Accounting for your bakery can take a while to master -- especially if you're running a retail outlet and a catering service -- but it pays off in the long run. Proper bakery accounting makes it easy to manage tax payments and returns. The more complete and accurate your accounting records are, the more power you have to analyze business trends and gain insights to improve sales.
The first step in accounting for your bakery is purchasing accounting software and setting up a chart of accounts. Most accounting software allows you to customize the accounts to your bakery. The chart of accounts is divided into business assets, liabilities and equity. Assets are the baked goods, machinery, equipment, furniture and other items that the business owns. Sheet pans, cake pans, bakery display cases, ovens, proofers and refrigerators are all common bakery assets. Liabilities are the amounts owed to others, like salaries you haven't paid yet or a supplier bill that's due soon. Equity is the sum of retained earnings from your business and any capital that you and any other owners have contributed.
Although you're probably working long hours at a small bakery, make time for bookkeeping. Enter all bakery transactions into your accounting software once a day, week or month, depending on the size of the bakery operations. Ask a shift supervisor to tally bakery sales and balance the cash register every day so bakery sales are accurate. Common bakery revenues are receipts from the sale of baked goods, catering orders and catering services. Common bakery expenses are rent, utilities, insurance, ingredients, vehicle and fuel expenses for deliveries and salaries. Every month, reconcile what you've entered in the accounting software with your monthly bank statement so you know you haven't missed anything.
One of the areas that small bakeries struggle with is understanding the true cost of their baked goods. Accurately calculating this figure ensures the cost of goods sold on your income statement is correct and can provide information for product pricing. For a bakery, all the baked goods and food you sell to customers are products. The cost of goods sold represents the direct labor, materials and overhead involved in the process. The direct materials are the raw materials, like flour and sugar, you put in your product. Direct labor costs are the salaries and benefits of employees who create and serve the products. The overhead is a portion of manager salaries, rent, utilities and other general costs you can attribute to the product.
Most bakeries need baking staff, a specialty bakery chef, delivery drivers, shift supervisors and front counter workers to run smoothly. However, having employees adds another set of accounting requirements for your bakery. In addition to cutting your employees checks on a regular basis, you must calculate your portion and the employees' portion of Social Security, Medicare, federal income tax, state income tax and unemployment taxes. Some accounting software has a built-in payroll module you can use to calculate it, or you can use a third-party payroll service to process the checks. Regardless, you'll need to make quarterly tax payments to the state and federal government to cover your portion of the taxes.