Food Truck Accounting: Bookkeeping Tips for Food Truck Businesses

Food Truck Accounting: Bookkeeping Tips for Food Truck Businesses

Small business owners should keep thorough financial records to understand their financial health and for compliance purposes. When it comes to restaurant accounting — especially for food truck owners, it’s even more important to maintain strict bookkeeping standards.

The average restaurant profit margin is just 3-5 percent, meaning there’s little room for financial error. For low overhead projects like food trucks, the profit margin may be even smaller, even if you’re pulling in $40,000 per month (the high end of a food truck’s average profit.)

Like any restaurant, food truck operators need to adopt good accounting practices to control food costs and other business expenses, stay compliant, and ensure that the truck is driving toward its financial goals.

In this article, you will learn how to adopt accounting strategies to help your food truck business thrive.

Food truck accounting 101

First off, let’s differentiate accounting and bookkeeping.

Bookkeeping is more of a day-to-day record keeping activity. This practice includes tracking expenses and managing financial data. The goal is to intake real-time earnings and expenses for future use in illustrating and forecasting food truck performance.

Accounting is the illustrating and forecasting part that’s built on bookkeeping. It’s the interpretation and presentation of that data to see the big picture. Accounting can help food truck owners make better decisions with measures on net income, food costs, and the over all bottom line.

They’re related, of course. Your restaurant bookkeeping will have a direct impact on your accounting as you can’t draw informed accounting insights without accurate bookkeeping. 

That’s why a tool like Toast’s point-of-sale (POS) system is so valuable for food truck bookkeeping. When you’re juggling orders from people lining up outside your truck, Toast’s POS system can effortlessly and automatically track the flow of money — all while improving the customer ordering experience.

That’s the first step towards stronger food truck accounting practices. Automated food service bookkeeping will help your accountant or your food truck accounting software provide better and more accurate visualizations into your food business’ financial health.

Food truck business accounting considerations

All restaurants should implement strong accounting practices, but food trucks have some specific accounting concerns to take into consideration. These include:

• Payroll: You probably don’t have a large staff working at the same time in your food truck, but when you’re scheduling a lot of different people to work different hours, payroll can get complicated.

• Tip handling: Tipping is very common at food trucks, and you have to figure out how to distribute tips to staff and avoid treating these incomes like profit.

• Inventory management: A food truck’s inventory is likely lean and frequently being renewed. That can be difficult to track in your books, but effective inventory management is crucial for strategic menu pricing and avoiding food waste.

• Cash flows: Food truck operators have to order supplies, pay employees, and manage myriad operational expenses. That creates some complicated cash flow! Good accounting will help you organize all of your scheduled and surprise payments so you can meet all of your financial responsibilities.

• P&Ls: Profit and loss statements are some of the most important accounting statements for any business, and they’ll be no less important to your food truck.

• Mechanical and transportation costs: Your business is a mobile food service operation. As such, it’s subject to maintenance costs that you might not have in a brick-and-mortar restaurant. 

• Additional insurance: Food trucks may have additional–or different– insurance needs by nature of driving on the roads. This is an important thing to factor into your accounting.

Outsourced vs. in-house food truck accounting

Should you hire a full-time accountant to manage your food truck’s books, or should you rely on an outside service? Ultimately, it depends on your business needs.

Pros of an in-house accountant

• Close personal knowledge of your business: An in-house accountant is likely familiar with how your food truck actually operates. They may have ridden along on shifts or at least been there when you’re stocking up or stripping down for the night. They’ll have a better idea of how the food truck operates in real-life, and not just from a numbers standpoint. As such, they can help identify waste, cost control opportunities, and have ideas to improve your food truck’s financial health.

• Quality assurance: When you work with an in-house accountant every day, you can have higher expectations and better access to ask questions and audit their work.

• Easy feedback loop: You’ll see an in-house accountant most days, making it easy to establish a working relationship and feedback loop. You might not get the same facetime with an outsourced accounting service.

Cons of an in-house accountant

• Expensive: The biggest drawback of an in-house accountant is that you’ll have to pay them more. You could pay an accountant to work hourly to save some money, but a full-time accountant will cost a competitive salary and benefits.

• Overwork: Food trucks are financially complicated businesses, and running the books as an individual can be very taxing. A single in-house accountant may risk being overworked or overextended, especially as your business grows.

Pros of an outsourced accountant

• Budget-friendly: Most businesses that use an outsourced accountant do so to save money. With so many food truck accounting services and software to choose from, you can find a custom plan that’s affordable for your business.

• Flexibility: Most accounting firms will put more than one accountant on your team, making them flexible and more available throughout the year. Software is always on.

