Common Pitfalls to Avoid When Managing a House Account for a Family Style Restaurant
House accounts have become a popular form of customer loyalty programs for family style restaurants, but managing them can be complicated for restaurant owners. With the proper guidance and understanding of the unique rules and regulations that must be followed, however, a restaurant owner can make running their house account an efficient, successful endeavor.
Understanding the Different Types of House Accounts
There are two main types of house accounts that a family style restaurant can offer its customers. The first is a revolving credit account, which allows the customer to accumulate charges up to a certain dollar amount. They can then pay it off in installments or with one lump sum payment. The second is a prepaid revolving account, which requires customers to prepay money upfront and use it to pay towards their accumulated charges. This type of account affords customers a certain level of control over their spending.
House accounts can be beneficial for customers who frequent the same restaurant often, as they can save time and money by not having to pay for each meal separately. Additionally, house accounts can help restaurants build loyalty with their customers, as they can offer discounts or other incentives to those who use them. Finally, house accounts can help restaurants better manage their finances, as they can track customer spending and ensure that payments are made on time.
Establishing a System for Tracking and Monitoring House Accounts
Once the type of house accounts have been decided upon, the restaurant owner must put in place a system for tracking and monitoring these accounts. This system should include the customer's name and contact information, the terms of their agreement (if any), their current balance, and any past due invoices or transactions. This information should be collected and stored in one easily accessible place, such as an online customer relationship management (CRM) system.
The CRM system should be regularly updated with new information, and the restaurant owner should also set up a system for sending out reminders to customers when their accounts are past due. This will help ensure that customers are aware of their account status and can take action to keep their accounts in good standing. Additionally, the restaurant owner should also set up a system for tracking payments and deposits, so that they can easily keep track of their house accounts.
Setting Clear Guidelines and Expectations for House Account Users
In order to ensure the smooth running of a house account, it is essential that customers understand the expectations associated with their account. This can include how payments are to be made, when they are due, how the account balance will be managed, the consequences of failing to adhere to the terms and conditions of their agreement, and any other pertinent information that may be relevant. Having all this information clearly communicated to customers upfront will help to prevent disputes or misunderstandings regarding their account.
It is also important to provide customers with a clear understanding of the customer service they can expect from the house account. This includes the availability of customer service representatives, the methods of communication available, and the expected response times. Providing customers with this information will help to ensure that they are able to get the help they need in a timely manner, and that their questions and concerns are addressed in a satisfactory manner.
Understanding the Costs and Benefits of Offering House Accounts
Offering house accounts can be both costly and beneficial for family style restaurants. On the cost side, restaurant owners will need to consider expenses associated with collecting payments, processing payments, tracking accounts, and providing customer service. On the benefit side, house accounts can lead to increased customer loyalty and improved customer satisfaction.
In addition, house accounts can help to streamline the payment process for customers, as they can simply provide their account information to the restaurant and their payment will be processed quickly and securely. This can help to reduce wait times and improve the overall customer experience. Furthermore, house accounts can help to reduce the amount of cash transactions, which can help to reduce the risk of theft and fraud.
Assessing Risk When Extending Credit Through House Accounts
Though offering house accounts can generate great rewards for a restaurant, there is also associated risk when extending credit through these accounts. To minimize any potential losses, it is essential that a restaurant do their due diligence in advance by carefully selecting their customers and evaluating any credit risk involved with each account. The restaurant should also collect personal guarantees from customers when necessary and require all new customers to submit credit applications.
In addition, it is important to establish a clear payment policy and communicate it to customers. This policy should include payment terms, late payment fees, and any other relevant information. It is also important to monitor customer accounts regularly to ensure that payments are being made on time. If a customer is consistently late on payments, the restaurant should take appropriate action to protect their interests.
Developing Policies to Address Late Payments or Outstanding Balances
In order to protect their business, the owners of a family style restaurant should develop clear policies that address late payments or outstanding balances. Those policies should include ways to collect on overdue amounts, how to handle disputed payments, what actions they will take in the case of persistent delinquency or fraud, and other scenarios that may arise due to customer misuse.
The restaurant owners should also consider the impact of late payments on their business. They should consider the cost of collection, the potential for bad debt, and the impact on their customer relationships. Additionally, they should consider the legal implications of their policies, such as the need to comply with applicable laws and regulations. By taking these factors into account, the restaurant owners can ensure that their policies are effective and compliant.
Properly Managing Overdrafts and Unauthorized Transactions
It is not uncommon for house accounts to experience overdrafts or unauthorized transactions. To protect the restaurant from any potential financial loss associated with those activities, it is important that proper bookkeeping procedures and checks and balances are established prior to agreeing on any house account terms. All relevant rules and regulations should also be reviewed on a regular basis in order to stay abreast of any changes.
It is also important to ensure that all staff members are aware of the proper procedures for handling overdrafts and unauthorized transactions. This includes having a clear understanding of the process for reporting any suspicious activity, as well as the steps to take in order to prevent any further losses. Additionally, it is important to have a system in place for tracking and monitoring any overdrafts or unauthorized transactions that occur, in order to ensure that the restaurant is not exposed to any unnecessary financial risks.
Ensuring Compliance with Tax Laws and Regulations
Tax laws and regulations must be taken into account when managing a house account for a family style restaurant. This includes ensuring that appropriate sales taxes are applied for certain items, filing all necessary paperwork, and accurately reporting any income generated from the accounts. If a restaurant does not adhere to federal, state, and local regulations then they may have to pay substantial fines.
Avoiding Fraudulent Activity in House Accounts
Due to the nature of house accounts, there is an increased risk for fraudulent activity. To protect their business from this kind of conduct, restaurant owners must take the necessary steps to ensure their accounts are secure. This includes properly verifying the identity of all customers, setting up robust internal controls, using encryption technologies, routinely monitoring activity on all accounts, and promptly addressing any suspicious activity.
Managing house accounts for a family style restaurant can be both rewarding and challenging. By employing best practices and following the guidelines outlined above, restaurant owners can ensure they properly manage their house accounts while avoiding some of the common pitfalls that may arise.