To read a restaurant P&L, go top to bottom in order: sales, cost of goods sold, payroll, then direct operating costs and G&A. Check that it's built on accrual accounting, where costs land on the date you received the product, not the date you paid. And know what's deliberately not on it: pass-throughs like tips and sales tax live on the balance sheet, not your P&L.
That's the short version. Here's the longer one.
I've been in this industry a lot. I've looked at thousands of P&Ls. The difference between a good one and a bad one could be costing you time and a whole lot of money.
When I look at a good P&L, the feeling is almost relief. You have confidence it's accurate, confidence it's consistent, and confidence you can make real decisions with it for next month. Most owners feel the opposite. The statement looks a little different from what they expected, and they don't trust it enough to act on it.
Usually that's because nobody ever walked them through what each section actually holds. So let's do that now, the way I'd read it.
"I've looked at thousands of P&Ls. The difference between a good one and a bad one could be costing you money." Ryan, FIXE
Sales is everything you earned: food, beverage, events, maybe retail. Simple enough.
But here's what trips people up. You're collecting more money than that every night. Sales tax and tips come through your POS, but they are not showing up on your P&L, and that's why the number might look a little different to you. That money isn't yours. You're holding it for the state and for your team, so it sits on the balance sheet instead.
If your sales line never matches your POS report, this is usually why. And if your bank account is the thing that never matches, read this next: Why Your P&L Says Profit but Your Bank Account Is Empty.
Your cost of goods sold is built from the invoices for product you received in that period, dated by when you received it, not when you paid it.
Say it's May and you get an invoice dated May 5th for chicken. That invoice belongs in May's COGS. Pay it in June? Still May. Received food in April but paid in May? That's April's cost, not May's.
That's accrual based accounting, and it's the only way you can read an accurate P&L in our industry. If your books put food cost wherever the payment happened to land, your food cost percentage is telling you about your bill-paying habits, not your kitchen.
Payroll is pretty basic. Every week or every other week you run payroll, and it shows up on your P&L: wages for servers, bussers, hosts, the kitchen, plus payroll taxes and maybe some benefits.
What doesn't belong there: the deductions and the tips you're paying out. Those are pass-throughs, so you can't use them to calculate profits. They sit on the balance sheet, same as sales tax.
Here's the part most owners have never heard of, and the one thing I'd want you to take from this post.
Two payrolls cover 28 days. Your month has 30 or 31. A good restaurant bookkeeper accrues for those extra days with an estimate, so your labor cost reflects the whole month, not just the paychecks that happened to fall inside it. Skip the accrual and your labor percentage swings month to month for no operational reason at all.
So here's your one diagnostic question. Ask your bookkeeper: how do you accrue payroll for the days two paychecks don't cover? If the answer is a blank stare, you've learned something important.
The last sections are direct operating costs and general and administrative: supplies, office supplies, credit card discounts, insurance. Pretty self intuitive.
The nuance is timing. Things like insurance and rent don't always get paid on an exact monthly basis. Sometimes you prepay them, and then you have to allocate that cost across the months it covers. And if you're on 13-period accounting, your 12 months of rent need to be spread across 13 periods.
"There is some accrual gymnastics you have to do for it to be accurate period by period." Ryan, FIXE
None of it is glamorous. All of it is the difference between a statement you trust and one you argue with.
Relief. That's the honest answer. You open it, you trust it, and you spend your energy on decisions instead of doubts.
That's why we built FIXE. We want restaurant operators to spend more time on what they do best, running their restaurant, and less time doing accrual gymnastics in the office at midnight. It's what we do for 600+ restaurant locations, and it's all we do.
Want to know how your books stack up right now? Take the FIXE Health Score quiz. It's free, it takes a few minutes, and it'll show you where your P&L stands.