This episode covers the fundamentals around how a profit and loss statement works and how a chef can use it as an operational tool and use it to dig deeper and have confidence in the numbers.

Show Notes

  1. What does the P&L do
    1. It reports sales and expenses
      1. Not the actual cash but commitments either coming in and going out
    2. Where do the numbers come from?
      1. Sales – cash, credit cards, client invoices
      2. Expenses – bills and invoices posted during the period,
        1. Invoice date determines when the charge is reported
      3. Restaurant p&ls generally have five main sections
        1. Sales
        2. Cost of Goods – food & beverage (usually consumables but some restaurants consider paper cogs usually fast food – burger wrapper, soda cups)
        3. Labor (not just payroll but salaries, taxes & benefits)
        4. Operating Expenses
        5. Occupancy
      4. Pro tip, most accounting programs allow you to click on the dollars (food cost) and see a detailed report of every transaction.
        1. Example – main line vendor sells dairy, meat, grocery, paper, chemicals. You can see if only the food on the invoice.
    3. EBITDA
      1. Earnings Before Interest Taxes Depreciation and Amortization
      2. More numbers below this line but you don’t need to worry unless you own the place.
      3. Basically how much the sales cost to execute
        1. Sales – Cost = profit or (loss)
        2. Did you make or lose money?
    4. Problems with P&Ls.
      1. Bookkeepers make mistakes
        1. Don’t take it personally and don’t make assumptions about whether or not it is deliberate
        2. If you don’t understand how it works you can’t spot the mistakes
      2. By itself, it can’t tell you where you are bleeding.
      3. You have to have something to compare it to.
        1. Usually a budget or last year’s sales.
        2. Know your Industry standard, are you a pasta joint, steak house, seafood house?
        3. Variance means the difference between two compared numbers
          1. Actual food cost $12,000 or %30
          2. Budgeted food cost $10,000 or 25%
          3. Variance $2,000 or 5%
      4. P&Ls usually¬†aren’t¬†completed until one to two weeks after the end of the period.
        1. By then you are half way through the next period and its too late to react
        2. This has given rise to flash reports & weekly inventory
    5. It’s just a reporting tool
      1. controlling costs starts with
        1. Charging the right price
        2. Purchasing effectively
        3. Not wasting or losing the product
        4. Performance standards
          1. if its good enough for the food, its good enough for your operations
    6. Next week – charging the right price.

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