Raymond S. Smidgall (et al.) in the book “Restaurant Financial Basics” defines it as:

“The process of organizing, analyzing, interpreting, recording, summarizing, and reporting financial information in ways that are meaningful for owners, managers, and other internal users and for lenders, and for other external users. Also referred to as accounting.”

The key terms in financial management or accounting are: organizing, analyzing, interpreting, recording, summarizing, and reporting financial information. It also means accounting.

Financial Management in Restaurants

For restaurant financial management, restaurant managers use financial information to manage daily operational activities. This is closely related to the revenue and profits earned, as well as daily expenditures. It’s about money coming in and going out.

Financial information needs to be organized and meaningful. Analysis and interpretation of this information are crucial. That’s why it needs to be recorded, summarized, and reported to those who need it. For example, the restaurant owner needs to understand the economic health of the restaurant.

Financial Management vs. Bookkeeping

Bookkeeping involves analyzing and recording specific financial transactions such as sales, revenue collection, and payroll. Data from bookkeeping is then summarized by accountants for interpretation by management.

Areas of Accounting

Some specialized areas in accounting/financial management include:

• Financial Accounting: The entire process of creating and using accounting information to make business decisions. Deliverables in this area include financial statements such as balance sheets, income statements (profit & loss), and statements of cash flows.
• Audit: Auditors assess whether controls or measures for managing cash and inventory are in place and effective. The financial management system is also evaluated to ensure that financial information is recorded and reported accurately. Financial reports are assessed to determine if they truly represent the financial position, operating results, and cash flows, and whether accounting principles are consistently applied.
• Managerial Accounting: The process of planning using financial information, both historical and forward-looking estimates. For example, in a restaurant, this might involve identifying the most popular dishes ordered by customers!
• Tax Accounting: Planning and preparing financial information for the purpose of filing and paying taxes to the government.