Making decisions when running a restaurant business is not easy, for there is a lot to consider. According to RestaurantEngine.com, startup restaurants often overspend on equipment and renovations. This overspending will then lead to growing debts and compromising other relevant areas. That’s why it’s essential to know how to manage a restaurant’s financial aspect, specifically in recording profit and loss statements.
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What Is a Restaurant Profit and Loss Statement?
Determining profitability is the reason why a restaurant owner should have a profit and loss statement. This statement form will contain the details of the restaurant’s revenue, sales, business ventures, expenses, and insurance costs. Other contents of a restaurant’s profit and loss statement also includes gross profit, income before and after depreciation, and income before and after tax deductions. Without the right calculations, a restaurant won’t be able to identify weak financial areas that need to be urgently addressed.
How To Make a Restaurant Profit and Loss Statement
Getorderly.com reported that some of the reasons why the restaurant failure rate is high involve ignoring costs, prices, and other miscalculations. Therefore, if you are going to open a restaurant, you should not only be a good chef, baker, or an expert in food but also in handling finances. However, don’t worry, for you can keep in mind the following tips as you begin creating your restaurant profit and loss statement:
1. Know Your Financial Priorities
Imagine going to a battle without knowing what to do or how to use a rifle. Obviously, you’ll end up dead in a minute; and that goes the same to your restaurant business if you are not aware of your financial priorities. So, identify what you will be prioritizing in your restaurant business profit and loss statement properly. You can even make a list to categorize and group them with ease, such as whether they fall into the income category, profit, or the loss category.
2. Choose a Period
Ask yourself the timeframe of your profit and loss statement. Are you going to record those from a year, a month, or a few months ago? By choosing a period or timeframe, you’ll be able to have a start and end date for your statement, and you can conduct a profitability comparison easily, too.
3. Collect Information
Gather all financial statement forms and documents that you’ve had in the duration or time-frame that you chose. You can include the previous profit and loss reports if there are any, income reports, tax declarations, etc. Also, if in doubt of the form’s accuracy, ask an accountant to help you understand each of it.
4. Eye on the Details
Profit and loss statements are more than just numbers; they are records of a restaurant’s current financial status. So, you should clarify and label what you are inputting in the form. Aside from that, you must check and ensure that the numbers you are putting match the numbers on your supporting financial statements and documents.
5. Calculate with Precision
When making a restaurant profit and loss statement, addition is not the only mathematical operation that you need to use. You also need to subtract, divide, and learn what sets to calculate first. Also, avoid relying on mental work when calculating. Instead, use calculators or financial worksheets for an easier and more accurate calculation.
What’s one of the benefits of using restaurant profit and loss statements?
Aside from the customization that focuses on your restaurant business’s financial needs, a profit and loss or P&L statement also helps you to identify gaps in your restaurant’s expenses and savings. This way, you can prevent bigger financial damage, especially since you will be able to create a financial plan to address the gaps.
Who can use a restaurant profit and loss statement?
Anyone who manages the financial account, makes the financial decisions, and keeps the financial records of a dining establishment can use a restaurant P&L statement. In specific, if you’re the owner, accountant, or authorized personnel chosen by the owner, then you can use it.
How can I manage my restaurant’s profit and loss?
After creating and filling up a profit and loss statement, you will have to make income statements, compare P&L histories, and consult with a financial analysis expert. But, you must continue recording your P&Ls since you still have to regularly check on the profitability and the state of your restaurant from time to time. Often, restaurant business owners create profit and loss statements monthly, bi-annually, quarterly, and annually.
Is there a format to follow when making a restaurant profit and loss statement?
There’s no required format to follow, but there is a standard format that accountants and business owners use. The format contains tables, or rows and columns, for the data of the restaurant’s profit or income, and loss calculations. Using a table makes it easier to plot, compute, and categorize information.
Establishing and maintaining a restaurant business is not easy. So, if you are going to venture into the restaurant industry, then you must be more than prepared with how you are going to manage and keep the restaurant afloat. Aside from that, you should always have up-to-date documents, especially your profit and loss statements, and other relevant restaurant business forms.
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