You can’t grow your restaurant if you don’t know where you stand financially. It’s why tracking your earnings and expenses is key. How do you do it? With a restaurant income statement. An income statement can help you see where you’re making money and where you could stand to cut expenses in order to boost profit.
In this post, we’ll talk about the importance of a restaurant income statement, show you how to prepare a restaurant profit and loss statement, and review some of the main expenses you should track.
What is a restaurant P&L statement?
A restaurant P&L statement—also known as a restaurant profit and loss statement or restaurant income statement—is a document that details the money your restaurant makes and spends within a given period (usually one month). In its simplest form, a restaurant income statement shows sales with costs subtracted to determine net profit or loss. But a robust statement shows a detailed breakdown of every line item. It’s important to analyze your profits and losses regularly in order to get a view of how your business is doing, track growth, and make improvements.
How do you prepare a restaurant income statement?
So how do you prepare a restaurant income statement? Restaurant reporting software can eliminate a lot of the grunt work that comes in generating restaurant financial statements. Still, having a general idea of what to track is helpful. To chart profits and losses, you’ll need to know two things: total income and total expenses.
Income refers to the money you make in the restaurant and through catering and private events.
Expenses include everything from rent and insurance to payroll and inventory.
Once you figure out income and expenses, you’ll need to calculate profits. To find that number, subtract expenses from income.
What expenses does a restaurant have?
You can’t track expenses if you don’t know what they are. Hint: there are plenty. When calculating expenses, you need to think about more than just rent and utilities. Also consider inventory, payroll, and repairs. And have you thought about marketing expenses? What about the cost of technology and POS systems? You should factor in all of these when determining expenses.
What does a restaurant profit and loss statement include?
As the name implies, at the most basic level a profit and loss statement shows you profits and losses. But a restaurant income statement is a bit more complex than that. It contains:
- A breakdown of sales
- A breakdown of costs
- A breakdown of labor costs
- A breakdown of operating costs
- A statement of net profit or loss
How much total money came into your restaurant. Be sure to include every revenue channel including catering, takeout, food trucks, private events, and dine-in sales.
A breakdown of the cost of goods sold
The costs of goods sold (COGS) is how much money was spent on the ingredients to make the menu items you sold. In other words, it’s the cost of food inventory used during a given time. Your inventory system should hold these numbers.
The cost of labor
How much did you pay servers, chefs, cashiers, and other employees? You’ll need to factor this in also. Many restaurants find that optimizing the number of workers on staff at any given time is a great way to boost profits. Keep a close eye on your labor costs.
This is what it costs to “keep the lights on.” Operating costs include utilities, repairs, marketing, cleaning supplies, and even rent, taxes, and waste removal.
Net profit and loss
The last section of the income statement is the net profit and loss section. This is why an income statement is often called a profit and loss statement. What you really want to know is if you gained or lost money each month, and that’s what this section is all about. If you’re spending more than you’re making, you’ll need to make some adjustments. And even if you post a positive profit, there’s always room for improvement.
What is an example of a restaurant profit and loss statement?
An example profit and loss statement would contain the elements below. While the table is a generalized view, it gives a concise breakdown.
In a detailed statement, there would be an itemized list for most of the sections below. For instance, sales would be itemized and categorized into food, beverage, merchandise, catering, and any other areas your restaurant sees fit to track for revenue. The same would follow for labor costs and operating expenses. Many restaurants find it helpful to calculate these on a daily and weekly basis and then sum everything up monthly.
The table below is strictly theoretical. Obviously, profits will vary depending on the industry, area, local expenses, and more.
|Net profit or loss||$14,000 profit|
As you can see above, we took total sales ($45,000) and subtracted the sum of total expenses ($31,000) to determine the net net profit.
What is the easiest way to generate a profit and loss statement?
You can try to track restaurant sales and expenses by hand, or you can do it the easy way. The easy way is to upgrade to the right software so you can get on with your day. We’re here to help. If you’re ready to track your profits and losses without all the messy paperwork, reach out. Let’s work together to grow your restaurant.