Let’s make sense of all the Account types and terminology in the previous section by putting together a budget. Budgets come in all shapes and sizes. The more detailed yours is, the better you can see where your money is going.
Once you have all of your expenses added up, you can see what your revenue needs to be to cover these basic expenses. This is your break-even point. If your sales are not meeting your break-even point, then you need to adjust your expenses accordingly or you are losing money. Of course, the reason you are in business is to gain a profit. You need to determine that number based on your individual or corporate goals.
Every business has both fixed costs and variable costs. Your fixed costs are those set costs that do not fluctuate month to month, such as rent, manager salaries, utilities, taxes, insurance, etc. These costs are completely independent of sales and are (for the most part) considered uncontrollable. The major variable costs that impact your bottom line in a restaurant are the variable, controllable costs – food cost, hourly labor, and overhead.
Below is a sample of a monthly budget. Be sure to include absolutely every cost that you will incur in your business when creating your custom budget.
The Ctuit Guide to Restaurant Accounting provides some high-level accounting concepts and best practices for restauranteurs. In this series, we will cover the most basic accounting principles – the ones that you need to know to get a better understanding of how to run a profitable restaurant.
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