Every restaurant owner wants to streamline restaurant operations to boost revenue and increase profit margins, right? But to really understand how to increase your profits, you need a clear picture of your current financial performance.
This is where a profit and loss statement can help.
By analysing your profit and loss statement, you get a better idea of how you’re performing financially. You can cut costs, identify areas of improvement, and help your restaurant grow.
If you’re new to profit and loss statements, don’t worry. We’ll show you what the statement includes, how to incorporate it into your operations, and how to use it to increase restaurant profits.
What is a restaurant profit and loss statement?
A profit and loss statement is a financial document that outlines your revenue, costs, and expenses. Also known as a P&L or income statement, it covers a specific time period — like your fiscal year or a financial quarter. The statement shows how profitable you’ve been during that period.
If your profits aren’t where they should be, you can use your income statement as a starting point to identify where and how to make changes to boost your revenue.
Pro tip 💡 If you analyse your P&L statement with your balance sheet and cash flow statement, you’ll have an even stronger understanding of your financial health!
What does a restaurant profit and loss statement look like?
A simple profit and loss statement is usually a document that has your total revenue on the top line. Then, it subtracts all the costs of running your restaurant (like rent and bills), plus other operating expenses like staff wages, cost of ingredients, and so on.
It can also include the following information:
- Gross profit (the amount you make after the cost of making and selling your food)
- Gross profit margin
- Interest
- Depreciation
- Insurance
- Income type (dine-in/takeaway)
- Taxes
- Accounting/legal expenses
- Advertising/marketing costs
The bottom line of the statement shows your net income (your earnings after subtracting all outgoing costs).
How to use your P&L statement to increase profit
Let’s take a look at some of the ways you can use your income statement to help your restaurant grow.
Examine every cost
Every cost counts when it comes to profit – especially if you’re running a small restaurant or local eatery. Why? Because if you don’t have the budget and resources of a large chain, you need to be aware of all your costs and how they compare to your revenue.
So when you have your P&L statement in front of you, review all your outgoing costs in detail. Are there things you’re paying for that you don’t need? Can you trim costs anywhere? Could you create new menu items to spread the cost of ingredients?
All of these changes, no matter how small, can bring your costs down and your profit margins up.
Identify gaps in skills
Your P&L statement can be a doorway into staff skills and performance. Imagine that your P&L statement shows a decline in profits from the last quarter. There are no noticeable reasons for this decline, but you’ve noticed that most of your waiting staff are relatively new to hospitality.
So, you invest in some training. That way, your workforce can offer a better experience for customers and be more efficient with their time. The more efficient your operations are, the better chance you have of increasing profits.
Plus, when people have a good experience, they’re more likely to leave a glowing review. And research shows that a higher number of online reviews can influence someone’s decision to visit your restaurant.
After training, you can keep using your income statements to monitor progress and track the impact of staff skills on your financial performance.
Analyse your P&L statement with technology
The right technology can improve your P&L statement analysis. How? By telling you how to be more efficient and productive — and often in real-time.
Take a look at Nory as an example. Our performance management software shows your sales performance every 15 minutes. As a result, you can make quick, informed decisions to increase profits.
You can also use our AI features to predict demand.
If the data shows you have a busy weekend ahead, our software will automatically create inventory order guides so you know what you need in stock. This stops you overspending and reduces your food waste. Plus, it helps you schedule your workforce efficiently to maximise your profits.
Have a chat with us to find out more about how our AI software can streamline your restaurant operations and push your profit margins to the next level!
FAQs
What is a Profit and Loss Statement in a Restaurant Context?
A Profit and Loss (P&L) statement, also known as an income statement, is a financial document that outlines a restaurant’s revenues, costs, and expenses over a specific period, such as a fiscal year or quarter. It shows the profitability of the restaurant during that time.
How Can Analyzing a P&L Statement Improve My Restaurant’s Financial Health?
By closely examining your P&L statement, you can identify areas to cut costs, improve efficiency, and adjust operations to boost revenue and profit margins. It serves as a crucial tool for financial assessment and decision-making.
What Typical Information is Included in a Restaurant’s P&L Statement?
A restaurant’s P&L statement typically includes total revenue, cost of ingredients, staff wages, operating expenses (like rent and bills), gross profit, gross profit margin, interest, depreciation, insurance, income types (dine-in/takeaway), taxes, and advertising/marketing costs.
How Can I Use a P&L Statement to Enhance Staff Performance and Efficiency?
Your P&L statement can highlight areas for staff training and development. For instance, if there’s a decline in profit with no clear external cause, it could indicate a need for staff training to improve customer experience and operational efficiency.
How Can Technology, Like Nory’s Software, Assist in P&L Statement Analysis?
Technology like Nory’s performance management software can enhance P&L analysis by providing real-time sales performance data, predicting demand, assisting in inventory management, and optimizing workforce scheduling. This can lead to more informed decisions, reduced waste, and increased profits.
