Restaurant Bookkeeping in BC: Tips, Liquor, Daily Close

Why Restaurant Books Are Different

Restaurants are bookkeeping on hard mode.

You have cash and card sales happening simultaneously. Tips flowing in and out. Perishable inventory that spoils if you buy too much. Liquor with its own licensing rules and cost tracking. Staff who work irregular hours. And a POS system that records everything but explains nothing.

Most businesses deal with monthly transactions. Restaurants deal with daily ones.

Does this sound like you?

• You close the restaurant at midnight and the last thing you want to do is count cash and reconcile the register.
• Your food costs feel too high but you are not sure because you have never calculated your food cost percentage.
• Tips are a constant headache. You are not sure if you are tracking them correctly for payroll and taxes.
• You bought a POS system that was supposed to make everything easier, but the reports do not match your bank deposits.
• Your liquor costs are eating into your margins and you suspect some product is walking out the door.

If any of those hit home, keep reading. Restaurant bookkeeping in BC has specific requirements that general bookkeepers often miss. Getting it right protects your business and keeps you on the right side of the BC Liquor and Cannabis Regulation Branch (LCRB).

No judgement if your books are behind. We have worked with restaurant owners who have not reconciled in six months. It is always fixable.

Daily Close Procedure

The daily close is the foundation of restaurant bookkeeping. Skip it and everything downstream falls apart.

Here is what a proper daily close looks like:

1. Run your POS end-of-day report. This shows total sales by category (food, liquor, beer, wine), payment method (cash, debit, credit, gift card), and tips collected.
2. Count your cash. Compare the physical cash in the register to what the POS says should be there. The difference is your over/short. Small variances (under $5) happen. Consistent or large variances are a red flag.
3. Record your cash deposit. All cash should go to the bank daily. If you are keeping cash on hand to "pay suppliers," stop. That creates a tracking nightmare.
4. Verify credit card and debit settlements. Check that the batch settlements from your payment processor match the POS report. These usually settle the next business day.
5. Record tip payouts. If you pay out tips in cash at the end of the shift, record the amount paid to each employee.

This entire process should take 15 to 20 minutes. Yes, it is tedious at the end of a long service. But it is the single most important bookkeeping habit for a restaurant.

If you are not doing daily closes, start today. Even if your books are months behind, start the daily close habit now and catch up on the old stuff separately.

Tip Tracking and Reporting

Tips are income. The CRA is very clear about this. Every dollar your employees receive in tips is taxable income, and you have specific obligations as the employer.

In BC, here is what you need to know:

1. Controlled tips (where you collect and distribute tips to employees) are treated like wages for payroll purposes. You need to withhold CPP, EI, and income tax on controlled tips and include them on the employee's T4.
2. Direct tips (cash tips a customer gives directly to the server) are technically the employee's responsibility to report. But as a practical matter, if you have a tip pool or you handle tip distribution in any way, CRA considers those controlled tips.

Credit card tips flow through your system automatically. These are definitely controlled tips. You must:

• Track the tip amount for each employee each pay period.
• Include tips in the employee's gross pay for payroll calculations.
• Withhold the appropriate deductions.
• Report tips on the T4 at year end.

Is this you?

• You pay out credit card tips in cash and do not include them on payroll.
• Your servers report their own cash tips and you do not track them.
• You are not sure if you are withholding CPP and EI on tips.

Getting tip reporting wrong can result in CRA penalties for failing to remit payroll deductions. It also exposes your employees to surprise tax bills. This is one area where doing it right from the start saves everyone a lot of pain.

Liquor Cost Management

Liquor is your highest-margin product and your highest-risk inventory. In BC, the LCRB requires you to maintain records of all liquor purchases and sales.

Your target liquor cost percentage should be between 18% and 24% of liquor revenue. If your liquor cost is higher than that, you are either overpouring, under-pricing, or experiencing theft.

Here is how to track it:

1. Record every liquor purchase. In BC, most purchases go through the BC Liquor Distribution Branch. Keep every invoice.
2. Track your liquor sales separately from food. Your POS should categorize sales by type: spirits, beer, wine, and non-alcoholic beverages.
3. Calculate your pour cost monthly. Pour cost = liquor cost / liquor revenue x 100. If you bought $4,000 in liquor and sold $20,000 in liquor revenue, your pour cost is 20%. That is healthy.
4. Do regular liquor inventory counts. Weekly is ideal. Monthly at minimum. Compare what you should have on hand (based on purchases minus sales) to what you actually have.

Common issues we see:

• No separation between food and liquor in the books, making it impossible to calculate pour cost.
• Inconsistent inventory counts that miss shrinkage for months.
• Bartenders overpouring because there are no standard pour measures in place.
• Promotional drinks or staff meals not recorded as comps, which inflates your actual pour cost.

LCRB can audit your records. If your purchase records do not match your sales, you have a problem. Keep clean records and do your counts.

Food Cost Monitoring

Food cost is the other critical number every restaurant owner needs to know.

Your food cost percentage = food purchases / food revenue x 100.

In BC, a well-managed restaurant should aim for a food cost between 28% and 35%. Fine dining might be lower. Fast casual might be higher. But if your food cost is above 35%, you are likely losing money on the food side of your business.

Here is how to keep food costs in check from a bookkeeping perspective:

1. Track food purchases weekly. Enter invoices from your suppliers as they come in. Do not let them pile up.
2. Separate food inventory from other supplies. Paper goods, cleaning supplies, and takeout containers are operating expenses, not food cost.
3. Do a monthly food inventory count. Count everything in your walk-in, freezer, and dry storage. Use the same categories as your purchasing records.
4. Calculate actual food cost monthly. Use the formula: beginning inventory + purchases - ending inventory = cost of goods consumed. Divide that by food revenue.
5. Compare actual food cost to theoretical food cost. Theoretical food cost is what your food cost should be based on your recipes and menu prices. The gap between actual and theoretical reveals waste, theft, or portion control issues.

