Running a restaurant comes with many moving parts, from managing staff and inventory to ensuring customers are satisfied. But one of the most critical aspects of maintaining a successful restaurant is managing the financials, especially the restaurant profit and loss statement. This document is the foundation of your financial health—it shows exactly how much money your restaurant is making (or losing) over a specific period.
Understanding how to calculate a restaurant profit and loss statement (P&L) can be overwhelming, but it doesn’t have to be. By mastering this financial tool, you can gain insights into where your restaurant is thriving and where improvements are needed. However, calculating and maintaining this statement takes time—something most restaurant owners don’t have in abundance. That’s why outsourcing this task can give you the freedom to focus on what matters most: your customers and your food.
At NorthStar Bookkeeping, we specialize in helping restaurant owners like you manage their finances with ease. Let’s break down how to calculate a P&L for your restaurant and why outsourcing this vital task might be the best decision for your business.
What is a Restaurant Profit and Loss Statement?
A restaurant profit and loss statement is a financial report that summarizes the revenues, costs, and expenses your restaurant has incurred over a specific time—usually monthly or quarterly. It helps you understand how much money you’re making, where you’re spending too much, and how your restaurant’s financial health stacks up.
The P&L statement is broken down into three main categories:
- Revenue: This is the total income generated by your restaurant, including food and beverage sales, catering, or any other services you offer.
- Cost of Goods Sold (COGS): These are the direct costs associated with producing your restaurant’s food and beverages. It includes ingredients, packaging, and supplies.
- Operating Expenses: These cover everything from labor and rent to utilities, marketing, and insurance.
By comparing your revenue to your expenses, the P&L shows whether your restaurant is making a profit or running at a loss.
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How to Calculate Your Restaurant Profit and Loss Statement
Calculating a restaurant profit and loss statement involves gathering data from various aspects of your business and organizing it into a clear financial snapshot. Here’s how to do it:
Step 1: Calculate Your Revenue
Start by adding up all the revenue your restaurant has generated during the reporting period. This includes sales from food, beverages, and any additional services like catering or delivery. Be sure to track all revenue streams separately to get a detailed look at where your income is coming from.
Step 2: Calculate Your Cost of Goods Sold (COGS)
Next, calculate your cost of goods sold. This is the direct cost associated with producing your menu items. For example, if your restaurant serves pizza, the COGS includes the cost of dough, cheese, toppings, and packaging.
To calculate COGS:
COGS = Beginning Inventory + Purchases – Ending Inventory
This formula ensures that you’re accounting for the ingredients you started with, the ones you purchased during the period, and those that remain at the end.
Step 3: Calculate Gross Profit
Once you have your total revenue and COGS, subtract the COGS from your revenue to calculate your gross profit:
Gross Profit = Total Revenue – COGS
Your gross profit tells you how much money you’re making before accounting for operating expenses. A lower-than-expected gross profit can indicate issues with food waste, portion control, or overbuying.
Step 4: Add Operating Expenses
Operating expenses cover everything from labor (wages, benefits, taxes) to rent, utilities, insurance, marketing, and equipment maintenance. Be sure to categorize these expenses to get a clear understanding of where your money is going.
Some of the largest expenses for restaurants are labor and rent. According to the National Restaurant Association, labor costs typically account for 30% of a restaurant’s revenue, while rent and utilities should be around 6–10%. Keeping these benchmarks in mind can help you spot issues in your financials.
Step 5: Calculate Net Profit
Finally, subtract your operating expenses from your gross profit to arrive at your net profit:
Net Profit = Gross Profit – Operating Expenses
Your net profit is the amount of money your restaurant has earned after accounting for all expenses. If this number is negative, it’s time to identify areas where you can reduce costs or increase revenue.
Common Mistakes Restaurant Owners Make When Calculating P&L
One of the biggest mistakes restaurant owners make is not updating their profit and loss statement regularly. Waiting until the end of the quarter—or worse, the end of the year—can leave you with limited options to correct course. It’s important to review your P&L monthly to catch financial issues early.
Another common issue is underestimating expenses or failing to categorize them correctly. For example, not properly allocating labor costs or not factoring in hidden costs like delivery fees and credit card processing charges can skew your understanding of profitability.
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“Many restaurant owners assume that their bottom line will speak for itself, but without an accurate P&L, it’s impossible to know where improvements are needed. A properly managed P&L helps restaurant owners thrive.” – Heather Kirstein, Co-Owner, NorthStar Bookkeeping
Should You Outsource Your Restaurant Bookkeeping?
As a restaurant owner, your priority should be running your business—not getting bogged down in financial spreadsheets. Managing the financials of a restaurant is complex, and without expert guidance, it’s easy to make costly mistakes. That’s why many restaurant owners choose to outsource their bookkeeping.
Outsourcing your P&L and bookkeeping needs to a professional service like NorthStar Bookkeeping gives you peace of mind. We ensure that your financial records are accurate and up-to-date so you can make informed decisions about your business. With our services, you’ll gain valuable time back to focus on improving your menu, service, and overall customer experience.
Partner With NorthStar Bookkeeping
A well-maintained restaurant profit and loss statement is crucial to the success of your business. It provides insights into your financial health, helps you control costs, and reveals areas where your restaurant can improve. However, calculating and maintaining these financial statements is time-consuming and complex. By outsourcing your bookkeeping to NorthStar Bookkeeping, you can rest assured that your P&L is in expert hands.
With our team of seasoned professionals, we’ll help you stay on top of your finances and avoid costly mistakes. Ready to take control of your restaurant’s financial health? Contact NorthStar Bookkeeping for a consultation today.