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Accounting

food truck payroll

Running a food truck is a business model that usually requires more than one person. As a food truck owner, it will become quickly evident that you cannot run your mobile business on your own. Because of this, you will need to hire employees to assist you in your day to day food truck operation.

Unless you have come up with a way of hiring staff members without having to pay them, there are a few things that you are going to have to be aware of to legally hire these individuals. Many of these steps are required even if you are going to be a one person show, while others will become a requirement as soon as you plan to expand your staff from 1.

9 Steps To Setting Up Your Food Truck Payroll System

Obtain an Employer Identification Number (EIN)

Before hiring employees, you need to get an employment identification number (EIN) from the IRS. The EIN is often referred to as an Employer Tax ID or as Form SS-4. An Employer Identification Number (EIN) is a nine-digit number that IRS assigns in the following format: XX-XXXXXXX. The EIN is necessary for reporting taxes and other documents to the IRS. In addition, the EIN is necessary when reporting information about your employees to state agencies. You can apply for an EIN online or contact the IRS directly.

Check Whether You Need State/Local IDs. Some state/local governments require businesses to obtain ID numbers in order to process taxes.

Independent Contractor or Employee – Know the Difference

Be clear on the distinction between an independent contractor and an employee. In legal terms, the line between the two is not always clear and it affects how you withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment taxes. As required by law, You will need to withhold payroll taxes from your employees checks, FICA (Social Security), SWH (State Withholding), FWH (Federal Withholding), SDI (State Disability Tax), Medicare, and FUTA (Unemployment Insurance Tax).

Take Care of Employee Paperwork

New employees must fill out Federal Income Tax Withholding Form W-4. Your employee must complete the form and return it to you so that you can withhold the correct federal income tax from their pay.

Set a Pay Period

You may already have a manual process for this, but setting up a pay-period (whether monthly or bi-monthly) is sometimes determined by state law with most favoring bi-monthly payments. The IRS also requires that you withhold income tax for that time period even if your employee does not work the full period.

Carefully Document Your Employee Compensation Terms

As you set up payroll for your food truck employees, you’ll also want to consider how you handle paid time off (not a legal requirement), how you track employee hours, if and how you pay overtime, and other business variables.

Don’t forget that other employee compensation and business deductibles such as health plan premiums and retirement contributions will also need to be deducted from employee paychecks and paid to the appropriate organizations.

Choosing a Payroll System

Payroll administration requires an acute attention to detail and accuracy, so it’s worth doing some research to understand your options. Start by asking fellow business owners which method they use and if they have any tips for setting up and administering payroll.

Typically, your options for managing payroll include in-house or outsourced options. However, regardless of the option you choose, you — as the employer — are responsible for reporting and paying of all payroll taxes.

Running Payroll

Once you have all your forms and information collated, you can start running payroll. Depending on which payroll system you choose, you’ll either enter it yourself or give the information to your accountant.

Record Keeping

Federal and some state laws require that employers keep certain records for specified periods of time. For example, W-4 forms (on which employees indicate their tax withholding status) must be kept on file for all active employees and for three years after an employee is terminated.  You also need to keep W-2s, copies of filed tax forms, and dates and amounts of all tax deposits.

Report Payroll Taxes

There are several payroll tax reports that you are required to submit to the appropriate authorities on either a quarterly or annual basis. If you are in any way confused about your obligations, take a look at the IRS’s Employer’s Tax Guide, which provides some very clear guidance on all federal tax filing requirements. Visit your state tax agency for specific tax filing requirements for employers.

There are many payroll companies you can hire to do your taxes and file your reports. You can have your accountant do this for you or you can buy payroll software and do it yourself.

Please note that its always best to consult with your lawyer and/or account to help you get set up and to make sure you are in compliance with all laws and regulations.

If you have any additional tips to setting up a food truck payroll system, please feel free to share them in the comment section below.

time clock cartoon

Food trucks have two major cost centers. One is food and beverage. The other is labor. Which do you think is most problematic for mobile food vendors?

If you said labor, either you’ve been running a food truck for at least a few months, or you have some genuine insight into the challenges of running a mobile food business.

Labor issues are typically the number one concern of most food truck owners. Food and beverage costs can be held in check through price adjustments and portion controls. On the other hand, labor costs are not controlled by paying low wages.

