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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.

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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.

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