Basic COGS Calculation
Have you ever wondered what the actual cost of goods sold calculation is for your restaurant? It may be the most important calculation you make in your restaurant. Read further or watch the video to learn why this is true and what the basic cost of goods sold formula is for restaurants.
Knowing your cost of goods sold could be the one of the most important things you measure in your business. To do it correctly, you have to have the right numbers and the right equation.
So what is the right equation to get to your basic COGS calculation? How do you do it?
Start with your beginning inventory – what was on the shelves the last time you counted. You should be taking inventory weekly – monthly at the minimum. (Only the food and liquor.)
Add to your beginning inventory your purchases. Earn, owe, use – accrual accounting.
This gives you a total – how much you have on your shelves that you could sell.
At the end of the period you’re measuring – preferably one week – you take an ending inventory. This gives you your product used.
What is used? Sold, waste/spoilage, theft and comps.
Use is blind – where it has gone has to be measured. To do this, divide your produce used by sales to get your cost of goods sold percentage. This is your food cost and/or pour/liquor cost.
If you come up with a 30% food cost, that means for every dollar in food sales that came in, I used 30 cents in product to bring that dollar into the business.
Restaurant cost of goods sold is a vital part of your business, piece of information you must know, to control your bottom line. With this basic COGS calculation, you’re halfway to knowing your most important number, prime cost.
If you would like to learn more about the basic COGS calculation and why it’s such an important number in your restaurant, read our free special report, Breaking Away from the Insanity: How to easily take control of your restaurant and make more money. Download it here. Watch more tips on our YouTube Channel.