Controlling food truck labor costs is best done through sound scheduling and improving your employee productivity. You increase productivity through training, better food truck kitchen layouts, and the use of labor-saving equipment and products.

This article addresses cost-related issues and ways to increase employee productivity — the areas in which a mobile food vendor has the most control.

Controlling Food Truck Labor Costs: Keep an Eye Numbers

Before you can develop appropriate and effective measures for labor cost control, you must gather the necessary information on which to make your decisions. Therefore, the accumulation and reporting of relevant labor cost information is critical. To do this, you need more than your calculator.

Productivity and labor cost efficiency cannot be addressed and assessed only in straight numbers. If customer service is compromised, the initial savings of a lower payroll cost can be negated by a decrease in sales caused by customer losses.

When trying to determine the productivity of your staff, the traditional ratio of “payroll to total sales” is not an effective and accurate measure of worker productivity and scheduling efficiency.

Essentially, you pull this ratio from your income statement to tell you how much sales you are squeezing out of your payroll expense. What could be more telling? Well, there are three reasons why additional measures must be used to analyze labor costs.

The traditional labor cost ratio really just indicates to management what needs to be addressed, without providing any specific information.

The figures reported on the monthly income statement are historical and after-the-fact. Labor cost should be controlled beforehand. This will require labor cost figures to be compiled at least weekly.

So what is the best measure of productivity? There is no one magic ratio. You need to monitor several benchmarks to take the pulse of your mobile food business.

Controlling Food Truck Labor Costs: Don’t Lower Wages

Food trucks should not control labor cost by keeping salaries and wages low. In fact, operations paying less than the going wage rate in their locale will find it difficult to hire and retain the more productive employees.

Think about it. If you felt you were a very good cook or manager, would you quit your current job and go work for someone who paid you less than you were making? I don’t think many of us would work for less.

About one-third of all employees who leave a job voluntarily, leave for better pay. You may have heard that money cannot be a motivator for increasing productivity.

Well, it is probably true that just increasing the wages of an employee will not necessarily mean they will be more productive, but when money is used as a reward for outstanding performance, it can be an effective motivator.

There are a number of scheduling methodologies you can use that will reduce your labor costs just by adjusting when you have employees arrive and depart from work. Efficient scheduling must reflect the variations in business volume that occur during the day and even meal period.

Your goal is to accomplish the necessary workload with a minimum number of labor hours while maintaining your level of service.

Productive employees should be rewarded with pay increases and earn more than average employees. Treat your valuable employees like you do your most valuable customers. Realize that the labor cost per cover and the number of covers per labor hour can be improved only with productive employees.

If productive employees are treated no differently from marginally productive ones, there is no benefit to the employee to do more than average for he or she will get the same enumeration either way.

Controlling Food Truck Labor Costs: Set Benchmarks

No single measure can be used to evaluate labor productivity; management must employ multiple measures collectively. Management must have a better index of labor productivity and no single measure can efficiently accomplish that. Therefore, additional measures are needed to properly analyze labor costs. The additional information needed is readily available as it is compiled on a daily or weekly basis. These measures are:

  • Covers per labor hour
  • Labor cost per cover
  • Labor cost per labor hour

Where do you start? Each time payroll is processed, total labor hours by job category are tallied. Management will compare actual hours worked to those originally scheduled and look for variances. If hours worked are greater than scheduled hours, they will investigate to determine the job category where the variance occurred.

Employee schedules are determined not by revenue but by customer counts. The “covers per labor hour” is perhaps the best indicator of labor productivity compiled by a mobile food service operation because it is not distorted by the way sales are affected by price increases and discounts.

Although some drops in customer counts occur in the long run when prices are increased, covers per labor hour remains the most effective indicator of employee productivity.

The “labor cost per labor hour” is another productivity index. It is calculated by dividing total payroll by total labor hours. When calculated by respective employee job categories, one can readily see the wage differentials between jobs. This information can assist management in establishing wage ranges for each job category.

The third index of productivity is the “labor cost per cover.” This tells us how much labor is used to serve each customer that walks up to your food truck service window. The total payroll is divided by the number of customers.

