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Your Path to Better Numbers: Why You Should Be Using the NRA's Uniform System of Accounts for Restaurants

by Jim Laube

In 1985, I opened my restaurant consulting practice. Having practiced as a CPA, one of the first services I'd offer a prospective client would be to prepare their monthly financial statements. Within the first year, I found myself involved in the ongoing accounting and financial statement preparation of 10 independent restaurants.

While many of the restaurant's P&L formats were similar, all were different and had their own unique characteristics. I began noticing that it was common to get telephone calls from a bookkeeper or general manager, with questions like: "Our ice machine went down last week and we had to buy ice. Where do we cost code ice?" or "We had a private party and bought decorations and ornaments, where should we charge these costs?" Particularly when I was pressed for time, my standard reply was "sounds like a Miscellaneous Expense to me." While being a fairly expedient way of handing a phone call, I discovered that one of the biggest expense categories for some restaurants became "Miscellaneous."

Most of these restaurants' expense categories was not reflective of the types of costs found in a foodservice environment. As a result many of their operating expenses were getting lost in "Miscellaneous". Obviously it's difficult to control a specific cost if you don't even know what it is.

About that time I attended a restaurant accounting seminar and learned about the National Restaurant Association's Uniform System of Accounts for Restaurants and immediately saw some advantages in using it.

Advantages of Using the NRA's Uniform System of Accounts for Restaurants -

  • It gives restaurant operators a common language based on a well thought out and "industry specific" means of understanding and analyzing their operating results and financial position.

  • Allows for the easy comparison of one restaurant's operating numbers to other restaurants.

  • Provides detailed instructions for accurately classifying (cost coding) the many expenses associated with operating a restaurant and guidance in accounting for many "unique" restaurant industry transactions.

  • Allows for easy comparison to industry averages that are published annually in the National Restaurant Association's "Restaurant Industry Operations Report." (see below for information on how to purchase)

  • When used to format your projections in business plans and financing packages, the Uniform System makes you and your numbers appear more credible because you're using the industry "standard" and accepted way to present this information.

This is very important, so I'll emphasize this point again - when making presentations to bankers and investment professionals to raise money, "always" format your financial projections using the Uniform System. It tells bankers, lenders and investment professionals you've done your homework, you know what's going on in your industry and I've found it even lends more believability to the numbers.

The Uniform System of Accounts for Restaurants has been in use for over 50 years and has been updated and revised several times. It is the NRA's largest selling publication. The latest edition was published in 2012 and includes a comprehensive expense dictionary to help you in classifying the many types of expenses you run into operating a restaurant. You can order the Uniform System of Accounts for Restaurants in our online store.

Over the years, I have converted many restaurants from their own proprietary chart of accounts to the NRA's Uniform System. While I must admit that it takes some time and can be a little disruptive, once the dust settled, no operator ever regretted it. The Uniform System proved to have many advantages over their previous one and most importantly it gives them a better understanding of what their numbers are telling them and how their restaurants are actually performing.




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