Accounting for Restaurants
Restaurant accounting is about two numbers watched weekly: food cost and labour cost. The tax side adds tip reporting, sales tax filings, and the FICA tip credit, which many restaurants never claim. Blue Sage handles the books at the frequency the business actually needs and the compliance that comes with tipped staff.
What we handle
- Weekly or monthly bookkeeping with food and labour cost tracking
- Tip reporting and allocation compliance
- FICA tip credit calculation and claiming
- Sales tax registration and filing
- Vendor and inventory reconciliation
- Equipment and leasehold improvement treatment
Who this is for
Independent restaurants, small groups, cafés, and food service operators.
The FICA tip credit is the most commonly missed item in this industry. Restaurants pay employer payroll taxes on employee tips, and a credit is available against that cost. Claiming it requires the tip reporting to be in order, which is a reason to keep it in order.
Deadlines and rules worth knowing
| Item | What applies |
|---|---|
| Food cost | Tracked as a percentage of sales, ideally weekly. Monthly is often too late to act on. |
| Labour cost | The other weekly number. Scheduling decisions are made against it. |
| Tip reporting | Employees report tips to the employer; the employer includes them in payroll reporting |
| FICA tip credit | A credit against employer payroll taxes paid on employee tip income. Frequently unclaimed. |
| Sales tax | Prepared food is generally taxable. Rules on catering and delivery vary. |
| Leasehold improvements | Build-out costs are generally capitalised, though some components may qualify for faster treatment |
How we work
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Review what exists
We read last year’s return and whatever records you have. Most of what needs fixing is visible quickly.
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Fixed quote in writing
Scope and price before anything starts, counting entities, states, and any cleanup needed.
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File and maintain
Returns prepared and filed, notices answered, and a projection before year end.
Questions
What is the FICA tip credit?
It is a credit against the employer share of payroll taxes paid on employee tip income above the amount treated as wages for minimum wage purposes. Many restaurants never claim it. Claiming it requires accurate tip reporting, which is a further reason to keep tip records properly rather than approximately.
How often should a restaurant do its bookkeeping?
More often than most other businesses. Food and labour cost as a percentage of sales are the two numbers that determine whether the restaurant makes money, and they need to be current enough to act on. Weekly or bi-weekly is common; monthly is usually the minimum that is useful.
Last reviewed 11 September 2026 by Fahadun Nabi, Founder, Blue Sage Tax and Accounting Inc.. General information, not advice for your specific situation.
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A free consultation call, no obligation, and a fixed quote if you want to go further.