I’ve spent years helping retail shops, cafés and small restaurants tidy up their books, and one lesson keeps repeating: small bookkeeping errors quietly eat into profit until a sudden review reveals a worrying hole. In this post I’ll walk you through the most common, sneaky mistakes I see in retail and hospitality businesses, how to spot them quickly, and practical steps to fix them so you stop losing margin every month.
Why these errors matter more than you think
Small businesses in retail and hospitality operate on thin margins. A few misplaced sales entries, uncaptured wastage or unmanaged staff costs can turn a healthy day into a month of losses. I’m not talking about dramatic fraud cases (though I’ve seen those too) — I mean the everyday, human errors that compound: receipts left unrecorded, inventory not matched to sales, or VAT treatment that’s off by a few percent. Over a quarter those mistakes can equal a full week’s payroll.
Top bookkeeping errors that hide profit drains
Here are the mistakes I find most often, and the signs that should make you look closer.
- Sales not reconciled to till or card reports. If your daily takings on your EPOS (like Shopify POS, Square, or Lightspeed) don’t match bank deposits and your accounting sales ledger, you have a problem.
- Unrecorded cash sales. Cash is easy to misplace mentally. It’s also very easy to forget to record. Over time this understates turnover and overstates profitability.
- Inventory shrinkage not tracked. Theft, wastage and spoilage are real in hospitality. If stock reductions aren’t logged, your cost of goods sold (COGS) will look artificially low.
- Purchases coded to the wrong period. Suppliers’ invoices booked in the wrong month skew gross margin and complicate VAT returns.
- Personal or owner expenses recorded as business costs. This inflates expense lines and can create tax headaches.
- Payroll errors: overtime and tips misrecorded. Incorrect wage allocation or missing auto-enrolment adjustments can lead to unexpected liabilities.
- VAT misclassification. Mixed-rate sales (hot takeaway food vs. grocery items) need correct VAT treatment — one slip here costs real money.
How to detect these errors — quick checks I run
When I’m called in to review a small business’ bookkeeping, I start with fast, high-impact checks that reveal whether deeper digging is needed.
- Bank-to-sales reconciliation: Compare daily/weekly EPOS or card machine reports with bank lodgements and your sales ledger. Any discrepancies over three consecutive days trigger a transaction-by-transaction review.
- Cash float audit: Pick random dates and count the actual cash in the till. Match cash sales recorded for those days. If cash recorded is consistently higher than counted, you’ve found leakage.
- Inventory variance analysis: Compare theoretical COGS (opening stock + purchases - closing stock) with recorded COGS. Varances above 3–5% are common in hospitality but anything above 10% is a red flag.
- Supplier invoice vs purchase ledger: Match a month of supplier statements to purchase entries. Missing invoices or duplicates often appear here.
- VAT spot checks: Pick a week and manually recalculate VAT on mixed-rate sales to ensure the point-of-sale system is tagging items correctly.
Practical fixes you can implement this week
Once you’ve identified where money is leaking, you need fixes that are simple and sustainable. Here are the actions I recommend to clients in retail and hospitality.
- Daily closing routine: Make reconciliation part of the end-of-day checklist. Close the till, reconcile card machine batches to bank lodgements, and save a PDF of the EPOS summary. It takes 10–15 minutes and dramatically reduces errors.
- Automate where possible: Use integrations between your EPOS and accounting software. Xero, QuickBooks Online and Sage all have apps (or partner apps like Zapier or A2X) that import sales and map them to the correct nominal codes and VAT rates.
- Implement a petty cash log: For cash payments, require a signed petty cash voucher with a receipt. Record petty cash claims weekly in the accounts.
- Inventory controls: Adopt simple stock sheets for high-cost items (e.g. alcohol, meat) and run a weekly count. Consider basic inventory modules in EPOS systems or a separate tool like Unleashed or Vend for tracking.
- Staff training and accountability: Train staff on correct menu coding and void procedures. Require a manager sign-off for voids over a threshold and keep a void log in the EPOS.
- Standardise purchase recording: Use purchase order numbers and require invoices to be emailed to a dedicated inbox (e.g., [email protected]). That reduces missing invoice errors and speeds month-end.
Small checks that save big money
These are quick routines I use to find hidden drains without doing a full forensic review.
- High-value supplier review: Scan payments over a set amount (eg £250) and confirm there’s an invoice and it’s coded to the right cost centre.
- Profit per square metre (retail) or seat (hospitality): Divide sales by space/seat numbers. Sudden drops often tie back to pricing, wastage or unrecorded discounts.
- Compare gross margin by category: Break sales into categories (drinks, food, retail goods). Categories with an unexplained increase in margin usually mean sales are being missed or stock isn't being captured correctly.
When to call in help
Sometimes the books are messy beyond what a few clean-ups can fix. Call me (or your accountant) if you find:
- Recurring unreconciled items older than 30 days
- Inventory shrinkage over 10% without an obvious reason
- VAT mistakes affecting multiple periods
- Payroll liabilities or pension auto-enrolment issues
We’ll prioritise high-risk areas, set straight the accounting records and put in controls so the same problems don’t recur.
Example checklist you can copy
| Daily | Weekly | Monthly |
|---|---|---|
| Close till & save EPOS summary | Reconcile cash takings to recorded sales | Match supplier statements to purchase ledger |
| Check card machine batch vs bank | Stock counts for high-cost items | Run VAT accuracy tests on mixed-rate items |
| Log voids & manager sign-off | Review discounts & promotions | Review payroll & pensions entries |
If you’d like, I can create a tailored checklist for your shop or café based on the EPOS and accounting package you use. Small changes in routines and a couple of automation fixes often recover far more profit than their cost — and they give you peace of mind. Drop me a note via the contact page at https://www.quinnaccountants.co.uk and tell me what system you use; I’ll share a short plan you can implement this month.
