Does your restaurant compile a monthly P&L Statement?
If it doesn’t, it should. Here’s why:
A profit and loss statement, or P&L, is a basic income statement that serves as a financial report card for your business. It is an important tool in measuring cash flow and controlling costs. The more frequent and more detailed the statement, the more accurate picture of your business you will have.
Here are 4 important measures that a monthly P&L Statement exposes:
1. Cash Flow – by recording and categorizing sales on a monthly basis, you can quickly identify trends in customer demands or the result of a marketing campaign. Knowing the week over week sales permits you to spot areas that require attention to build or to prevent potential issues from becoming problems.
2. Inventory Control – a weekly cost reading of inventory bought and/or held of all items sold, consumed or used allows you to react to rising costs by adjusting menu offerings and portioning. It also permits adjusting purchasing practices in relation to your cash flow and business volume. The restaurant must purchase enough products to serve customers without running out and without having too much left over going bad on the shelves.
3. Cost Control – detailed tracking of fixed and variable costs, such as payroll, operating expenses and occupancy costs can highlight wasted resources. Labor cost is often one of the largest expenses, but is also one of the most easily controlled (how many workers do you need on a Tuesday night while maintaining high-level customer service?). Tracking efficient use of all resources minimizes unnecessary expense.
4. Profit Margins – the most important piece of your P&L will be the end results. What is actually left over from your sales, once all your expenses are deducted from them? You’re in business to make a profit and if you are not in any given week, you need to consider making changes to your business.
Knowing this information in nearly real time allows you the best opportunity to effectively manage your business for profit. A weekly review allows you to be more nimble and flexible in making business decisions in a timely manner and know their impact on the bottom line.
Every business will vary based on product offerings. Don’t know where to begin? 4Q Consulting, LLC can create customized tracking systems for your business. Give us a call today for a free consultation.
All original content copyright Noelle E. Ifshin, 2012-2013.