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Cash-based or Accrual-based accounting for restaurants

Jul 11, 2025

Learn why cash-based accounting is the best for most restaurants

When running a restaurant, keeping your finances in order is crucial—not just for tax time, but for making smart business decisions every day. One of the first choices you’ll face is which accounting method to use: cash-based or accrual-based. Let’s break down what these mean, why it matters, and why cash-based accounting is often the best fit for restaurants.


What’s the Difference?

Cash-Based Accounting

  • Revenue is recorded when cash is received.
  • Expenses are recorded when cash is paid.
  • Simple: If money moves in or out of your bank account, it’s recorded right then.

Accrual-Based Accounting

  • Revenue is recorded when it’s earned, even if you haven’t been paid yet.
  • Expenses are recorded when they’re incurred, even if you haven’t paid them yet.
  • More complex: You track money as soon as you send an invoice or receive a bill, not just when cash changes hands.

Why Does It Matter for Restaurants?

Restaurants are fast-paced, high-volume businesses. You deal with lots of small transactions every day, and cash flow is king. Here’s how each method plays out in practice:

Cash-Based Accounting: The Restaurant Advantage

  • Simplicity: You only record what’s actually happened in your bank account. No need to track accounts receivable or payable.
  • Real-Time Cash Flow: You always know exactly how much money you have on hand.
  • Tax Benefits: You only pay taxes on money you’ve actually received, not on sales you haven’t collected yet.
  • Easier to Manage: Most small restaurants don’t have complex credit arrangements with customers or suppliers, so there’s little need for accruals.

Accrual-Based Accounting: When Is It Needed?

  • Bigger Operations: If you’re running a large restaurant group, catering business, or have lots of credit sales and supplier contracts, accrual accounting can give a more accurate long-term picture.
  • Required by Law: In some countries, or if your business grows past a certain size, you may be required to use accrual accounting for tax purposes.

Example: Cash vs. Accrual in Action

Suppose you buy $1,000 of ingredients on credit in June, but pay the bill in July.

  • Cash-Based: You record the expense in July, when you actually pay.
  • Accrual-Based: You record the expense in June, when you receive the ingredients (even though you haven’t paid yet).

For most restaurants, the cash-based method matches how you actually experience your finances.


Why We Recommend Cash-Based Accounting for Restaurants

  • It’s easier to understand and manage.
  • It matches your real-world cash flow.
  • It keeps your bookkeeping simple and focused on what matters: the money in your account.

Unless you have a specific reason to use accrual accounting (like complex credit arrangements or legal requirements), cash-based accounting is usually the best choice for restaurants.


Get Started with Simple Restaurant Accounting

At Fidistra, we’re built for cash-based accounting. Just upload your bank statements, and we’ll handle the rest—giving you instant, accurate Profit & Loss reports without the headache.

Ready to simplify your restaurant’s finances? Get started for free today!