You will have to set up a basic accounting and record keeping system for your business. There are many software choices for tracking expenditures and balancing your bank account. By buying a basic off-the-shelf software package, you'll save money. These packages have all the necessary features you need to set up sales, purchase, and create general ledgers to manage your accounts and petty cash. Software systems will be programmed to adhere to the Generally Accepted Accounting Principles (GAAP) rules, which you and your accountant should follow.
You'll need to set up a chart of accounts for coding the elements used to classify, record, budget, and report information. The National Restaurant Association publishes A
When using general-purpose accounting software, you'll have to put in your own descriptions, such as expense items for food, beverages, and linen rental. Which headings you choose will depend on how you wish to analyze them later, so discuss this with your accountant.
As soon as you have a business structure, open a business checking account. Don't try to operate a business with your personal checking account. Commingling assets and operating in a nonprofessional manner will only get you into trouble later on when you have to pay taxes and figure out your profit.
Open a business account at a bank that caters to small businesses so that the fees you pay will be minimal. Hopefully, you'll be able to establish a relationship with this bank. As they get to know you and your business needs, you'll be able to approach them for lines of credit, loans, credit cards, and other important services.
Most likely, the money in your business account won't earn interest. This won't make much difference at the beginning, but as you grow you may want to open an interest-bearing savings account. You can keep most of your money in the savings account and move money into the checking account as needed.
If you don't have the final name for your catering business, you can open the bank account under the corporation's name and file a DBA certificate with your state later. It's simpler if you can open the account with the final business name. That way, the information on the checks will match your business's name and avoid confusion.
Accepting credit cards is a convenience that customers will appreciate. Credit card sales must be processed or settled in order to transfer the money to your bank account. There's a fee for this, and fees vary from processing company to processing company. With recent innovations like PayPal, sole proprietors can easily accept credit card payments. You'll need to open an account with PayPal and provide your banking information. Fees for credit card processing will range from just over 1 percent to more than 3 percent depending on the type of credit card and the volume of sales that you process.
State Sales Tax Issues
While state laws may vary slightly, you'll need to pay sales tax on the catering sales you make. Since there's no tax on most food items, the state expects to be paid once you turn raw ingredients into edible dishes. Since you'll pay sales tax on food wrap, food trays, and other equipment when you purchase it, you don't have to charge your customers sales tax on those items. Just include the prices of those items in your selling price for the event.
When you cater for a nonprofit organization, a certified 501(c)(3), or another legitimate tax-exempt organization, you must get a current copy of their tax status and keep it in your files with the paid invoice for that job. If you are ever audited, you will be asked for proof of why you didn't collect or pay sales tax.
Finding an Accountant
Finding an accountant is much like finding an attorney. Try to find a small business accountant who is familiar with food businesses or at least has retail and service businesses as clients. Use a certified public accountant (CPA), an accountant who has passed a regulated exam and meets the requirements of this industry-recognized accreditation. Ask for recommendations from other small business owners. The American Institute of Certified Public Accountants is also a good resource for finding CPAs in your area. Visit their Web site at