10 Ways QuickBooks Is Blocking Your Restaurant’s Growth Part 1

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The biggest obstacle to growth for most restaurant operators isn’t the front of the house – financial management is the key to success.

All too often small operators start off using QuickBooks or other off-the-shelf solutions for their accounting software. For one or even two locations of a specialty restaurant that might be good enough. For locations approaching $500,000 in annual sales, or a concept looking to expand to multiple locations, QuickBooks simply won’t support your goals.

All too often many restaurant operators run their businesses totally blind to their financials, or even worse, think they have good financials but are actually making decisions based on bad information.

Many restaurants get their start with Quickbooks, and that’s OK. However, for operators focused on growth, there’s a better way.

There are generally two schools of thought when restaurateurs are considering upgrading their finance system. The first is a best-in-class approach using restaurant back-office management software to manage the operational reporting, integrated with a best-in-class ERP (such as ASTUTO CRM-ERP) to manage the financials; or a restaurant-specific suite product that combines accounting/ERP and operational reporting in one system (Restaurant 365 or Compeat).

The suite products all market aggressively based on their purported ability to provide “everything” financial/operational that a restaurant operator needs to run their business. In reality, these products tend to be decent at operational reporting, but are poor to adequate on the accounting/financial reporting side.

If you own or operate a restaurant company that has more than two locations and has plans to add more, QuickBooks is killing your accounting team and leaving you in the dark.

We’ll look at the top 10 reasons that you should use a best-in-class financial software solution that supports your growth strategy.

This post covers the first five reasons. Follow the link at the end, to see the remaining five, including a look at the ROI of a better financial solution.

Not Restaurant Specific
Manual Manipulation
Multiple Entity Support
Food & Beverage Costing & Analysis
Accounts Payable Inefficiency

The most significant disadvantage of QuickBooks is that it is a generic business solution. It doesn’t support standard P&L formats commonly used in the restaurant industry, nor does it natively support different reporting periods other than the standard calendar month format. QuickBooks comes with a standard chart of accounts, which doesn’t include many items you need for restaurants. Sure, there are restaurant charts available, but you have to create these manually.

The dirty secret for most restaurant accounting staff, is they spend more time in Excel than they do in QuickBooks to manually manipulate data and format it for restaurant-specific reporting. We’ll talk more about that later.

QuickBooks also doesn’t support looking at food and beverage costs as a percentage of sales. If you want to track food costs as a percentage of food sales, or liquor costs as a percentage of liquor sales, QuickBooks doesn’t support that. Some poor accounting person will have extract and format that data manually, most likely in Excel.

Generating useful reports out of QuickBooks usually requires masterful manipulation in Excel. The accounting staff may gloss over how much time they spend doing it, but rest assured, it’s too much. Relying on Excel for reporting – comes with attendant problems, such as formula errors and manual work to populate the data.

Automate that process with solutions such as Sage Intacct that display real-time operational and financial reporting through online dashboards and integrations with operational systems, eliminating the need for Excel reports.

QuickBooks also doesn’t have adequate capabilities to assign different permission levels to different users. It is easy for someone to make a mistake and make a mess of the books – and then it’s difficult to find and correct the errors.

Sage Intacct offers robust security and permissions, the ability to manage access by role or by user, and a complete audit trail that tracks all user activities in the system, helping protect the integrity of financial data.

Perhaps QuickBooks will support growing from one location to two or three. However, the manual work will compound as you grow. Eliminating manual work and increasing automation in your accounting system is the best way to prepare your organization for growth.

QuickBooks and most other small business accounting software does not support multiple entities. Opening a second location will also mean creating a new QuickBooks file. This can also lead to a different chart of accounts which will create reporting issues down the road. You will also find yourself logging in and out of multiple files wasting precious time and productivity.

To look at consolidated financials for multiple locations, you will most likely have to manually compile everything in Excel in. Manual work increases the chance of errors and formula mistakes as well as being time-consuming.

QuickBooks doesn’t properly categorize food and beverage costs, which is more of an issue for smaller operations. Larger operations typically have better insight into their costs of good sold.

When menu items are not costed correctly, it’s challenging to analyze menu pricing or item profitability. This is where the restaurant back office management software comes into play. The best approach is to invest in software to do the heavy lifting, with a best-in-class approach that supports integration with leading ERP systems.

QuickBooks is not designed to manage the high volume of invoices that larger restaurant operations entail.

The important thing is to automate the time-consuming accounts-payable processes while integrating with best-in-class payment and bill management solutions. Sure, QuickBooks Online offers some payment integrations, but Sage Intacct provides a payment service native in the product, as well as integrations to Bill.com, MineralTree, Yooz and other solutions.

For a growing company, you need an ERP like Sage Intacct that’s designed to support a larger transaction volume than QuickBooks and provides tighter internal controls via approvals and user-based permissions.

For multiple-entity restaurant companies, Sage Intacct offers the ability to track purchasing and A/P balances for common vendors across entities and automates intercompany bill entry.