It seems like Food Trucks are all the rage these days, and it's easy to understand why. Entrepreneurs who are passionate about food can enjoy the fun parts of owning their own restaurant without the commitment of a brick-and-mortar location. This gives food truck owners the ability to go where their customers will be, work special events and make their business more dynamic than a traditional restaurant. However, it also creates an intense administrative burden. Here's just a few reasons why Food Truck Accounting is unique and cumbersome.
Multiple Cities = Multiple Filing Obligations for Sales Tax and Payroll Taxes
When you're selling prepared food or products, you're obligated to charge your customers Sales Tax. You then have to file Sales Tax reports and remit the Sales Tax you've collected to the appropriate City, County, State and Special District. This can be a complicated process for brick-and-mortar locations, but it gets even more complicated for Food Trucks and mobile vendors because you're obligated to calculate and pay Sales Tax for each location that you served during that filing period.
To make things even more complicated, each location may have their own Sales Tax rate, which needs to be calculated on each transaction and charged to the customer, then reported and remitted at a later date. The location may also have their own Payroll Taxes.
For example, the City of Aurora, Colorado has different Sales Tax rates, depending on which part of the city you're in. Denver has their own Sales Tax, as well as Occupational Privilege Tax for each employee who works there in a month, as does Greenwood Village. So, let's say you own a Food Truck and you're serving a location in Aurora on Monday, a different Aurora location on Tuesday, Denver on Wednesday and Greenwood Village on Thursday. In that time, you've delighted many customers, run yourself and your staff completely ragged and created 5 or more Sales Tax Filing obligations and at least 3 Payroll Tax Filing obligations in a matter of 4 days. In a busy month of serving, the administrative burden can stack up quickly. Here's an actual photo of a Food Truck owner after filing their monthly paperwork:
Payroll: Confusing and Annoying for Busy Business Owners
When you're busy looking for events to put on your calendar, prepping food to be served, and working several events a week, staying on top of payroll can be daunting. You may have specific Payroll Tax obligations for each city that you serve, wage garnishments or other unique payroll items for each employee, and then there's increased workload that comes with turnover and hiring of new employees. Realistically, a Food Truck owner could spend 5-10 hours each month calculating and running bi-weekly payroll for just a handful of employees.
Profitability By Location: Some Spots are Hot, Some Spots are Not
You're in business for yourself for a number of reasons, but if you're not concerned with the profitability of your business, then you won't be in business for very long. For Food Trucks, it can be easy to create a schedule of events or a menu around what's convenient, but you should also be concerned with whether or not you can turn a profit at that location. Since your costs can vary by location, so will your profit margins. Tracking and calculating these things can become complicated, which is why so many Food Truck owners don't do it, but it can mean the difference between being in business for six months or six years.
"So, what if I don't do things the right way? Does it really matter?"
Ah, the age-old accounting question, which gets asked of me every time a business owner comes to understand how complicated it is to do things the right way.
If you don't calculate your profits, you're likely leaving money on the table or could be positioning yourself to go out of business. These realities are harsh, but not nearly as bad as if you mess up on Sales Tax or Payroll.
If you don't file the required Sales Tax reports, you'll receive a letter assessing the Sales Tax based on the City/County/State's "estimate", which, in my experience, is always significantly more than the actual Sales Tax liability would have been if properly reported by the owner. For example, about a year ago we began working with a new client who had been assessed an $8,500 Sales Tax liability, when really it should have only been about $200. Sometimes we can get the bill adjusted to what the Sales Tax should have actually been if properly reported in the first place, but sometimes the City/County/State will insist the business owner pay the amount that they have assessed. Ouch!!!
Finally, messing up your Payroll can be the worst of the 3. If you don't do your payroll properly, you could alienate your employees by messing up their paychecks. You could also end up in trouble with the Department of Labor or the IRS, which, in the best case is expensive and the worst case is criminal. Don't be that guy.
The Solution: Full-Service Food Truck Accounting by Canavan, Syddall & Associates
We've developed an Accounting package specifically for Colorado based Food Truck owners and Mobile Vendors to help alleviate all of the stresses and headaches that I've mentioned above. For a flat-rate monthly fee, we'll take care of your Sales Tax, Payroll, and provide you with monthly financial reports to help you evaluate your profitability. You can even customize the package to include additional services that you find valuable.
Interested? Give us a shout at office@CSAaccounting.com or call or text 303-284-1096.
Know a Food Truck owner? Refer a friend who subscribes to this package and we'll give you a $500 referral bonus once they've been a client for 3 months.