In this day and age, restaurant owners and managers are responsible for a lot more than simply cooking and serving good food. Running a restaurant business means you need a solid understanding of the wider restaurant industry and business acumen to help you manage your restaurant’s financial health. Knowing how to write and understand a restaurant P&L (profit and loss) sheet is crucial.
But what is a restaurant P&L sheet, and how can you create one from your financial statements? In this article, we’ll answer these questions and more with a simple guide to restaurant P&L reporting and bookkeeping tips. By learning more about restaurant P&L statements, you can stay in control of your finances and gain clarity about your business operations.
A restaurant profit and loss statement, also known as a restaurant P&L statement, is a financial report or income statement that gives an overview of your total sales and profit margins over a set period of time.
A detailed restaurant P&L statement can give a restaurant management team a thorough understanding of their cash flow and net income over a month, quarter, or year.
It can also help managers make decisions about food costs and menu pricing by giving insight into food sales, overhead costs, and total revenues. A restaurant owner can use a P&L statement to monitor controllable expenses and ensure they’re not overspending.
In short, a restaurant P&L statement is a restaurant income statement detailing a business’s total costs and profits.
Restaurant P&L statements can vary depending on your precise business needs. However, most business owners follow a similar template, with some critical metrics for calculating your net profit and gross profit.
Sales data is one of the most critical elements of a restaurant's P&L statement. You’ll need to record every food and beverage sale your business processes.
For most restaurant businesses, this is the only source of income. However, if you have an additional source of income (for example, if you rent out a function room for a fixed fee), you should include this as a separate line item in your P&L sheet.
Often abbreviated to COGS, the cost of goods sold is the price you pay to produce each menu item (not the amount customers pay — that is your sales data). To calculate your COGS, add your total food and beverage costs, including the price for each inventory item needed to produce a dish or drink.
You can calculate your restaurant labor costs by adding up the total amount of money you spend each month on staffing — the wages and salaries you pay to every member of your front-of-house and back-of-house teams. Remember to include any payroll taxes associated with your staffing so all your labor expenses are accounted for.
You can calculate your labor costs as part of your COGS values or keep them separate — do whatever’s easiest for you or your accounting system. Together, labor costs and COGS are often referred to as a business’s “prime costs.” Prime costs can help you calculate whether you’ll make a profit or loss on a menu item — your prime cost should be lower than the price customers pay for a dish or drink.
A business’s gross profit shows the amount of money it earns on each item sold. To calculate it, subtract your total prime costs (labor costs and COGS) from your total sales data for a set period.
Operating expenses are usually calculated separately from prime costs because they aren’t included in your gross profit. Restaurant operating costs can include the following:
Occupancy expenses, such as real estate, insurance costs, utilities and bills, licensing fees, and waste removal costs
Equipment purchases
Taxes
Restaurant marketing and advertising costs
Anything you need to spend money on to run your business that isn’t directly associated with producing or serving food can be an operating expense.
A business’s net profit is arguably the most important piece of data on a restaurant’s P&L statement. It’s often called the “bottom line” of a business — usually because it’s literally at the bottom of a profit and loss sheet.
Your net profit or net income is the total amount of money your business makes in a given period. To calculate it, subtract your operating costs from your gross profit. This will show you your business’s total profits for the month, quarter, or year.
Writing a restaurant P&L statement might sound complicated, but there are several tools that can make it quick and easy to calculate your bottom line and better understand your restaurant finances:
Point-of-sale (POS) software: One of the main benefits of a POS system is that it automatically collects and collates sales data. You can synchronize it with inventory management systems to record the precise cost of producing each item (the COGS data), meaning you don’t have to calculate your gross profit manually.
Self-service devices: If you run a self-service restaurant, you might think it’s harder to keep track of your sales because your staffers won’t be aware of each transaction. In fact, the opposite is true — self-service apps like KioskBuddy automatically record each sale and provide an analytics dashboard. It also reports all transactions to the Square Dashboard, which has even more advanced reporting capabilities.
Google Sheets or Microsoft Excel: Many business owners use spreadsheets for their P&L statements. Creating a balance sheet in Excel or Google Sheets is easy, but you can also download a template (or follow the one provided below). Simply update it each month with the most relevant sales and expenses data.
Restaurant accounting software: If you’re not a fan of numbers, you might prefer to use bookkeeping software to create a P&L sheet for you. All you need to do is input your sales data and expenses. The software can produce the P&L statement for you.
Below, we’ve provided a simple template structure to create your monthly restaurant P&L statement. The values included are purely illustrative.
Creating and reading a restaurant P&L sheet can be simple with the right tools and know-how. Keep track of your sales data and record all expenses, then use dedicated accounting software or a simple spreadsheet to produce up-to-date profit and loss statements showing your bottom line.
If you use self-service kiosks, KioskBuddy can make it simpler than ever to keep an eye on your sales data. It has a real-time analytics dashboard that lets you see and export live sales information with just a few taps.
Sign up for KioskBuddy to set up an easy-to-use self-service system in your restaurant.