Keeping track of your restaurant’s earnings and expenses is essential to know if you are making money or losing it. One of the most effective ways to do this is by preparing a profit and loss statement. This report helps you understand your restaurant’s profit, control expenses, and make better financial decisions.
What Is a Profit and Loss Statement?
A profit and loss statement (P&L) is a financial report that shows your total revenue, costs, and net profit over a specific period. It tells you if your restaurant is profitable or not. A well-prepared P&L can help you cut unnecessary expenses and increase your earnings.
The basic formula for a restaurant profit and loss statement is:
Total Revenue – Total Expenses = Net Profit (or Loss)
For example, if your restaurant earns RM100,000 in a month but spends RM80,000 on rent, food, salaries, and other costs, your net profit is RM20,000.
Steps to Create a Profit and Loss Statement
1. Record Your Revenue
Revenue is the total money your restaurant earns from food sales, drinks, catering, and other services. You can get this data from your sales reports or point-of-sale (POS) system.
For example, if you sell RM50,000 worth of food and RM10,000 in drinks in a month, your total revenue is RM60,000.
2. List Your Cost of Goods Sold (COGS)
COGS includes all the costs related to preparing food and drinks, such as ingredients, packaging, and cooking gas. It does not include salaries or rent.
For example, if you spend RM20,000 on ingredients and kitchen supplies, your COGS is RM20,000.
3. Calculate Your Gross Profit
To get your gross profit, subtract the COGS from your total revenue:
Total Revenue – COGS = Gross Profit
If your revenue is RM60,000 and your COGS is RM20,000, your gross profit is RM40,000.
4. Account for Operating Expenses
Operating expenses include rent, salaries, electricity, water, marketing, and other business costs. These are necessary to keep your restaurant running.
For example:
- Rent: RM5,000
- Salaries: RM15,000
- Utilities: RM3,000
- Marketing: RM2,000
- Miscellaneous: RM1,000
Total operating expenses: RM26,000
5. Calculate Net Profit or Loss
To find out how much money you are making, subtract total expenses from gross profit:
Gross Profit – Operating Expenses = Net Profit
If your gross profit is RM40,000 and your total expenses are RM26,000, your net profit is RM14,000. This means your restaurant is making money.
If your expenses are higher than your revenue, you are running at a loss, and you need to find ways to reduce costs or increase sales.
Why a Profit and Loss Statement Is Important
A profit and loss statement gives you a clear picture of your restaurant’s financial health. It helps you identify areas where you are losing money, allowing you to take corrective action before losses pile up. By analyzing this report, you can determine if you need to adjust menu prices to maintain profitability while keeping customers happy.
Managing costs is crucial, especially food and labor expenses, which often make up the largest portion of your budget. A detailed P&L statement helps you track these costs and find ways to reduce waste and improve efficiency. It also improves cash flow management, ensuring you have enough funds to cover expenses and invest in growth.
According to Malaysia’s Department of Statistics, 60% of restaurants close within the first three years due to financial mismanagement. Without a clear financial report, it’s easy to overspend and struggle with cash flow. A well-prepared P&L statement helps you make informed decisions, avoid unnecessary expenses, and ensure your restaurant remains profitable.
Restaurant P&L Example
Here’s a simple restaurant P&L example for a month:
Total Revenue: RM100,000
Cost of Goods Sold (COGS): RM35,000
Gross Profit: RM65,000
Operating Expenses: RM50,000
Net Profit: RM15,000
This example shows that the restaurant is making a profit of RM15,000 after all expenses are deducted.
How Often Should You Prepare a P&L Statement?
It’s best to prepare a P&L statement every month so you can track your financial performance and make necessary changes. Some restaurants do it weekly to stay on top of their cash flow.
Common Mistakes to Avoid
Not Tracking All Expenses
Even small costs can add up over time and reduce your profit. If you don’t track all your expenses, you may be spending more than you think. Keep a proper record of every purchase, including small things like condiments, cleaning supplies, and delivery charges. Using an accounting system or software can help you track these expenses easily.
Ignoring Food Waste
Food waste can increase your cost of goods sold (COGS) and reduce your profit. If too much food is wasted, you are essentially throwing money away. Keep an eye on inventory and portion sizes to reduce waste. Train your staff to store ingredients properly, and monitor expiration dates to prevent spoilage. If you notice frequent leftovers, consider adjusting portion sizes or modifying the menu to minimize waste.
Overlooking Labor Costs
If you are spending too much on staff wages, it can eat into your profits. While it is important to pay fair wages, you need to manage your staff schedule effectively. Monitor your busiest and slowest hours and adjust shifts accordingly. Cross-training employees to handle multiple tasks can also help you reduce labor costs without affecting service quality.
Failing to Adjust Menu Prices
Ingredient costs fluctuate, and if you do not adjust your menu prices accordingly, you could end up making less profit. If the price of essential ingredients increases, consider either raising menu prices slightly or finding alternative suppliers. Regularly reviewing your menu pricing can help you maintain profit margins without surprising your customers with sudden price hikes.
FAQs
- How do I create a P&L for my restaurant?
To create a P&L, record your total revenue, subtract the cost of goods sold to get gross profit, and then deduct operating expenses to find your net profit. Use accounting software or spreadsheets to keep it organized. - What is the easiest way to do a profit and loss statement?
The easiest way is to use EasyEat’s Profit and loss calculator. You will get accurate financial reports for your restaurant that can help you find out if your efforts are in the right direction.
