Ever thought about opening your own hospitality business one day? Maybe you have worked in hopso your whole career and see money going through the business but not sure where it all ends up? Maybe you have business experience in other industries but you’re not 100% sure where profit is made and lost.

We are bookkeepers, accountants and advisors to the hospitality industry and have worked with hundreds of businesses.

While every business is different, and there are varied models and routes to profit, let us show you an outline of what we see most often and what is possible with planning and careful operation. Below are some headings and definitions of what we call a Snapshot P&L - a summarised version of a ‘profit & loss statement’, one of the most useful financial reports your accounting software creates.

Gross Revenue (110%)

This is the total money you receive from customers paying for food and drink in your venue. Nearly all of it will attract GST (Goods & Services Tax) at 10%, which the business collects on behalf of the ATO and pays to them every 3 months after reporting in your BAS. (Business Activity Statement)

Net Revenue (100%)

This is the money you have left after the GST is removed. This is all you have to pay for everyone, everything and hopefully make a profit.

Cost of Sales (25-30%)

These are the direct costs of making the sales, so generally, all of the ingredients and packaging required. For a cafe, this would include the coffee beans, milk, sugar, coffee cup, lids and stirrers used to make the sale.

These costs have to carefully calculated in order to charge the correct amount.

Wages, Salaries & Superannuation (35-40%)

The biggest single expense is usually the staff required to make and serve food and drinks. This has been creeping up for years and faster than business owners seem willing to raise their prices.

Thankfully the industry is generally now very compliant with employment awards but you must make sure you understand and pay all loadings and penalty rates applicable, including regular Super payments (which have just risen to 10%)

Rent & Landlord’s Outgoings (10-15%)

These are the fixed costs each month for the lease and may include outgoing expenses of the landlord such as certain insurances or utility connection costs.

These costa are very hard to reduce, indeed it may rise by a set percentage each year depending on your lease. As such it’s essential to make detailed plans and forecasts to know if your lease is affordable before signing.

All Other Expenses (10-15%)

Power, water, insurance, cleaning, bank fees, repairs & maintenance, advertising & marketing - the list never seems to end. While some expenses are regular or repeat each month, unexpected costs will occur and should be allowed for in a budget.

• Net Revenue (100%)

• Cost of Sales (25-30%)

• Wages, Salaries & Superannuation (35-40%)

• Rent & Landlord Outgoings (10-15%)

• All Other Expenses (10-15%)

• Profit (0-20%)

As you can see from the above breakdown, if each category is at the lower end of the range a healthy profit of around 20% is possible, however, if each cost is at the higher number, the business will only break even. The margin’s in the hospitality industry are notoriously thin and have to be very carefully monitored and managed.

Get in touch with us today to learn how we can help you track and control your business with Cafe Bookkeepers.