Owning a running a bar or brewpub calls for you to perform a variety of tasks that you may not have done otherwise. Bookkeeping is one of these jobs that few bar owners relish. But there are a few basic bookkeeping concepts that are important to get right if you want to make money.
Here's an overview of four vital accounting figures you need to understand.
The cost of labor is the cost of hiring and paying employees. This may also include non-payroll items like independent contractors depending on what functions they perform. If labor takes up a large percentage of your gross sales (often if it grows to more than food costs), you may not have enough to purchase other important fixed-cost items or make a small profit.
Analyze labor costs to determine not only how much of your total income is spent on workers, but also how much you spend per hour on wages compared with sales. You may be able to better deploy employees during busier times or perform some work yourself during slower times.
Food and drinks are the biggest expense of most bars and small restaurants. And they should be, since this is what you're selling to the public. But there are two basic numbers that are key to making money. First, you should know how much percentage of gross sales was spent on food and food supplies. This lets you know if you made money as a whole.
You should also work with your bookkeeper to determine how much each dish or category of dishes costs on average. This will help you price things correctly and avoid losing money on specific offerings.
If inventory sits in the back room, you don't make money on it. And, unlike many other retail ventures, bar inventory often expires or becomes unusable. Your bookkeeper can record inventory purchases as well as items going out as "cost of goods sold". This number helps you identify what sells well, what items are less expensive to make, and what things you should keep less of on hand.
The final major part of the bar's financial puzzle is the lease or mortgage cost. This should be a much smaller percentage of sales — often as low as 8% to 10% — to keep things running. If your location is more expensive, you may want to consider either ways to reduce that expense or ways to boost gross income to compensate.
To better understand how to calculate these expenses as well as what you should be spending, work with a professional small business bookkeeper service who has experience in the retail food industry. It may take some time investment, but the result will surely be a noticeable boost in your bottom.