What Restaurant Owners Should Look for in a Monthly Profit and Loss Statement

A restaurant profit and loss statement should do more than confirm whether the business made money.

It should help the owner understand where the money came from, where it went, and what needs attention before the next month is over.

Unfortunately, many restaurant owners receive financial statements that are late, confusing, or too general to guide an actual business decision.

A useful restaurant profit and loss statement should clearly show sales, labor, food and beverage costs, operating expenses, and net income. It should also be consistent enough that the owner can compare one month with another.

Start With Total Restaurant Sales

Begin by confirming that the sales reported in the accounting system reasonably match the restaurant’s point of sale reports.

Restaurant revenue may include:

1. Food sales
2. Beer, wine, and liquor sales
3. Coffee or beverage sales
4. Catering revenue
5. Event revenue
6. Merchandise
7. Gift cards
8. Delivery platform sales

Separating major revenue categories makes the report more useful. A restaurant owner should be able to see whether food, beverage, catering, or another part of the business is growing.

Bank deposits should also be reviewed carefully. The amount deposited may be lower than total sales because payment processors deduct fees, tips, refunds, and other amounts before making the deposit.

That difference does not necessarily mean the bookkeeping is wrong, but it should be reconciled and understood.

Review Restaurant Cost of Goods Sold

Cost of goods sold represents the direct cost of producing what the restaurant sells.

Depending on the business, this may include:

1. Food purchases
2. Beer, wine, and liquor
3. Coffee beans
4. Bakery ingredients
5. Packaging
6. Supplies directly connected to sales
7. Inventory adjustments

A rising food or beverage cost percentage can point to vendor price increases, waste, portioning problems, theft, menu pricing issues, or inaccurate bookkeeping.

The numbers become more valuable when they are compared with sales. If food sales increase but food costs increase much faster, the owner should investigate why.

Understand Restaurant Labor Costs

Labor is one of the largest expenses for most hospitality businesses.

A restaurant profit and loss statement should separate labor clearly enough to show what the business is actually spending.

Labor may include:

1. Hourly wages
2. Salaried wages
3. Overtime
4. Employer payroll taxes
5. Workers compensation
6. Employee benefits
7. Payroll processing fees
8. Contract labor when applicable

Owners should compare labor costs with total sales and review changes over time.

A high labor percentage does not automatically mean too many employees were scheduled. It could reflect lower sales, training hours, overtime, management changes, a new location, or payroll expenses being coded incorrectly.

Look for Expenses That Changed Suddenly

Compare the current month with previous months and investigate meaningful changes in:

1. Repairs and maintenance
2. Credit card processing fees
3. Utilities
4. Software subscriptions
5. Marketing
6. Linen and cleaning services
7. Smallwares
8. Insurance
9. Professional services
10. Delivery platform fees

A change may be completely reasonable. The important part is recognizing it early enough to respond.

Check Whether Expenses Are Categorized Consistently

Financial reports become difficult to use when the same expense is categorized differently each month.

For example, a software subscription should not appear under office expenses one month, marketing the next month, and professional services after that.

Consistent restaurant bookkeeping allows owners to compare results over time and makes year end tax preparation easier for the restaurant’s CPA.

Do Not Confuse Cash With Profit

A profitable restaurant can still experience cash flow problems.

Loan payments, equipment purchases, owner distributions, credit card balances, and unpaid vendor bills may not appear on the profit and loss statement in the way an owner expects.

That is why a restaurant owner should not rely on the bank balance or profit and loss statement alone. The balance sheet, outstanding bills, debt obligations, and available cash should also be reviewed.

Questions to Ask Your Restaurant Bookkeeper

1. Are all bank and credit card accounts reconciled?
2. Do sales match the point of sale reports?
3. Are payroll expenses recorded correctly?
4. Are vendor bills current?
5. Are any transactions still uncategorized?
6. Did any expenses change significantly?
7. Are there old balances that need investigation?
8. Is the bookkeeping current enough to support decisions?

A restaurant bookkeeper should be able to explain the numbers in plain language.

Restaurant Bookkeeping Support in Northern California

Fairwell Collective provides restaurant bookkeeping, QuickBooks support, account reconciliations, accounts payable, vendor bill tracking, financial reporting, payroll administration, and sales tax support.

We work with restaurants, cafes, bars, bakeries, wineries, and other hospitality businesses in Auburn, Roseville, Sacramento, and surrounding Northern California communities.

If your financial reports arrive too late or do not give you confidence in the numbers, contact Fairwell Collective to discuss a clearer monthly bookkeeping process.