The point of tracking food costs and inventory is to see margin, not just to satisfy your accountant at tax time. Restaurants that only know food cost once a year are flying blind. The places that hit 28% food cost consistently are the ones tracking weekly, sometimes daily.

Start with purchases. Every invoice from Sysco, US Foods, your produce vendor, and your liquor distributor needs to get into the books coded to the right category. Don’t lump everything as “food cost.” Break it out by proteins, produce, dairy, dry goods, paper, beer, wine, and liquor. The breakdown matters because beer cost percentage and food cost percentage are different problems with different solutions. When everything is combined, you can’t tell what’s actually wrong.

Beginning and ending inventory drive your real COGS calculation. The formula is straightforward. Beginning inventory plus purchases minus ending inventory equals cost of goods sold. Without an accurate count, COGS is just what you spent that month, which doesn’t reflect what you actually used. Buy a $4,000 case order on the 28th and your food cost looks terrible if you don’t count that product as ending inventory. Count it correctly and the cost lands in the month it actually gets consumed.

Physical counts have to happen at period end. Weekly counts give the best data. Monthly counts are the minimum if you want real margin visibility. The counts need to cover the kitchen, dry storage, walk-in, freezer, and bar. Bar counts include open bottles, which means counting tenths or using a scale. Skip the bar count and you have no idea what your pour cost actually is.

Recipe costing is where most operators leave money on the table. If you don’t know what each menu item costs to produce, you don’t know what your margin should be. Build a recipe card for each item with portions, prices, and yields. Update those cards when vendor prices change. Then compare theoretical food cost, which is what your recipes say you should be running, to actual food cost from your books. The gap between the two is waste, theft, over-portioning, or comping that nobody is tracking.

Waste tracking deserves its own line. When a cook drops a tray of proteins, when produce goes bad in the walk-in, when a steak gets sent back and refired, that’s real money. Most kitchens use a waste sheet by the prep station. The number isn’t the point. Awareness is. Staff who know waste is being tracked waste less.

Vendor credits get missed constantly. Short shipments, spoiled product, billing errors, promotional credits. Reconcile every vendor statement against your invoices and credits. Money sitting as an open credit with a vendor is money you’ve already paid for and aren’t using. We see this all the time when we take over restaurant and bar bookkeeping for new clients. A few hundred dollars in unused credits at one vendor, then another at the next, then a billing error that’s been carrying for six months.

When all of this comes together, you can pull a P&L that shows food cost as a percent of food sales, beverage cost as a percent of beverage sales, and labor as a percent of total sales. Those three numbers, run weekly, are the difference between a restaurant that knows where its money is going and one that’s guessing. Tax categorization takes care of itself when the underlying tracking is right. Margin visibility is the actual goal.

Gina spent years as CFO of a local restaurant chain before founding GMJ, so the operational side of this isn’t theoretical. If you want bookkeeping, tax and consulting services built around how restaurants and bars actually run, that’s the work we do every day.