Gross Profit and how you can calculate this

Watch the video or read the article below to understand how to calculate your gross profit and what this figure means for your business.

What you need to calculate your gross profit

Before you can calculate your gross profit, you will need your sales figure and you will also need your cost of food figure. If you would to know how to work out the actual cost of your food click here.

Calculate your gross profit

You simply take your sales figure for the period, minus your cost of food for the same period, and you will get your gross profit.

For example, if your sales were £5,000 for the month and the food cost to your business was £1,000 then this would result in a £4,000 gross profit.

How to better understand your gross profit

To understand what your gross profit is saying about your business, you can convert the figure into a gross profit %. You can do this by dividing your gross profit by your sales and multiply by 100.

Using the example above, take your gross profit of £4,000 and divide it by your sales figure of £5,000 then multiply the result by 100. You will get 80%.

This tells you that for every £1 of sale you make in your Restaurant, 80p (£1 x 80%) is your gross profit. Have you worked out your gross profit margin, if so how does this compare to your expected gross profit margins?

Monitor your Gross Profit

Using real time accounting data, you should be continuously monitoring your actual gross profit margins to your expected gross profit margins.

Your expected gross profit margins will have been calculated during the phase of designing your menu and you will have calculated the ideal margins based on your menu pricing. You may compare this to your actual gross profit margins and find big differences which is the reason why your Restaurant may not be making enough profits.

Real time accounting allows you to identify these differences immediately so you can minimise the cost of business and take more money home.

How we can help you

We can help you monitor your actual gross profit margins and use real time accounting to help you achieve your ideal gross profit margins.

if you would like to know more, you can contact us on 0121 227 6277.

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