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

As we mentioned in the past 2 blog posts, 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. This month, we share the 3rd concept which we believe is important for you to grasp.

Concept 3: Cost-To-Sales Ratio

When analysing financial reports, an important fact to bear in mind is that there isn’t a single number on its own which can tell you everything you need to know about your business.

However, there is a ratio which is important for your business, and that’s the cost-to-sales ratio. Sometimes it’s referred to as the ‘efficiency ratio’.

Example: Food Cost-to-Sales Ratio = (Food Cost / Food Sales) x 100%

In the F&B industry, this ratio is approximately 1/3 but could range from 26% to 36%.

(Click here for more: Restaurant benchmarks.)

Why should you care about Labour Costs, Occupancy Costs & Operating Expenses?

Calculating Cost-to-Sales Ratio allows you to benchmark your F&B business with other F&B businesses without sacrificing accuracy. It gives you a good indication how your business is really faring.

So instead of seeing (scary!) high overheads/costs or deceptively encouraging high sales revenue on their own, the cost-to-sales ratio will give you a good idea of whether you have kept a tight rein on expenses.


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.  

Basic Concepts that Will Help You Run a Profitable F&B Business – Part 2 of 3

As we mentioned in last month’s blog post, 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. This month, we share the second concept which is of importance to the success of your F&B business.

Concept 2: Labour Costs, Occupancy Costs & Operating Expenses

Labour costs, occupancy costs & operating expenses are various categories of expenses which you need to pay close attention to. 

‘Wait,’ you ask. ‘Why do you use confusing words like ‘labour costs’, ‘occupancy costs’ and ‘operating expenses’. Can’t you refer to them as wages, rental expenses and other expenses?’

Well, firstly, labour costs includes more than wages. It also includes superannuation, work cover, training costs, employee benefits, payroll taxes (if applicable), etc.

Secondly, occupancy costs includes more than rental expenses. It also includes council rates, water rates, utilities and insurance.

Lastly, operating expenses include everything else – from marketing and advertising to serviettes and cutlery.

Why should you care about Labour Costs, Occupancy Costs & Operating Expenses?

Besides cost of goods sold, these are the areas which you have opportunity to cut costs, and increase profits. Admittedly, the occupancy expenses and some operational expenses aren’t as easy to cut back on, and they usually make up a smaller portion of your overall expenses. However, you can keep a lid on costs by ensuring that you review the costs of various supplies and negotiate with your suppliers regularly.

Once you understand where funds are being expended, you can monitor it and make changes whenever necessary in order to save more of it. More savings means more profits in your pocket as the business owner.


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.  

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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