Master Restaurant Financials with Cost Accounting

COGS-Well Team
Jul 16
3 min read

Overview

In the restaurant business, time is money. Most operators don’t have time to dig through spreadsheets or wait until the end of the month to find out whether they made money. You need fast, accurate answers – and that’s where cost accounting comes in.

Two people in a meeting room with brick walls. A woman smiles, discussing with a man, using a Dell laptop. Coffee cup on table.

Integrating a cost accounting system with a financial accounting system enables operators to reduce costs, increase controls, save time, and optimize profits.

While traditional financial accounting reports what has already happened, cost accounting gives you real-time visibility into your inventory, menu performance, and operational efficiency.

Financial vs. Cost Accounting

Financial accounting is designed for external audiences like investors, lenders, and tax authorities. It tells them how your business performed over a completed period using reports like your Profit and Loss Statement and Balance Sheet.

Cost accounting, on the other hand, is an internal tool that helps your operations team manage inventory, recipe costs, and menu performance in real-time. It shows what’s happening behind the numbers – tracking the cost and quantity of inventory used to produce the menu items sold.

It allows you to set target costs or profits for menu items, calculate ideal (theoretical) inventory usage and cost, and perform menu analytics.

Expanded, Dynamic Reporting

Chef in white uniform drizzles oil on a colorful dish of tomatoes and greens in a professional kitchen, displaying focus and skill.

Financial accounting reports are backward-looking. You get the data after the period ends, making it hard to course-correct in the moment.

Cost accounting gives you dynamic, real-time reports that help guide daily decisions. You can figure out how much to order or prep, see variances in your inventory usage, and optimize your menu pricing or purchasing based on changing ingredient costs.

“With COGS-Well, we’re more confident in our reporting, our variance analysis, and the financials that we send out to our stakeholders.” - Linda Liu, Manager, Finance & Accounting

Item-Level Insights that Increase Control

If you're looking at financial accounting reports, you'll see summarized sales revenue and category-level totals for food, liquor, beer, and wine – but not item-level detail. You're in the dark about inventory or menu item activity.

Hands typing on a laptop showing a spreadsheet with a data entry form. Phone, glasses, and notepad on a wooden table nearby.

With cost accounting, you get detailed transaction activity for every inventory item, including ordering, receiving, transfers, and beginning and ending counts. You can also see inventory cost trends. For menu items, you get suggested pricing, recipe cost trends, quantity sold, and performance based on profitability and price. This level of visibility gives you the control needed to make smarter purchasing, pricing, and menu decisions.

“When you're looking at reports in COGS-Well, it really gives you that granular breakdown of what you need to see for each location. District leaders can just pull up their own district and get an idea of what’s happening without having to run 900 reports.” - Jeremy Lanni, Director of Catering, Events, Fundraisers & Partnerships, &pizza

Syncing Ops and Finance for Accuracy

Two bakers in aprons discuss orders in a bakery. One writes in a notepad. Various breads are displayed. Shelves with ingredients and tools in the background.

A restaurant cost accounting system can calculate your cost of goods sold (COGS) and the ending inventory value required by your financial accounting system, eliminating manual entry and reducing human error.

Accuracy is also improved because cost accounting calculates COGS based on inventory usage versus purchases.

With your systems in sync, costs reported for operations will match those reported for finance, and your team can close the books faster, easier, and without discrepancies.

“Being able to switch from weekly inventory counts to periodic inventory counts while improving our COGS period over a period has been an insane time saver.” - Emir Aydin, Director of Operations

The Bottom Line

Using cost and financial accounting together gives restaurant operators the visibility and control needed to make better business decisions. The more you understand your inventory costs and usage, and menu performance, the more opportunities you have to cut costs and improve margins. You’ll know exactly what drives your profits – and what drags them down.