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  • Writer's pictureCOGS-Well Team

Why Track Your Cost of Goods Sold (COGS)?

As a restaurant owner, keeping track of your cost of goods sold (COGS) is essential for the success of your business.

COGS is the direct cost of producing the food and beverages you sell to your customers.

In other words, it includes the cost of ingredients, packaging, and any other expenses incurred in preparing the dishes.

"As food and beverage costs are one of the largest components of the actual cost structure, it is imperative to have accurate, real-time analytics to monitor how things are going. The data tells a story - using a system that can help me interpret the story is invaluable". Joan Gilchrist, owner of Cherry Lane Ventures.

Calculating your COGS helps you determine the profitability of your menu items. By knowing the cost of producing each dish, you can set the appropriate price to ensure that you are making a profit. You can also identify which dishes are more profitable and adjust your menu accordingly, either by increasing the price or substituting ingredients to reduce the cost.

Another advantage of keeping track of your COGS is that it helps you identify areas where you can cut costs without sacrificing quality. For example, you may find that you are spending too much on a particular ingredient or that you can negotiate better prices from your suppliers. By being aware of your COGS, you can make informed decisions to reduce your expenses and increase your profit margins.

In addition, monitoring your COGS can help you manage your inventory more efficiently. By having a clear idea of how much of each ingredient you need, you can avoid overstocking or understocking, which can lead to waste and higher expenses.

Finally, calculating your COGS is an important step in preparing your financial statements. It allows you to accurately report your costs and expenses, which is essential for tax purposes and for obtaining financing if you need it.

“COGS-Well automatically creates balanced accounting adjustments for counts and transfers and this is saving us a great deal of time. We used to have to calculate these manually.” Cooper Thurber. Purchasing Manager, Pier 22 Restaurant Group.

In conclusion, keeping track of your cost of goods sold is crucial for the success of your restaurant. By understanding your COGS, you can make informed decisions about pricing, menu items, inventory, and expenses, which can ultimately lead to higher profitability and a more successful business.

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