Check out this example:

Assume:

  • Total Payroll Cost = $1,400
  • Total Labor Hours = 144
  • Total Covers Served = 1,200

Therefore:

  • Covers per Labor Hour (1,200/144) = 8.33
  • Labor Cost per Labor Hour ($1,400/144) = $9.72
  • Labor Cost per Cover ($1,400/1,200) = $1.17

Did we miss something in regards to controlling food truck labor costs? If so, please feel free to share them in the comments section below, Tweet us or share them on our Facebook page.

accounting basics

The key to any successful mobile food business is simple: profits. As a food truck owner, you need to make money to survive, and in order to make money, you need to know accounting basics and systems to control cash flow, reduce losses and maximize your profits. Keeping track of your finances will put you in a good place to monitor your cash flow and make the most of your business in the long run.

Accounting Basics: Cash Flow

Managing cash flow means tracking all the cash that is coming in and leaving your food truck business. With sales and expenses always playing a balancing act, estimating future cash flow can be a guessing game until you get the feel for your roaming restaurant’s business patterns, or when the money comes in versus when it goes out. Essentially, you want to strive for more income than expenses. When you are able to bring in more money than you spend, you are maximizing your net income, and overall your profits will grow.

Accounting Basics: Record Keeping

Recording your cash flow, including income and expenses, is critical to your food truck’s accounting procedures. Your income includes all cash and credit card sales received. Outgoing expenses should be recorded with the help of receipts and invoices. Your Point of Sale (POS) system typically keeps track of all credit card and cash sales, and all receipts should be filed and recorded in a Profit and Loss document (P&L). It is also essential to keep a close eye on your inventory counts.

Accounting Basics: Taking Inventory

Your mobile food business’ inventory includes the supplies, products and ingredients you have on hand to prepare and serve food and beverages. Inventory is an important factor in managing business accounting, because it represents an investment in food and supplies that are needed for you to make a profit. You should always consider your inventory as cash in a different form, and count it consistently and thoroughly.

Accounting Basics: Profit and Loss Statement (P&L)

Your profit and loss statement, or P&L, is much like an income statement for the food truck. This document serves as a report to summarize income, expenses and inventory, illustrating your business’ total profits and losses over a specific period of time. It is best to prepare a P&L each week if at all possible. This will make it easier to track numbers and comparing reports from month to month and even year to year. A P&L statement includes information relevant to your cash flow, including sales and labor expenses.

Accounting Basics: Software

Most food truck operations do not have in-house staff of accountants available to do their accounting leg-work, so many use computer programs to help record their financial information. The best software includes a Point of Sale (POS) system, financial software, and the software to integrate the two. Fully-integrated systems like these can take the burden off you and help you fully analyze your financials by running comprehensive reports.

Do you have any suggestions for our accounting basics list? We’d love to hear your thoughts. Feel free to share them in the comment section below, Tweet us or add them to our Facebook page.

food truck accounting

In this article we’ll provide the very basics of food truck accounting and how to use those figures to understand how your mobile food business is operating.

Operating a food truck is challenging in the best of times and success depends on keeping your eye on your mobile food business’s profitability. As a food truck vendor, it is important that you understand the basics of accounting principles and especially key performance indicators (KPIs) that provides you with a snapshot on how your mobile business is doing at any given moment.

This knowledge will not only prepare you for managing your business, but also your ability to forecast any potential problems before it happens. You don’t have to become an expert on accounting, but you should be aware of these three important financial statements:

The Balance Sheet

The first food truck accounting statement you need to become familiar with is the balance sheet. A balance sheet allows you to see your food truck’s daily financial health. By analyzing each of your main business categories such as cash, inventory (if you keep one), loans and other expenses, it will provide you with a snapshot on how your business did within a certain period of time.

The balance sheet will help you keep a close eye on your inventory – especially supplies such as food ingredients, products, and any other items that help your truck run properly.  You can create accurate forecasts and see any trends appearing during the week. You will be able to make informed decisions on when to order certain supplies, or if your service window staff isn’t pushing your high value meals enough.