Is this you?

• You have no idea what your food cost percentage is.
• You order from suppliers based on gut feeling rather than sales forecasts.
• You have never done a proper food inventory count.
• Your menu prices have not changed in two years but your supplier costs have gone up.

Knowing your food cost is not just bookkeeping. It is survival. Restaurants operate on thin margins, and food cost is the biggest lever you can pull.

POS System Integration

Your POS system is the nerve centre of your restaurant. It captures every sale, every modifier, every discount, every tip. The question is whether that data is making it into your accounting software.

Most modern POS systems (Toast, Square, Lightspeed, TouchBistro) can integrate with QuickBooks Online or Xero. But integration does not mean automatic accuracy.

Here is what a good POS-to-accounting integration should do:

• Record daily sales by category (food, liquor, beer, wine, non-alcoholic).
• Separate sales tax collected.
• Record payment method breakdown (cash, credit, debit).
• Record tips collected and tips paid out.
• Match to bank deposits correctly.

Common problems we see:

1. The POS sends total sales to the accounting software but does not break out categories. You see "Sales: $3,500" but have no idea how much was food versus liquor.
2. Tips are lumped into sales, inflating your revenue numbers.
3. Discounts and comps are not recorded, so your books show higher revenue than you actually earned.
4. The POS records sales on one date but the bank deposit arrives two days later, causing reconciliation confusion.

Take time to configure your integration properly. Map each POS sales category to the right revenue account in your accounting software. Set up separate accounts for tips receivable and tips payable. And reconcile daily to catch issues before they snowball.

If your POS integration was set up by the POS company's sales rep, get a bookkeeper to review it. Sales reps set up the POS for the POS, not for your books.

Sales Tax on Food vs Liquor

Sales tax in a BC restaurant has specific rules that differ from other businesses.

GST (5%) applies to almost everything you sell in a restaurant: food, liquor, beer, wine, and non-alcoholic beverages.

BC PST (7%) applies to liquor and non-alcoholic carbonated beverages but not to most prepared food. This means:

• A burger and fries: 5% GST only.
• A glass of wine: 5% GST + 7% PST = 12%.
• A can of Coke: 5% GST + 7% PST = 12%.
• A coffee: 5% GST only.

This split creates a bookkeeping challenge. Your POS needs to be set up to apply the correct tax rate to each item. And your books need to track GST and PST separately because they are remitted to different agencies (GST to CRA, PST to the BC Ministry of Finance).

Additional taxes to be aware of:

1. Liquor markup. The BC government applies a markup on liquor purchases through the BC Liquor Distribution Branch. This is built into your purchase cost, not a separate tax you collect.
2. Gratuity charges. If you add an automatic gratuity (for large parties, for example), that gratuity is subject to GST.

Is this you?

• You are charging the same tax rate on everything and hoping it works out.
• You have not checked your POS tax settings since the system was installed.
• You file GST but have never filed a PST return because you did not realize you needed to.

Get your POS tax settings reviewed. A small configuration error can mean you are under-collecting or over-collecting tax on every single transaction. Over months, that adds up to a real problem.

Frequently asked questions

Are tips taxable for restaurants in BC?

Tips are taxable income to the employee in all cases. Whether you, the employer, deduct CPP and EI on them depends on the type: controlled tips (mandatory service charges, employer-administered tip pools) are pensionable and insurable and run through payroll; direct tips that pass from customer to employee without employer control are not subject to CPP and EI at source. This follows the CRA's controlled-versus-direct tip rules.

What is the PST rate on liquor in a BC restaurant?

Liquor sold in a restaurant in BC is subject to 10% PST, plus 5% GST. Prepared restaurant food is generally not subject to PST, and soft drinks carry 7% PST. This is set out in the BC Ministry of Finance guidance for food and beverage service providers and retail liquor sellers (https://www2.gov.bc.ca/gov/content/taxes/sales-taxes/pst/publications/food-beverage-service-providers-retail-liquor-sellers).

Why does my restaurant PST return never reconcile?

The most common cause is mapping liquor PST (10%) and soda PST (7%) to the same account, or not separating taxable categories in your point-of-sale system. When each tax rate maps to its own liability account and your daily close keeps food, liquor, and soda separate, the return reconciles cleanly.

Get restaurant books that hold up

Running a restaurant is hard enough without stressing about your books. But your books tell you whether the restaurant is actually making money or just staying busy.

Is this you?

• You are working 60-plus hours a week in the restaurant and bookkeeping always gets pushed to "later."
• Your books are three or more months behind and the pile keeps growing.
• You got a letter from CRA about late GST/HST or payroll remittances and it made your stomach drop.
• You suspect your food costs are too high but you do not have the data to prove it.
• You are paying your staff tips in cash and you are not confident the payroll side is handled correctly.
• You want to apply for a loan or bring on an investor but your financials are a mess.

Most restaurant owners we work with hit this point within the first two years of operation. You are not behind because you are bad at business. You are behind because running a restaurant is a 16-hour-a-day job and bookkeeping requires focused attention you do not have at midnight.

At Fluent Book, we work with BC restaurant owners to get their books clean, their tip tracking correct, their food and liquor costs visible, and their tax filings on time. We understand the daily-close rhythm and the POS integration challenges.

Book a free 30-minute discovery call at fluentbook.ca. Tell us what is going on and we will give you a straightforward plan to get your restaurant's finances sorted.

Book a free 30-minute discovery call at fluentbook.ca and get your restaurant books running as smoothly as your kitchen.