How To Create A Restaurant Balance Sheet: Example & Template

January 18, 2022 by Adam Hoeksema

Like any other business, restaurants also need to track their performance, profit & loss, and stay on top of their finances. That’s why several accounting tools are needed, and a restaurant balance sheet is one of them.

If you’re thinking a profit-and-loss (P & L) statement is enough, you’re not quite right since a P & L statement is basically just an account that shows your revenue and expenses.

In comparison, the balance sheet shows a broader picture of your restaurant’s financial health. It gives an overview of assets, equity, and liabilities of your business. Based on these insights, you can forecast short-term and long-term cash flow, identify risks, and make informed business decisions.

In this guide you’ll learn everything about restaurant balance sheets – how to create and read them, review a restaurant balance sheet example, and watch a video tutorial on how to fill out our restaurant balance sheet template.  

So, let’s read on:

What is a Restaurant Balance Sheet (and Why It is Important)?

A restaurant balance sheet shows:

-        Assets: How much your business owns.

-        Liability: How much your business owes.

-        Equities: How much is left over for the owner.

Put simply, it shows the net worth of your restaurant at a given point in time. Because it summarizes your restaurant’s finances, balance sheets are also called the statement of financial position.

So, balance sheets can be used both internally and externally:

  • Internally: Restaurant owners, key stakeholders, or staff can review balance sheets to determine whether the business is succeeding or failing. Accordingly, you can revise your policies and procedures to overcome challenges and drive your business towards success.
  • Externally: Some external entities might be interested in knowing your business resources and sources of funds. Based on these insights, potential investors can decide whether it would be wise to invest in your business or not.

External auditors may also use your restaurant balance sheet to check whether your business is complying with reporting laws or not.

3 Main Issues That Balance Sheets Can Reveal About your Restaurant

As mentioned above, a balance sheet shows all your assets and liabilities in one place. So, you can easily compare things and take necessary actions to rectify risks and mistakes timely. Though a restaurant balance sheet is helpful in many ways, the biggest risks it helps uncover and avoid are discussed below:

#1 Insufficient Cash Flow

About 29% of businesses fail because of poor cash flow. That’s why it’s crucial to monitor your cash flow so you’ll always have enough to pay your employees, utilities, and food costs.

A well-maintained balance sheet shows whether your business has positive cash flow or not. If not, you can take necessary actions to ensure that your restaurant never runs out of cash.  In addition to your balance sheet, our free cash flow template can help you project future cash flow. 

#2 Discloses Solvency

Solvency refers to a restaurant’s ability to meet its long-term debts. It’s the state when there are more assets than liabilities. It’s important to track your solvency position because it shows your business’ ability to manage operations into the predictable future. You can quickly check your restaurant’s solvency by looking at the equity on your balance sheet.

#3 Unsustainable Debt Levels

Your restaurant balance sheet shows when your debt levels aren’t sustainable. Too much debt on the balance sheet shows you may default on debt or declare bankruptcy. Using this accounting statement, you can easily identify these issues in advance and avoid long-term financial troubles.

Just make sure you create a clear and accurate balance sheet that shows the right figures.

How to Create a Restaurant Balance Sheet?

Creating a balance sheet for your restaurant is not rocket science. But you still need to be careful and pay attention to certain things. Fortunately, we have a ready-to-use restaurant balance sheet spreadsheet template that you can use to create accurate accounting statements for your business. We’ll talk about that later in this blog, along with a restaurant balance sheet example.

So, now coming to the point, most balance sheets use the following equation: 

Assets = Liabilities + Equities   

So, three critical components of balance sheets are – assets, liabilities, and equity. Understanding these components is important whether you're doing it manually or using a balance sheet template.

Here we go:

Assets

Assets are business-owned resources that generate revenue. For example, two types of assets for restaurants are:

  • Current Assets: Current assets can be converted into cash within a year or less. Examples: Current liquor inventory, checks, stocks, etc. 
  • Fixed Assets: Fixed assets are meant for long-term use and cannot be turned into cash quickly. Examples: Furniture, restaurant building, machinery, and intangible assets like copyrights, licenses, franchise agreements, etc.

Here is a screenshot from our restaurant balance sheet template:

Restaurant Balance Sheet Template Assets

Liabilities

Liabilities refer to money you owe to others, such as recurring expenses and debts. There are two subcategories of liabilities:

  • Current Liabilities: Any amount of money your restaurant has to pay within a certain period of time. Examples: salary, taxes, building rent, and loans. 
  • Long-Term Liabilities: It refers to long-term financial obligations of your restaurant, such as deferred tax payments, capital leases, etc.

Equities (Shareholders/ Stockholders Equity)

According to the formula/equation above, equity is what’s left to you after subtracting liabilities from assets. Known as retained earnings, it’s the amount you take home.

Here is a screenshot from our restaurant balance sheet template that displays liabilities and equity section:

Restaurant Balance Sheet Liabilities and Equity Spreadsheet

Now, let’s begin with the process of creating a restaurant balance sheet:

Select a Balance Sheet Date: Decide whether you want to report monthly, quarterly, or yearly. Once you've decided this, pick a date to create and report your restaurant's balance sheet.

Add your Assets: Now, create a list of all the current assets (as per liquidity) and then the fixed assets. Add them and mention the ultimate value in the total assets section. 

Add your Liabilities: Start listing the current and non-current liabilities. Add the sections' values individually and sum up their sub-total.

Calculate the Equity and Verify the Balance Sheet: Find out the shareholders' equity along with its working capital and retained earnings. Once done, verify whether the sum of liabilities and equities equals assets. If it does, you have estimated the values correctly.

How do you Read a Restaurant Balance Sheet?

Well, reading a balance sheet is very easy if you know the basics. By now, we hope you’re familiar with what assets, liabilities, and equity are.

Let’s check out the following restaurant balance sheet example to understand better:

Source

As you see from the restaurant balance sheet example above, it's arranged in two sections. Assets are on the left, and the right side lists the restaurant's liabilities and equity. In the last row, you see that the value of total assets equals the combined value of liabilities and equity. It means all values put into the sheet are accurate.

A clean and accurate restaurant balance sheet provides a complete picture of debt and helps create strategies to increase your profitability. Based on this statement, you can create financial projections for your business, pitch to investors, and even apply for a loan.

Use a Restaurant Balance Sheet Template to Make Things Easier

Luckily, there are balance sheet templates for restaurants that make it easier to create these statements, even if you know nothing about accounting. These templates consist of dedicated sections assets, liabilities, and equity.  We have two templates available:

1) Restaurant Balance Sheet Spreadsheet Template - use this if you are an existing restaurant and you have been asked to provide a current balance sheet

2) Restaurant Sales Forecast & Projection Template - use this if you need to create up to 5 years of financial projections including a balance sheet, cash flow statement, and profit and loss.

Simply purchase, download, fill out, and you’re done. The best part is that you can use this for any type of restaurant facilities, such as coffee shops, bars, and alike.

To sum up, you see how important and easy it is to create balance sheets for your restaurant. Like every other business, the long-term success of your restaurant depends on data-driven decisions. Using restaurant balance sheets with profit & loss statements helps you understand your business's current financial health and discover opportunities to grow revenue.


Banner image: Photo by Marcus Herzberg from Pexels

Top Right image: Pexels




About the Author

Adam is the co-founder of ProjectionHub which is a SaaS web application that helps entrepreneurs create financial projections for their business. Since 2012, over 40,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections. Adam also serves as the Executive Director of Bankable. Bankable is a Small Business Administration (SBA) lender that makes loans from $500 to $250,000 to Indiana small businesses that are unable to secure financing from a traditional bank.

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