Restaurant owners rarely have Human Resources staff. And with more employees, there is more paperwork, and restaurants can be quickly overwhelmed with the following procedures and rules. Restaurants often fail or face fines and other negative consequences because of mistakes in paperwork or failure to file forms on time.

Owners try to do too much and fail to delegate reporting tasks, or they ignore key areas such as paperwork and accounting, which can lead to theft, getting in trouble with government agencies and losing control of finances. You’ll never understand how everything in the restaurant works, how payroll costs include more than salaries or what insurance companies base their rates on unless you review the forms your business is required to maintain and file.

Restaurant work requires competence in multiple areas, but many owners undertake challenges that they are ill-equipped to handle. Entrepreneurs typically try to cook, keep the books, design advertising, manage people, make repairs and establish warm connections to customers. Paperwork problems often take unreasonable amounts of time and swamp managers with employee, government and investor demands for information.

Frequently, restaurant owners don’t spend enough time learning about paperwork, so they often entrust the details to an office manager. Whether dealing with company records or government forms, a hands-off attitude is a recipe for disaster. Through malicious intent or ignorance, other people won’t always have your best interests in mind, so you need to have some familiarity with forms and your business information to prevent gross errors from putting your restaurant or finances at risk.


Keeping Accurate Payroll Records Takes Time

Payroll records take more time than any other area of restaurant accounting. Company insurance rates depend on accurate payroll data, and federal, state and local governments require regular reports, tax withholding, forwarding of withheld funds, child-support payments and wage garnishments. All these actions depend on accurate records.

You could be audited by any or all of these agencies, so your records need to be accurate and complete. Agencies require that restaurants maintain records for a certain number of years so that accurate information is available for grievances, unemployment claims, Social Security payments and lawsuits.

Surviving the demands of generating timely and correct reports could prove frustrating to entrepreneurs who are more comfortable working in the kitchen or mingling with the customers than sitting behind a desk, keeping records and filing reports. Restaurant accounting software can help you keep accurate records and reduce the time you spend on records, but someone has to input the data, review it and authorize filing reports. Payroll services help to handle all the messy details of figuring out multiple-garnishment protocols, health-insurance policies, benefits packages, and insurance and agency audits that restaurants routinely face, but owners still sign the checks. You just can’t run a restaurant without learning the rudimentary facts about paperwork.

  • The IRS requires that restaurants keep certain records, which include I-9 forms, payroll records, documentation, W-2 forms and 1099 forms for vendors and service workers.
  • Each level of government requires tax deposits in timely fashion, such as general sales taxes, payroll withholding, food and beverage taxes and unemployment insurance assessments.
  • Ordering supplies effectively depends on keeping organized inventory records. Also, a system for tracking employees who oversee the records needs to be in place to prevent theft or discover incompetence.
  • Restaurant paperwork includes the basic accounting knowledge that owners need to file tax returns, monthly and quarterly reports and loan applications.
  • Owners need to be aware of their obligations for running I-9 government background checks.
  • Organized records prove financial details to insurance companies, social service agencies and employers who request employee job references.
  • Courts from local jurisdictions and other states often request child-support payments, back-tax assessments and wage garnishments.

Sloppy Records Lead to Employee Theft

Employers who keep good records, take accurate inventories and monitor employee behavior suffer fewer thefts and losses of inventory. Basic accounting helps to identify losses from outright theft, mismanagement and company waste. Your accounting procedures should identify the employees who handle deliveries and putting stock away so that you have some idea of whom to hold responsible when the figures don’t balance.

  • Small restaurants often experience minor and major thefts because owners trust the wrong people, often employees hired without background checks.
  • Using strong accounting and payroll software puts people on notice that cash, inventory and guest checks get monitored, and these controls deter theft and fraud.
  • Owners need to establish cash-handling procedures to prevent thefts in the front of the house. Sales reports, taking regular register readings and changing cash drawers periodically help to identify the employees that are responsible for cash shortages.
  • Inventory controls help to track your inventory of ingredients from the time foods and supplies enter the restaurant until the kitchens and staff deliver the items to customers.
  • Information security is also an important factor. Poor records or lax computer security could lead to identity theft and liability for restaurant owners.

Key Paperwork Organizational Tips

Business owners have a legal responsibility to keep good records of employees, payroll, expenses, capital equipment costs, depreciation and maintenance and service schedules.

  • Organized offices mean that managers and authorized staff can find information quickly.
  • Compiling personnel documentation helps speed up audits, employee reviews and hiring practices.
  • Accurate paperwork gives owners the tools they need to make better management decisions.
  • Management should keep accurate files for each employee that include I-9 documentation, government correspondence, original job applications, salary and work histories, references, copies of ID cards and emergency contact information, including next-of-kin contacts.
  • Best recordkeeping practices mean limiting employee access to your records with keys and pass codes to prevent the staff from changing their records.
  • In the restaurant industry, it takes an average of 18 months to catch employees who steal, pilfer, embezzle or misrepresent their qualifications. Organizing records and paperwork reduces the time needed to uncover employee problems.

Paperwork Concerns Generated by the Affordable Care Act

The Affordable Care Act adds new levels of paperwork and bureaucracy for swamped restaurant owners, and accurate paperwork could help to generate insurance incentives, reduce operating costs and qualify restaurants for tax credits of 35 to 50 percent on their health-insurance premiums. Restaurants with more than 50 full-time employees could face penalties of $2,000 per employee for failing to carry health insurance. This is an immediate issue and involves research and professional assistance.

Restaurants need POS systems, management software, outsourced payroll services or experienced accountants to handle their paperwork, file government reports, manage health-insurance problems and deal with payroll issues. The benefits of good paperwork include transparency, increased profits and better management of people and resources. You can and should take the time to review each report because understanding paperwork issues can help you make better management decisions in your restaurant.