Here’s how you can make the right decisions that will reduce costs and increase your profits.
It’s good for business to analyze the previous months P and L and take decisions accordingly for the current month, like which costs need to be reduced. Who needs to be hired, and at what salary? Which vendor invoices need to be paid and which ones can we put on hold? Should I look for cheaper alternatives in packaging? Is there a way to reduce delivery costs? Etc.
So I decided, I wanted to have my previous months P and L ready by the 5th of the current month. E.g., I wanted the P and L for June to be prepared by the 5th of July, so I could understand what were our costs and how much money we made in June and then be able to make better decisions for July.
But the problem was…I could only get my accountant to prepare June’s P and L by the 15th of July, and sometimes she’d give it to me by the end of July…It was frustrating, because what was the use of seeing June’s P and L by the end of July…I mean, I lost the opportunity to see what I could do better in July based on June’s performance…and I’m never going to get July back.
I was also unsure of the decisions I was taking in July because I didn’t know how we performed in June. I mean…were the decisions I was taking in July actually going to reduce costs and increase profits for July. I wasn’t sure…I felt I was shooting in the dark.
So one month, I got fed up.
I decided I wanted to have my previous months P and L ready by the 5th of the current month so I could see how much money we made, what were our costs etc.
To make this happen, the first thing I did was sit with my restaurant manager and my accountant together. We discussed with my manager how he could plan out his reporting schedule to deliver revenue and cost figures to my accountant by the last day of each month, such as revenues, tax, tips, cost of food, beverage, packaging, labor cost, etc.
At the end of our conversation, he decided that he would send her revenue, tax, and tip figures every day instead of waiting for the end of the month and as for the costs, he’d plan to only focus on preparing his costs, taking inventory stocks, etc. on the 31st and do nothing else, so he could give her the cost figures by the 31st anyhow!
This way, my accountant had everything she needed to prepare the previous months P and L for me by the 5th of the current month.
If you can analyze your last months P and L by the 5th of this month, you’ll be able to make better decisions that will help you reduce your costs and increase your profits among many other benefits that will directly impact your employees and customers too.
I won’t lie, It will take time to do this, but it’s totally worth knowing how you performed and what you need to do to perform better.
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