

Note Receivable - Current Portion XXX Note/Loan Payable - Current Portion XXX

Total Current Assets XXX Total Current Liabilities XXX

Fixed Assets Long Term Liabilities

Leasehold Improvements XXX Note/Loan Payable - Long Term Portion XXX

Accumulated Amortization - L/H Imp. XXX Note/Loan Payable - Long Term Portion XXX

Furniture Fixtures & Equipment XXX Total Long Term Liabilities XXX

Accumulated Depreciation - FF&E XXX

China, Glass, Flatware Par XXX Other Notes/Loans Payable XXX

Small Equipment Par XXX

Total Fixed Assets XXX

Total Liabilities XXX

Other Assets

Deposits Paid XXX Shareholders' Equity

Liquor License XXX Capital Stock XXX

Organizational Expenses XXX Retained Earnings - Prior Years XXX

Logo/Artwork XXX Current Profit / Loss (-) XXX

Note Receivable - Long Term Portion XXX Total Shareholders' Equity XXX

Total Other Assets XXX

Total Liabilities and

Total Assets X X X Shareholders' Equity X X X


SUMMARY INCOME STATEMENT FORMAT

Current % of Year-To- % of

Period Sales Date Sales

Revenue

Food Sales XXX XX XXX XX

Beverage Sales XXX XX XXX XX

Total Revenue XXX XX XXX XX

Cost of Sales

Food Cost XXX XX XXX XX

Beverage Cost XXX XX XXX XX

Total Cost of Sales XXX XX XXX XX

Gross Profit XXX XX XXX XX

Operating Expenses

Salaries & Wages XXX XX XXX XX

Employee Benefits XXX XX XXX XX

Direct Operating Expenses XXX XX XXX XX

Music & Entertainment XXX XX XXX XX

Marketing XXX XX XXX XX

Utility Services XXX XX XXX XX

Occupancy Costs XXX XX XXX XX

Repairs & Maintenance XXX XX XXX XX

Depreciation & Amortization XXX XX XXX XX

Other (Income)/Expense XXX XX XXX XX

General & Administrative XXX XX XXX XX

Total Operating Expenses XXX XX XXX XX

Income Before Interest &

Non-Operating Expenses XXX XX XXX XX

Interest & Non-Operating Expenses

Interest Expense XXX XX XXX XX

Other Expenses XXX XX XXX XX

Total Interest & Non-Op Expenses XXX XX XXX XX

Income Before Income Taxes XXX XX XXX XX

Income Taxes XXX XX XXX XX

Net Profit or (Loss) X X X X X X X X X X

Are My Costs Uniform Report

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