Income Statement

Your income statement (or in other words the Profit and Loss statement (P&L)) is another food truck accounting report that you need to understand. Normally created on a monthly basis, it’s a summary of your income, inventory and other expenses. With the average profit margin for a food trucks at 10-15%, it is important that you check your P&L statement on a regular basis as it will help you know if your food truck is profitable or is running at a loss.

Cash Flow Statement

The final food truck accounting report you will need to understand the basics of is the cash flow statement. The cash flow statement is different from your P&L report – it allows you track where your actual cash is at this moment. By managing your cash flow, you will be able to verify that you have actual cash on hand to pay employees and suppliers. You will be tracking cash flow on a daily basis, verifying cash in coming from sales against the amount of cash going out through your accounts payables, monthly expenses, food inventory, and labor costs.

The main difference between an income statement and cash flow is that the cash flow report tracks the flow of cash you have on hand (or in your bank) or your solvency.

Running a food truck can be challenging, however, pitfalls can be avoided if you keep a strict eye on your bottom line.  Keeping track of these food truck accounting reports will provide you with the guidance you need to be on top of your mobile food business.

food truck accounting

If you are a food truck owner determined to keep your truck service window open, you’ve got to have your eye on each and every issue that could potentially stall your mobile food business. That means not overspending or wasting supplies, keeping only necessary staff and rewarding them for their good work, and promoting your food truck brand.

The sad thing is that accounting mistakes can trip up all the good work you do in these areas, leading to lost revenue, lost customers, and even trouble with the IRS. Here are a few of the most common food truck accounting mistakes, and how you can avoid them.

Keep Consistent

One mistake that even the smartest mobile food vendors make is not having clear procedures when it comes to their accounting. Some vendors play fast and loose with their personal accounting, which makes them think they can just wing it and get by with their mobile food business accounting. But that’s just not the case. You’ve got to have rules in place to make sure every accounting detail is handled the same exact way. That will reduce the chance that something important is missed, and help you approach tax time calm and prepared.

Reconcile Accounts

Data entry errors can be devastating, and there’s really no way to avoid them. Accounting data entry is tedious, and it’s all too easy to miss a zero or switch some numbers around. Sure, you can accept a small amount of errors, but the fewer the better. And the best way to prevent them is to have all of the data entry reviewed, whoever does it. Reconcile each and every spreadsheet to its appropriate account, and mistakes won’t go undiscovered for very long. Do this at least once a month and you’ll be sure than small problems won’t become larger.

Have A Budget

Although it’s hard to believe, some food trucks actually work without a budget. They think that the fact that they know how much money being spent is enough, and you don’t need to waste time with a detailed accounting budget. That’s one of the biggest mistakes you can make. Just because your mobile food business is working as is doesn’t mean it’s working as optimally as possible. Start with the last two months of expenses to give you a baseline, and then create a budget for the following month. You’ll be able to adjust it as you go along, but even if it’s not quite right it will help you far more than simply keeping an eye on expenses.

Stay Organized

Finally, many food truck owners are very disorganized with their record keeping. This will certainly come back to bite you when tax time rolls around. It may be that you’re not categorizing the company’s expenses, or not noting down enough detail to satisfy a potential closer look by the IRS. Just remember that the situation is never too far gone. Create a chart of all accounts and go back to the beginning of the current year to categorize. You can’t change the past, but moving forward with strict organization will help you save money for the future of your food truck empire and avoid costly legal troubles.

As a start-up food truck owner, you may want to pay yourself last to conserve money for your business, but sometimes putting yourself first is the trick to succeeding.

With so many expenses to pay for your mobile food business such as a truck payment, commissary rent, food inventory and staff wages; it can be hard to fit your own salary in. And as a food truck vendor, you may assume you should put everything you make back into the business. Not so. The first thing you should do with your money is pay yourself first.

pay-yourself-first

Many food truck owners who bootstrapped their companies feel that paying themselves is a luxury; however, we feel (and will show you why) that it is a necessity for the success of your business.

Why You Deserve a Salary

If you’ve got a nice cushion of savings, you may not need a salary right now to pay your bills. But that could change, so it’s best to prepare for the day when your funds run out. Getting into the habit of paying yourself, even just a little bit, will give you money for personal expenses when things get tight or sales slow down. If your food truck business happens to fail one day, you would have gotten something for your efforts by paying yourself and saving money for that rainy day.