Cons of an outsourced accountant

• Effort: An outsourced accountant won’t understand your business like an in-house accountant would. As such, you may have to over explain at times, which can be frustrating and time-consuming.

• Lack of personal touch: Outsourced accountants aren’t going to come up with any inspired innovation plans. They’re not involved enough in your business to give you any kind of real white-glove service.

Which accounting method is right for your food truck

Cash method, accrual method, and modified cash-basis accounting are the three primary accounting methods.

Cash method records revenues and expenses when they are received and paid.

Accrual method records revenues and expenses when they occur, but before they’re received and paid. 

Most restaurants use cash accounting or modified cash-basis accounting. However, if you’re doing more than $25 million in sales (congrats!), the Internal Revenue Services (IRS) requires accrual accounting.

Most likely, your food truck will use cash accounting since most of your money comes from customers paying at the window while expenses are fairly regular and immediate.

More important than your accounting method, you need to know the financial statements your food truck needs to keep up with the bookkeeping. Use your food truck’s business plan to inform your financial plan, and make sure to keep at least three primary financial reports: the income statement, balance sheet, and cash flow statements.

Maintaining a detailed and accurate profit and loss statement is also critical. Make sure these are up to date with all of your food truck’s incomes and expenses. 

Income can typically come from daily or weekly reports from your POS system. If you do any catering with your food truck, you may also refer to those invoices or even track that side of the business separately.

Expenses are best tracked via supplier and vendor invoices.

Invoice automation tools can be a game changer when it comes to tracking expenses. These systems, such as xtraCHEF by Toast, can put hours back in your week while unlocking additional insights via detailed, line-item level insights for every ingredient or product in each invoice.

How to pick an accountant

Think you’d rather have a food truck accountant than accounting software? Consider the following during the vetting process.

Accountant affiliation

You could choose an independent accountant or an accounting firm, it just depends on your budget and the relationship you’d like to have with your accountant.

Accounting requirements

How involved are your accounting needs, really? Do you need a full-time accountant or can you get by with part-time?

Freelance accountants and accounting firms may charge by the hour. Many firms also charge more per hour for more experienced accountants.

If you’re going with a large firm, you may be able to maximize your opportunity by trusting more junior accountants with the basic, day-to-day food truck invoice processing, bookkeeping and accounting. When you have more complex projects like calculating plate costs, you can enlist a more senior accountant.

Specialization

Many accountants specialize in the food industry, but food trucks aren’t the same as the typical brick-and-mortar restaurant. Your expenses are different and cash flows differently, so it’s important to find an accountant with food truck accounting experience.

Software familiarity

You should ensure any accountants are familiar with the accounting software you use. Or you should be prepared to change to their preferred system. They should also have a general understanding of your point of sale software and any other critical food truck management systems.

How to pick a food truck accounting software

Many accountants use accounting software to make their lives easier. You can always try to use accounting software yourself before hiring an accountant. There are many options out there, however, so consider the following when looking for a food truck accounting software:

• Needs: Every food truck operator has different needs. Do you just need a program to pump out financial reports? Do you want to automate invoices, perform recipe costing, and other more advanced accounting projects? The best accounting software will support all of these needs and more.

• Budget: The more you pay for food truck accounting software, the more you get. So determine your needs and budget before signing on the dotted line.

• Functionality: If you’re hiring a food truck accountant who knows the software well, you may not worry about complexity. If you’re trying to do it yourself, you’ll want an intuitive food truck accounting software.

• Flexibility: The best accounting software is cloud-based and mobile-friendly so you can access it anywhere.

FAQs

How often do restaurants do inventory?

This depends on how often you have deliveries in your restaurant. Most restaurants do inventory check-ins 1 - 2 times per week, but it makes sense to take count of your inventory every time you’re restocking, to make sure that everything is fresh and within its expiration dates. 

How is food cost calculated?

Food cost percentage is calculated by taking the cost of goods sold and dividing that by the revenue or sales generated from that finished dish. Learn more about calculating food cost percentages here. 

How much food inventory should a restaurant carry?

You only need to have enough inventory to cover your sales, plus a little bit extra in case of an emergency. For most restaurants, this usually means about 5 - 7 days worth of inventory, if you’re getting 1 - 2 deliveries per week. 

What is a good inventory to sales ratio?

A good inventory to sales ratio is between 4 and 8, which means selling your entire food inventory between four and eight times each month. 

What is the average inventory turnover ratio for restaurant food?

The inventory turnover ratio indicates the number of times the store sold out its inventory in a given time period. A low inventory turnover ratio indicates either low sales or too much inventory in stock, while a high inventory turnover ratio indicates either strong sales or a poor inventory purchasing plan. The restaurant industry average is about five.