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  • Posted by: Dante Odoni
Restaurant Accounting 101: How to Keep Your Business Profitable - Odoni Partners LLC - Certified Public Accountants

Restaurant Accounting 101: How to Keep Your Business Profitable

Running a restaurant is a big deal. From menu planning to customer service to ensuring your employees are well paid and happy, living life in the restauranteur lane can be stressful. Add accounting and monthly sales figures into the mix, and you’ve got a recipe for a meltdown. That is if you don’t know how to make accounting work for you. In this article, we’ll take a quick look at the top five pieces of accounting know-how to keep your restaurant running in the green.

1. List it All

Create an exhaustive list which you can use to track every expense. This is called a Chart of Accounts. This chart places every piece of financial information you have into one of five categories: assets, liabilities, revenue, expenses, and equity. You will put payroll, restaurant supplies, and daily sales into one of those categories. Using this chart will help you stay on top of every dollar that comes into and goes out of your restaurant.

2. Know What You’re Selling

Determining the cost of goods you’ve sold is an essential factor in keeping your restaurant profitable. There are two ways to calculate the cost of goods sold.

– You can take the total number of a menu item sold and multiply it times the cost to make it.

– You can compare your inventory at the beginning of the week to inventory at the end of the week and subtract the two numbers.
Knowing this number helps ensure pricing is spot on to make a profit on each plate sold.

You can also use these numbers to figure out your percentage of sales in comparison to cost. By taking your food costs and dividing it by food sales, then multiplying by 100%, you’ll get your ratio.

For example: $15,000 (cost) /$45,000 (sales) x 100% = 33.3%
Most restaurants sit in the range of 26-36%.

3. Figure Out Your Big Expenses

Labor costs = Payroll, payroll tax, and employee benefits for everyone involved in operating your restaurant from front to back house. Labor includes cooks, busboys, servers, hosts, dishwashers, your accountant, managers, and you if you get a salary.

Occupancy expenses = Rent, property tax, utilities, and property insurance.

Operating expenses = Everything else. Power, water, gas, napkins, advertising, new knives, chefs aprons, a new chalkboard sign for your menu, you name it.

4. Learn Where to Adjust

When you combine your cost of goods sold with your labor costs, you get your prime cost. This is the number to look at when you want to improve your profit. Your other costs are less adjustable, but expenses in the prime cost category, including labor and price per meal, are where you can make adjustments.

5. Look Into the Future

By keeping a close eye on all of your numbers, you’ll be able to produce reports week by week. With time and consistency, you’ll start to see your regular flow of business. Use your accounting so you can look ahead and adjust for holidays, slow seasons, and times of the year you historically perform well as a restaurant.