Service charge and tips in a restaurant: how to calculate and record them
A service charge is the restaurant’s money. A tip is the staff’s money passing through the restaurant’s till. Mixing them inflates revenue on paper and muddles what you owe your team.
In short: a service charge is an amount the restaurant imposes; it appears as a line on the bill and is the restaurant’s revenue. A tip is an amount the guest leaves voluntarily for staff, and it is not revenue: it is something the restaurant owes its employees until it hands it over. So the first is recorded in a revenue account, and the second in a liability account.
Service charge: rules you set
- Percentage or fixed? A percentage (10%, say) is usual for dine-in. A fixed amount suits a token charge per table.
- On which order types? Normally on dine-in only, not takeaway or delivery. A guest who collects and leaves received no table service.
- Transparency: print it on the menu. A charge that appears out of nowhere on the bill costs you a guest.
- Exceptions: a special guest, or a complaint? A manager must be able to remove it from one bill, with a record of who did.
A worked example
| Line | Amount |
|---|---|
| Table items | ₪200.00 |
| Service charge 10% | ₪20.00 |
| Total due | ₪220.00 |
| Guest paid | ₪250.00 and said “keep the change” |
| Tip | ₪30.00 |
The restaurant’s revenue from this table is ₪220, not ₪250. The thirty is not yours. (If your prices include VAT, the tax is inside these amounts, and the service charge is taxable like any other line on the bill.)
How are they recorded in the books?
| Line | Account | Nature |
|---|---|---|
| Item sales | Sales | Revenue |
| Service charge | Service charge revenue | Revenue — separate, so you know its size |
| Tip | Tips payable to staff | Liability — cleared when handed over |
Keeping service charge in its own account answers a simple question: how much does it bring in each month? Keeping tips separate prevents three mistakes: inflated revenue, paying tax on money that is not yours, and an argument with staff over “how much were this week’s tips?”.
Cash tips and card tips
Cash left on the table may never pass through the till, and recording it is optional. But a tip that arrives inside a card payment, or as “keep the change” from a note that went into the drawer, must be recorded; otherwise the drawer shows a surplus at the shift count and nobody knows why.
Distributing tips
How you distribute is for you and your team to decide: each waiter keeps their own, or a shared pool split equally or by points that include the kitchen. Whichever it is, you need a trustworthy number to start from: total tips for the period, and who received them. That is what a tips report gives you.
In Sahl
In Sahl’s restaurant module the service charge is defined as a percentage or an amount, you choose the order types it applies to, and it can be removed from a bill by someone with permission. It enters the bill as an ordinary line, so it passes through the same tax calculation, and its revenue goes to a “service charge revenue” account. A tip is recorded with its payment and posted to “tips payable to staff”, with its own report. When you split the bill, the charge is spread across the shares in proportion.
Frequently asked questions
What is the difference between a service charge and a tip?
A service charge is imposed by the restaurant, appears on the bill and is its revenue. A tip is left voluntarily by the guest for staff, and is something the restaurant owes them, not revenue.
Is a service charge applied to takeaway orders?
Usually not, since it pays for table service. A good system lets you choose which order types it applies to.
Is a tip taxed as revenue?
A voluntary tip is not the restaurant’s revenue, which is why it is recorded as a liability to staff. For tax detail specific to your situation, ask your accountant.