What the Heck Are General Ledger Codes, Anyway?
We talk about General Ledger codes, or GL codes, all the time at xtraCHEF since they play such an important part in restaurant accounting best practices.
But those of you who operate small businesses or aren’t directly managing your restaurant’s finances may find yourself thinking, “What the heck is a General Ledger code, anyway?”
Understanding GL codes is important to anyone in the industry who wants to increase financial efficiency and drive down food costs. So today, we’ll cover exactly what General Ledger codes are, how they help accountants and food costs, and how best to implement them at your restaurant.
Let’s get started!
General Ledger codes, explained
To begin with the basics, a General Ledger is used as the source of truth for all points of accounting. It tracks every transaction made during the lifespan of a company. In restaurants or restaurant groups, the General Ledger would include things like vendor purchases, labor expenses, and daily sales.
Chances are, you have so many transactions going into your General Ledger that it’s hard to keep track of all of them as individual line items. This is where GL codes come into play. The codes are created by business owners or accountants in order to categorize transactions and make the full ledger searchable.
Codes can be either numeric or descriptive, depending on the requirements of the accounting system or software that’s used—there is no right or wrong way to implement them, although numeric codes are considered the best practice for coding the General Ledger.
GL codes are usually kept as broad as possible to keep the General Ledger “clean,” or neatly organized and audit-ready.
Why General Ledger codes are important for restaurants
GL codes offer a layer of specificity that’s important for both the finance and ops sides of the restaurant business. For accountants, the codes help them become more efficient with bookkeeping work.
Take, for example, a restaurant accountant who needs to reconcile vendor statements against actual invoices. With General Ledger codes, they can easily search through entries with specific criteria rather than examining each entry individually, ultimately saving the restaurant money on labor costs.
Another key benefit that specific GL codes can offer restaurants? Spending insights! In order to reduce prime costs, it’s not enough for restaurants to just remove options from the menu or cut staff hours—they must get food costs under control, too.
However, super-specific General Ledger codes make the books “messy,” which doesn’t help accountants. Plus, ledger entries would still need to be exported from the accounting system in order to really drill into purchasing data, requiring someone with the extra time to do the digging on Excel.
Restaurants can solve this issue with xtraCHEF!
How to implement General Ledger codes at your restaurant
Our AP Management feature not only digitizes invoices, but also automates the GL coding process, which reduces the time spent on repetitive, boring back office work. In our platform, operators or accountants only need to code the line items on an invoice once, and our AI-driven technology will automatically code invoices from that point forward.
xtraCHEF also offers the opportunity for operators to get as specific as possible on their GL codes with categories. Like the codes themselves, categories can be applied to invoices once, and our tech will apply the same logic to future invoices.
Items with a General Ledger code for Food can be categorized on xtraCHEF by the type of Food, like Protein or Produce, and get even more specific from there, like differentiating Ground Beef from Ribeye. The xtraCHEF categories help keep the ledger clean while offering the detailed spending insight that operators need to drive down food costs.
Categories fuel data-driven reports in xtraCHEF that offer an easy-to-read visual representation of where money is being spent. We have several GL-specific reports for accountants and Food Cost Ratio and Price Fluctuation Comparison reports for operators who need easy insight into where their money is going.
These reports are automatically generated! There’s no need to export a thing from our platform, nor is there a need to spend hours pouring over a massive spreadsheet, in order to get important data that can be used to save the business money.
Get the most from your General Ledger codes with xtraCHEF
Thousands of restaurants, independent groups, franchisees, and accountants already use xtraCHEF to automate GL coding and apply specific categories to invoice data. Are you ready to join them?
Request a demo with one of our experts to see exactly how our AP automation works, what General Ledger codes and categories look like on our platform, and how those details fuel other features of our platform, like Inventory Management and Recipe Management, to give operators even more data-driven insights into food cost.
We’re excited to help you get started!