Restaurant Bookkeeping: Sales, Payroll, Inventory and Prime Cost Explained

Restaurant Bookkeeping: Sales, Payroll, Inventory and Prime Cost Explained

Restaurant bookkeeping can become complicated quickly.

Money comes in through multiple channels. Suppliers are constantly being paid. Payroll changes every week. Inventory moves daily.

Behind all of it, restaurant owners are trying to answer one important question:

Are we actually making money?

Understanding a few key areas can make restaurant financials much easier to manage.

Sales

Sales are the starting point, but total revenue doesn't tell the whole story.

Restaurant operators may need to account for dine-in sales, takeout, online ordering, delivery platforms, catering, gift cards and other revenue sources.

Understanding where revenue comes from allows operators to compare different parts of the business and identify trends.

Payroll and Labour

Payroll is often one of the largest expenses in hospitality.

But the dollar amount alone isn't particularly useful.

Restaurant owners should understand labour in relation to sales.

If sales increase significantly, labour dollars may naturally increase too. The more useful question is whether labour is growing proportionately.

Tracking labour percentage over time can help identify scheduling issues, overtime and opportunities to better align staffing with business volume.

Inventory

Inventory represents money sitting on your shelves, in your fridges and inside your walk-in.

Without accurate inventory counts, calculating food cost becomes much more difficult.

Purchasing $20,000 of food during a month doesn't necessarily mean you used $20,000.

Some of those products may still be sitting in inventory.

Accurate beginning and ending inventory helps determine what was actually consumed during the period and produces a much more meaningful food-cost calculation.

Food Cost

Food cost is one of the most important metrics in restaurant operations.

When it starts increasing, there can be many possible causes: supplier pricing, waste, portioning, incorrect recipes, inventory problems, theft, menu pricing or purchasing decisions.

Simply knowing that food cost increased isn't enough.

Good financial reporting should help you investigate why.

Prime Cost

Prime cost combines the two major controllable expenses in most restaurants:

Cost of goods sold + labour.

Monitoring these expenses together gives restaurant owners a useful picture of how efficiently the core operation is running.

Changes in prime cost can often reveal problems long before they become obvious on the bank balance.

Your Bookkeeping Should Tell a Story

The purpose of bookkeeping isn't simply to make sure every transaction has somewhere to go.

When restaurant books are properly organized, the numbers begin telling a story about the operation.

At Prime Cost Partners, we provide hospitality-focused bookkeeping and profit-control support for restaurants, cafés, bars and other service businesses.

Our goal is to turn financial information into something operators can actually use.

Because knowing your numbers is important.

Understanding what they're telling you is even better.