Accounting is defined as “The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof.” Accountants record and analyze the financial information of the companies where they are employed. Acting as strategic partners, accountants analyze and interpret information to provide the data that managers and operators need to make confident and competent decisions in a timely fashion. They use their keen skills of observation, interpretation and analysis to uncover inefficiency and then determine how to help things run more efficiently.
Mind-numbing stuff for an operator who just wants to please customers with scrumptious pizza. All too soon, new operators realize that cash fl ow doesn’t equal profits and that many factors go into determining your bottom line. Like it or not, accounting is a necessary part of any good business. How do you turn your passion for pizza into a profitable business? Chad Schanker, owner of Pittsburgh-based Pizza Roma’s Moon Township location, states: “After three years in business using an electronic cash register and conventional means of accounting — with a good CPA guiding the way to make sure we were dotting the i’s and crossing the t’s — I believe that an operator needs to have a third party maintain the books. By that I mean somebody who is not in the kitchen making pizzas 60-plus hours a week.”
Schanker’s viewpoint is not atypical. Hiring a third party pays for itself many times over if you don’t have the time or desire to do it yourself. Schanker advises that you, the CPA and bookkeeper all have to be clued in to what numbers are crucial to your business and assess those continually. Jerry Teasley, a franchise developer for Fox’s Pizza Den, sees many different bookkeeping systems in place. “We try to adapt to however the franchisee has their system structured,” he says, stressing that operators must concentrate on daily balancing and controlling food and labor costs. “Do the math or let a program do it for you,” he advises.
Using a solid accounting system means you don’t wait until you visit your CPA/accountant, which generally is done on a monthly or quarterly basis, to know where you stand in your business. That could be too late to get the information you need to ensure you remain efficient and profitable. Michael Shepherd, owner of two Michael Angelo’s pizzerias in Ohio, recently switched to a professional software program. Why?
“The switch really didn’t save me any time,” he says. “If anything, I spend more time on it now. But now I have a ton of information at my fingertips, my accounts are always reconciled and I’m never late on any bills.”
Shepherd says he and his wife spent about six hours per week on accounting. He adds that “each store, as part of the daily paperwork routine, prints several daily recap reports that show important items like sales (taxable and not), sales tax collected, gift cards sold and redeemed, invoiced sales, cash paid out. … All of this is entered into our accounting software at the beginning of each week. Each day from the pizzeria is entered in as a summary invoice for the day, reflecting all of the pertaining info. Each store has its own ‘class,’ so I can filter out reports and expenses for each store. This allows me to have my books current on a weekly basis. I can print a profit and loss statement at any time and know it is correct or print out a balance sheet for the bank anytime they want. Doing this myself gives me complete control over my financials. I know exactly where my business is at any moment and this allows me to make on-the-fl y decisions and purchases or cutbacks as needed. Plus, it eliminates the possibility of any outside accountant from skimming or stealing.”
I come from a family of educators and accountants. At my pizzeria in Punxsutawney, Pennsylvania, our accounting system started with a ledger and soon moved onto DIY spreadsheets. The key to this method is communication with my accountant. He has to know which numbers I consider crucial — my prime cost. I have to realize just how he needs numbers presented to him so we are on the same page when it comes time to generate reports and documents. The last expense anyone needs is to run up an hourly consulting fee with their accountant. Yet, my accountant still recommends that I go to a professional accounting program. Why? Human error. Reconciling spreadsheets, bank statements and such can be a tedious and time-consuming job. Today’s software can provide an internal accounting review process. This checks for suspicious transactions and common accounting mistakes and gives the user advice on correcting the transactions.
It’s time to realize the importance accounting software can play in your business success. Bookkeeping is record keeping. Entering transactions on a daily basis is essential, but it is only a fraction of a business’ accounting needs. You need operational information available at your fingertips so that you can make good decisions every day. If your company is growing, realize that banks require accurate financial statements to determine your potential for loans and lines of credit.
“I would make sure it (accounting software) is a widely used program with support from the manufacturer,” adds Shepherd, “as well as a good, solid support forum or knowledge base somewhere out on the Web. Also check with your accountant to see if he prefers a specific program.” An investment starting at $200 can put your accounting system on the same playing field as the big guys, even giving you analytical tools to view up-to-date key financial trends and see how your company is performing compared to other companies. Keep that in mind if you’re one of the “old school” operators still crunching your numbers the old-fashioned way.
Scott Anthony is a Fox’s Pizza Den franchisee in Punxsutawney, Pennsylvania. He is a marketing consultant and speaker at the Pizza Expo family of trade shows.