Business Insights

Profits and Loss: The P&L Story

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Income and Expenses

Two letters tell the tale of your business success: P&L, aka “profit and loss.” Generating this kind of information, or a document that has your operational income and expenses organized in a way that makes sense, is crucial to knowing where your restaurant currently stands – and where it can go next.

Financial Accuracy

Let’s start by saying that Quicken and other accounting software P&Ls are not operational P&Ls. So make sure that the P&L being generated by you, your accountant or bookkeeper has meaning specifically to your business model. As in, keeping overhead and other non-prime expenses separate from food and beverage expenses. In the end, your numbers person should be delivering organized financial data to accurately assess circumstances and steer the business. And that means being specific.

Invoices and Inventory

Try coding your invoices and costs. Instead of just one big block labeled “food expenses,” break invoices and inventory into meaningful categories. Examples: Beef, Chicken, Dry Goods, Dairy and Produce. This way you can see which items or relatable categories specifically drive the numbers, helping you drill down to where you can or should cut costs. This kind of tracking can also include delineating departments, such as Labor, Management, FOH, Security, Bar, BOH and Bussers. Of course, line items such as property taxes/ mortgage or rent, interest, insurance, utilities, equipment repair and waste removal should factor in. They all count!

Business Divisions

Treat catering like a division of your regular business, and report catering income and expenses accordingly, on its own. Do you have overlapping staff or food and beverage items between the two profit centers? Allocate a proportion of those costs to the catering side of your business as appropriate. Separation also helps because of the typical scenario with catering: deposit vs. final payment. You’ll have a better handle on what has been paid and what is owed.

Customer Interaction and Orders

Other useful metrics include how much of your income comes via online ordering, or how many burgers go out the door as takeaway. This knowledge is valuable beyond the sense of profit and loss: It delineates the ways customers interact with you, allowing you to allocate resources to accommodate and thus increase the customer satisfaction those measurements represent.

Tips on Tips

Tips & taxes are a dual responsibility of you and your servers; make sure you know the law and how it affects your P&L Promotions & comps also affect your P&L; include them in a separate accounting.

Manage Percents

• List every category expense as a percent of sales.
• Tracking these percentages over time helps generate category norms, also known as budgets!
• With established budgets, even incremental improvements are easier to see and achieve.

Manage Percents

Start planning for next year NOW!

  • Take a look at bottom-line profits and losses and work backwards into the number that you want.
  • For example, if you’re pushing for higher sales, consider ways to improve server training, expand your operation or strengthen your marketing effort.
  • If lower labor costs is your must-do, figure out how many hours you’re over target and work with managers to aim for new goals.
  • Once goals are set, determine how many more guests you need (based on check average) – each week, each day, each lunch period, etc. – to hit your targets.
  • Last but not least, get more great business advice from industry experts by contacting your Shamrock Foods Sales Representative.

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