Basic Concepts that Will Help You Run a Profitable F&B Business – Part 1 of 3

Not everyone is trained in accounting or bookkeeping. Or to make sense of Balance Sheets and Profit & Loss Statements. However, knowing the basics of F&B accounting can help you understand your accountant or bookkeeper better and goes a long way to ensuring the success of your business. Here’s concept number 1.

Concept 1: Cost of Goods Sold

Google search throws up heaps of confusing definitions of ‘Cost of Goods Sold’, so we don’t blame you if you don’t fully grasp the concept. 

Simply put, ‘Cost of Goods Sold’ refers to the total cost incurred when making a product for sale. An equivalent is ‘Cost of Sales’ which is the total cost incurred when providing a service.

You can calculate the cost of goods sold the hard way, eg. how many lattes you sold compared to the cost of raw materials to make it. (Note: Cost of goods sold does not include wages or utilities. It only includes the cost of the actual ingredients that make up the dishes or beverages on your menu.)

OR you can calculate the cost of goods sold using your accounting software (we highly recommend Xero, which connects to various apps), which will calculate cost of goods sold based on all expenses, adjusted for opening and closing stock.

Why should you care about cost of goods sold?

Cost of goods sold represent the cost of your food and beverage inventory, which directly ties to the profit you make per plate or cup sold. Keeping close tabs on this number will help you ensure that you have priced your menu correctly, which will ensure that you make a healthy profit on each plate of food or each cup of beverage sold at your restaurant.


Contact us today regarding a fixed monthly fee bookkeeping package that will suit your needs, and more importantly, free up your valuable time so that you can focus on building a profitable F&B business.  

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