Giving yourself a salary can have tax benefits for certain business structured, as it will reduce your company’s profit. Talk to an accountant to find out what benefits your tax type (LLC, partnership, corporation) has with your salary.

Other benefits to paying yourself include:

  • You can save money for future business efforts or for personal use
  • You may work harder to increase revenues and thus your income
  • Investors (if you have them) see you are committed to growing your company
Build in Your Salary

Plan your salary from the beginning. When you set up your budget and food truck business plan, include at least a small salary (weekly, bi-weekly or monthly) for yourself. If you’re going to be seeking financing, having your salary built in is key, as it will increase the amount you ask for from investors. In this case, determine how much you need to live, as well as what you’re worth.

If you’re bootstrapping, start by paying yourself a modest salary, even if it’s just a few hundred dollars a week. This can increase as your profits grow. You can also pay yourself through employee benefits such as health insurance or 401K investment.

When to Not Pay Yourself

There are a few instances when you can delay paying yourself:

  • You don’t have enough to pay for your food truck employees’ paychecks or pay bills to your suppliers, delay paying yourself until these expenses are covered.
  • You have significant up front expenses, you can delay your compensation until all expenses are covered with money brought in from food sales.

You’ve achieved something great by starting a food truck business. As a culinary entrepreneur, you’re willing to take risks to grow your mobile food business. You deserve to be paid, just like any of your employees. Invest in yourself just like you do your food truck.

tip of the dayFinancial metrics are always going to be import to track for your food truck empire, but they only tell part of a story. The bean counters love financial metrics because they measure results clearly, but as a food truck owner, it’s your job to influence the inputs that drive those results.

To do this, measure the things that contribute to revenue, such as customer retention, food quality quality, and customer referrals (via social media and word of mouth)  to ensure you get the right financial results in the right way. Keep your staff members focused on the inputs with the highest correlation to your financial growth. If you keep tabs on the contributing factors, you’ll know when something’s gone wrong long before your accountant can dial your phone number.

Managing your food truck employees may be difficult, but it doesn’t hold a candle to managing their payroll. Executing payroll manually involves a slew of complex calculations, check cutting and tax withholding, which is a lot of extra work for a busy food truck owner. The price for mistakes can be steep, and it may lead to a stressful (and costly) visit from an auditor or a letter from an attorney.

food truck payroll options

This is why many mobile food vendors choose to outsource payroll. There are many options when it comes to managing payroll, including hiring an accountant and utilizing online or offline payroll services. Hiring an accountant might be ideal, but it also may not be in the budget for a small food truck start up.

This article breaks down some of top-ranked payroll service options (in no specific order) to consider for your food truck business, which will help you simplify your payment and tax-filing processes:

Intuit/QuickBooks ($39/month)

Starting at $25 a month, Inuit Online Payroll is an affordable and simple option for newcomers to the world of payroll. It can be integrated with the popular QuickBooks accounting software to support federal and state tax requirements for $39 a month. It’s generally considered one of the most accessible and straightforward payroll platforms for beginners, and it offers many helpful features, like Online Time Tracking for employees to record their hours. It provides employers with free mobile apps to manage payments. It also allows employees to check on their paycheck details online.

ADP ($160/month)

ADP is possibly the best-known brand name when it comes to payroll services, and it offers a full-service system that can also be integrated with QuickBooks. ADP RUN, their small business-focused payroll service, has more features than Intuit does but it’s also significantly pricier. Additionally, some users find it slightly more complicated to set up due to a greater diversity of options. Unlike Intuit, ADP RUN offers 24/7 customer service assistance as well as payroll mobile access for employees (rather than just employers). Due to the price, it’s often considered a better option for growing businesses that can afford its more extensive features.

ONPAY ($40/month)

ONPAY is another affordable full-service small business payroll service, which offers a lot of the perks of Intuit, like unlimited monthly payrolls, at a comparable price. It even has a few extra features, like employee compensation through Pay Cards, which are helpful for employees who may not have bank accounts. It can be integrated with QuickBooks, but lacks the ability to sync with other popular software, such as Quicken and QuickBooks Online.

