How to Boost Your Restaurant’s Profitability Using COGS: What Should Food Cost Be in a Restaurant?

The only way to know if you’re in the red or the black is to keep an accurate account of all money coming and going from your restaurant. This may sound like common sense, but many financial anxieties come from a lack of dedication to accurate bookkeeping. Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice.

What is the difference between bookkeeping and accounting?

The content on this website is provided “as is;” no representations are made that the content is error-free. Beyond rent and staff salaries, the restaurant industry battles hidden costs—especially food waste. The New Mexico Restaurant Association highlights this as a major pitfall. Don’t fall into the trap of overstaffing “just in case” or cutting too lean.

How to Calculate Restaurant Performance and Financial Metrics

Fine dining restaurants often have higher food costs because they use premium ingredients and offer more elaborate menu items. In contrast, fast food restaurants have lower food costs due to simpler menus and bulk purchasing. Labor is typically one of the biggest line items on the budget, so getting staffing levels right is absolutely essential. Effective restaurant inventory management involves meticulously tracking and monitoring the flow of ingredients from procurement all the wat to consumption. It entails a comprehensive understanding of what ingredients are received, how they are utilized in preparation, and what remains in stock.

How Should You Record Food Purchases?

Since accounting is complicated and the restaurant industry is unique, the professional you choose should be an expert in both. Restaurant owners who are just getting started may feel the need to seek out restaurant accountants. But you can manage your own restaurant accounting services with the right software.

Monitor your cash flow, which refers to the amount of cash coming in versus the amount of cash going out of your business on a daily, weekly, and monthly basis. Track your consumables and supplies to calculate the value of the food you have in stock and determine the average daily inventory costs. Payroll in the restaurant industry can be challenging as tracking employee hours is complex.

From there, build an staffing model that aligns labor levels with predicted demands and service needs throughout each shift. Use scheduled hours judiciously – staff up during peak periods and scale back during slower times. Cross-train employees to be flexible across multiple roles and stations.

What Is A Good Food Cost Percentage?

In general, you want to make sure that your chart of accounts is set up in a way that makes it easy for you to see how profitable each part of your restaurant is and where you should focus more resources. Hence, the gross profit margin is expressed as a percentage, the percentage being the amount of revenue your restaurant made over your cost of goods sold. Bookkeeping, however, how to do bookkeeping for a restaurant is used to summarize all financial transactions into the three main categories which are assets, liabilities, and owner’s equity. Accounting is necessary to make sure that you have records of all important financial data. Not only does it facilitate essential functions like tax paying, but it also provides essential insights into how your business is performing.

• Accounting ratios are used by accountants to help them monitor the financial performance of businesses.
• Payroll in the restaurant industry can be challenging as tracking employee hours is complex.
• The right tools and partners in place make it easier to focus on building great customer relationships to keep your restaurant running for years to come.
• Join a restaurant management group like restaurantowner.com, and learn what is working in the group’s restaurants and what owners are having problems with.
• When you have the accounting tools that FreshBooks offers, you won’t need to spend money on accounting firms.
• While accounting for restaurants can be arduous, it doesn’t have to be a daily struggle if you choose the right approaches.

“If your POS isn’t configured for 3rd party delivery apps, you risk recording revenue multiple times. Input 3rd party orders received at your restaurant directly into the POS – this establishes an official record of all sales, whether they originate from your restaurant or third-party apps. Owning a bar or restaurant is an exciting way to pursue your passion and create an independent income. That said, running a restaurant or bar is fast-paced, demanding, and full of challenges that require thinking on your toes. As the primary source for all the revenue and all of the cash, you want everything to go through there as much as possible so that nothing slips through the cracks and your data is as accurate as it can be. The seamless integration between Toast, xtraCHEF, and your restaurant accounting platform can unlock untold efficiencies and automation.