Book-keeping for restaurants, hotels and pubs
Summary of Key Points
- Use computer software for your accounts if at all possible.
- Keeping an accurate cash book is the single most important thing to get right.
- Decide on a relevant sales or cost code for everything – never cop out with “general” or “miscellaneous”.
- The VAT account is the most important one from a legal point of view.
Keeping accounts can be daunting at first. The key is to break it down into a series of simple, manageable tasks. This note will summarise these and suggest the best ways for putting together an accurate set of books.
Using Computer Software
Unless you have a really deep-seated fear of using computers – which is OK and it’s better to acknowledge that than use a computer – then there are lots of advantages of buying accounts software (for less than £200 for most small businesses):
- You won’t have to spend lots of time manually adding up data, the computer will do that for you.
- You won’t have any errors due to poor handwriting, though you will have the odd keying error.
- You will be able to send your data electronically to your accountant to check that everything is OK.
- It should save in accountancy fees as your accountant will have less “bashing in” of raw data to do.
- It is extremely difficult – and inadvisable to try – to work out payroll manually if your business employs anyone.
- You are less likely to make errors on the VAT return by using computer software to do it.
- You’ll get a set of account codes – the “Chart of Accounts” which have been tried and tested by similar businesses.
Cash is often a significant element of the takings of a hotel, restaurant or pub. Keeping an accurate cash book which reconciles to till rolls is the single most important feature of any set of such accounts. Even if other aspects of the books are not right, a good accountant will be able to re-create them if the cash book is in good order.
There is a separate page on Restuarant and Pub Cash Control which goes into this issue in more detail.
Chart of Accounts
This is the name given to the various headings under which the business will report its results.
- The profit and loss headings deal with the ins and outs over a period of time – Sales, Direct Costs and Overheads are the main headings used. The balance sheet headings show the trading balances of the business at a given date – Fixed Assets, Current Assets, Current Liabilities and Capital are the main headings used.
- When you are posting transactions to the chart of accounts, never post anything to “general expenses”, “miscellaneous” or other headings of that sort – these headings are all tax disallowable. Make a decision at the time of posting as to which account name best fits the transaction being posted.
- One good thing about accounting software is that it will set you up with Charts of Accounts which have stood the test of time – and HMRC investigations! Good packages will come with different options suitable for different industries.
The VAT Account
All VAT-registered businesses have a legal obligation to keep a separate account within their books for their VAT – the VAT control account. This records the amounts due to or from HMRC and the cash movements made to settle these balances. The amounts due will normally be made up of 2 offsetting balances:
- Output VAT on sales – to be paid to HMRC, less
- Input VAT on purchases to be repaid by HMRC to the business.
If anything is likely to trip up the beginning book-keeper it is probably VAT. The trickiest things to deal with are purchases which have some VAT-chargeable items and some zero-rated items, typically:
- Invoices from supermarkets and similar businesses selling food (zero-rated) and non-food items.
- Expense claims from employees which have non-VAT elements such as mileage claims and food bills.
Even relatively simple businesses will want to keep other ledgers for greater control. The two most commonly used are:
- The Purchase Ledger which shows balances owed to each supplier.
- The Sales Ledger which shows balances owed by each customer.