Paychex ($88/month)

Another popular option, Paychex offers comprehensive online payroll services for small businesses. Like the previous two options, it can transfer payroll data into QuickBooks as well as other types of software, and it offers very comprehensive online payroll options. It does, however, charge an extra fee for certain services, such as direct deposit, and adds an extra charge per extra employee. It also lacks online employee access and a local check-printing feature offered by most other services.

SurePayroll ($80/month)

SurePayroll is a subsidiary of Paychex. It offers comprehensive web-based payroll options focused on small business. It has all of the bells and whistles offered by popular services like Intuit, but unlike most services, it does not charge an extra fee for adding extra states. It has the option of filing taxes for you and will work with the IRS on your company’s behalf. On the downside, it’s relatively pricey and may be a better fit for small- to medium-sized businesses rather than those with a handful of employees.

ProPayroll ($75/month)

ProPayroll is a comprehensive online payroll system with an impressive collection of features and pay options. It is known for its excellent customer service, but has more limited software integration capabilities and requires a few more additional fees compared to other payroll services.

MyPayrollHR ($75/month)

MyPayrollHR is another online option that offers integration with QuickBooks and Sage accounting software. It provides a good array of features and payment options. It offers several free features that many other services don’t, like not charging for the addition of extra employees, W-2 services or the inclusion of additional states. The only sticking point for smaller food truck operations may be the price, which still can’t compare to the affordability offered by Intuit and ONPAY.

Please Note: Prices are rounded approximations of the cost of the full-service payroll and tax-filing assistance for a business with five employees. They may vary based on number of employees or additional features. These features and qualities of these service options are subject to change.

If you use another payroll system we didn’t include, please feel free to share it in the comment section below or on Twitter @MobileCuisine.

 

comp

A comp is the act of providing a customer a food or beverage item for free. While it’s a common practice of food truck owners, it should only be used in certain situations. By comping your food or beverages, you are training your customers to expect it. Then when you don’t, they’re disappointed for not getting something they wouldn’t have gotten at another food truck anyways.

When To Avoid Giving A Comp Meal

 

A customer that simply orders something they end up not liking, not because it was bad, but because it doesn’t suit their taste, is never someone whose meal should receive a comp in our opinion. Along with other complaints from customers who eat most or all their meal, or do not have enough of an appetite to let you make them something else, you should be offering these people some sort of bounce back offer instead of a comp.

Your first approach should always be to try and replace the food with something they do like. Even if you have to make a dish twice, as long as you collect the money for it, you still have some gross profit left to contribute. When you give a comp, you not only don’t get the money, but you also incurred the expense of preparing the food. The difference between collecting a reduced gross profit, and actually paying your customer to eat from your truck is huge.

If you can’t replace the food, and the customer’s complaint is reasonable, offer them a coupon or gift certificate and promise to make their next visit better. By offering a comp meal, you can’t guarantee that the customer will even come back. When you give them a discount for their next visit instead of a comp, there is a very good chance they will return, and they likely won’t be alone. You’ll have the opportunity to make a better impression and win a regular customer for your food truck.

Comp Meals Can Be A Financial Headache

The other issue with comp meals is that it is often one of the most common errors in the financial statements of food trucks is the incorrect recording of food and beverage comps.  And if you have a lot of comps, your income statement will be greatly distorted if they are not handled correctly.

The biggest impact is in the calculation of cost of sales. When calculating cost of sales, it’s essential that you only include the cost of products that contribute to revenue… not amounts for which no payment is expected or that do not represent sales to guests. In other words, sales and cost of sales must not include the retail value or cost of comps.

What is your food truck’s comp policy? We’d love to hear if you comp, or when you do or don’t. You can share your thoughts via email, Facebook or Twitter.

tip of the dayTo understand your food truck  financials, knowing these three measures of if and how money is coming in is a good place to start:

  • Growth. Growth in sales is usually — but not always — a positive sign. Look for year over year growth but remember that it has to be profitable and sustainable.
  • Cash generation. Cash allows companies to stay in business. Cash generation is the difference between all the cash that flows into the business and all the cash that flows out. Investigate where the cash is generated, how it’s used, and whether enough is coming in.
  • Return on assets. Any company’s return on assets is its net profit divided by the average value of its assets during a given period of time. This measure shows you how well your mobile food business is using its assets to make money.
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