Restaurant Accounting Software Key Terms

Explore restaurant accounting software terms to make good business choices

Restaurant accounting software often handles the complex calculations that are needed to determine the profitability of a business. These software programs work side-by-side with point of sale programs to produce minute-by-minute details of how the business is being run. Varieties of terms are used in these programs. Terms like operation ratios, prime cost, cost of goods sold and food costs are associated with a business' potential profit and its success.

 

Operating ratios

There are various types of operating ratios, but they are all used as a factoring process to determine the financial health of a business. The most common is the Net Profit to Total Sales ratio, which directly shows if the business is making money. These formulas are plugged into most restaurant accounting software packages.
Try: Zeromillion provides more information on operating ratios.

Prime cost

Prime cost is the total cost of goods plus the cost of gross labor, which can include wait staff, kitchen personnel, etc.
Try: White Hutchinson Leisure & Learning provides more information about prime cost and its importance in accounting methods.

Profit and loss (P & L) statement or income statement

The profit and loss statement is a document showing how well a business manages inventory to make a profit. It tells the business how well they are doing meeting profit goals or managing loss. These statements are generated by most accounting software for restaurants.
Try: Ohio State University provides more information on profit and loss statements, including how they are calculated.

Cost of goods sold (COGS)

Cost of goods sold, or COGS, refers to the costs associated with the production of the goods (food) sold by the restaurant.
Try: Investopedia provides more information on cost of goods sold.

Labor costs

Labor costs are the costs of employing people in the business. The cost is measured by wage, benefits, taxes and payroll costs. Restaurant accounting software can produce reports to compare labor cost percentages to sales. Businesses need to find an effective labor cost versus revenue ratio to remain operational.
Try: The Restaurant Resource Group provides more information on labor costs associated with productivity.

Food costs

Food costs are a large part of any restaurant accounting software, since they are one of the most manageable aspects of restaurant profit and loss. They are calculated as net food purchases divided by net food sales.
Try: StarChefs provides more information on food costs.

Copyright © 2011 Business.com, Inc. All Rights Reserved.

---