COGS in restaurantes: How to calculate, reduce costs and profit!
Mastering the art of calculating Cost of Goods Sold (COGS) is undoubtedly a determining factor in ensuring the financial health of a restaurante. Moreover, this metric is not just a number, but is also directly linked to profit margins, total revenue and efficient stock management.
In the dynamic food service scene, which encompasses both restaurantes commercial and catering companies, When it comes to the cost of goods sold, entrepreneurs face a major challenge: balancing the books and pricing products correctly. However, this challenge can be overcome with a fundamental tool that is often misused by many managers: the Cost of Goods Sold (COGS).
As well as impacting daily operations, neglecting this metric can cause financial instability, something that restaurantes managers cannot afford. Understanding COGS provides a clear view of inventory costs over a specific period, allowing managers to make strategic adjustments when necessary.
What is CMV? Explaining the metric
The Cost of Goods Sold (COGS) is a financial indicator which helps bar and restaurantes managers assess overall sales performance. In addition, the COGS determines whether the establishment generates profit, becoming a fundamental metrics to be accompanied in the management of its restaurante.
This metric refers to the cdirect production costs of the items sold and is widely used in bars, commercial restaurantess and collective meals. As such, COGS is crucial for measuring the operational efficiency and profitability of a restaurante.
Benefits of calculating and optimizing COGS
A manager who has detailed information on the Cost of Goods Sold (COGS) is undoubtedly at a competitive advantage. This is because efficient COGS management is essential for the profitability of a restaurante.
If, on the one hand, a high COGS may indicate wasted ingredients, poor stock management or inadequate pricing, on the other hand, a very low COGS may indicate that restaurante is cutting costs in ways that impact the quality of ingredients or the preparation of dishes.
Thus, by monitoring and optimizing the COGS, restaurantess can effectively find the ideal balance between the quality of the dishes offered and the profitability of the business.
Since 1990, Teknisa has stood out as a management specialist for companies in the food sector. With this outstanding experience, it has the ability to offer innovative solutions and implement projects that result in reduced expenses and optimized purchasing, factors that have a direct impact on the Cost of Goods Sold (COGS).
We invite you to watch the video for more information on this topic
The importance of reducing costs and optimizing the cost of goods sold (COGS)
The continuous search for efficiency and financial control is essential to the success of any business. However, in the food sector, where the Cost of Goods Sold (COGS) plays a crucial role, the optimizing expenses can make the difference between sustainable growth and stagnation. Therefore, identifying ways to reduce the costs associated with COGS becomes a fundamental strategy. In this way, managers can guarantee financial health of the restaurante while maintaining the quality of the dishes on offer.
Challenges in looking at expenses and financial planning
One of the main challenges faced by companies is obtaining a clear overview of expenses in timely manner. Often, this clarity only occurs after the end of the month, when costs have already exceeded forecast limits. Consequently, this lack of visibility can lead to unpleasant surprises and negatively impact financial results.
In addition, the lack of integrated planning between budget and actual, especially with regard to approving purchases and expenditures, is a critical issue. Without proper alignment, As a result, managers may make decisions that do not take into account the direct impact on COGS. This, in turn, results in unnecessary expenses that could jeopardize restaurante's financial health.
The importance of proactive solutions to control CMV
To meet these challenges, it is essential to adopt proactive solutions. An effective approach is to guarantee an early view of the budget in relation to what has been achieved. In this way, it is possible to preventively block expenses before they occur. This makes it possible to make more informed decisions and avoid overspending which directly affect the CMV.
Workflow and expense control
The implementation of a organized workflow and a system for approving expenses is essential for controlling COGS costs. In addition, involving managers and directors helps ensure that spending has a positive impact on the budget.
In short, the reduction of costs and optimization of the Cost of Goods Sold are goals which can be achieved with efficient financial management. Therefore, having foresight, establishing clear workflows and analyzing expenses are important steps to ensure the financial health and sustainable growth of a business in the food sector.
Comprehensive financial management: The role of CMV
In addition to managing COGS, it is essential to have a comprehensive financial management. This involves overcoming challenges that affect financial results, such as the lack of accurate data and predictability.
The lack of knowledge about where to act and which deviations to correct, as well as the delay in identifying monthly problems, can hinder corrective action and assertive decisions.
In addition lack of predictability is also a challenge. Without a clear view of financial performance, it is not possible to plan investments with confidence.
Why adopt agile software to track COGS in restaurantes?
To achieve successful Cost of Goods Sold (COGS) and cost reduction results, it is crucial to implement efficient processes e adopting intelligent software. These tools not only simplify the manager's life, but also optimize daily activities.
What's more, monitor financial results in real time is an invaluable advantage of these systems. With up-to-date data available at any time, managers can make informed and assertive decisions quickly. This agility is fundamental for adjusting strategies and avoid overspending that can negatively impact the COGS.
Benefits of Teknisa's intelligent software
Teknisa's intelligent software has been developed to offer insights and detailed analysis, allowing for a more comprehensive comprehensive understanding of costs and expenses involved in the operation. With this information, the manager can identify patterns, trends and valuable opportunities for the cost reduction. This creates an environment conducive to making informed decisions, always with the aim of optimizing the Cost of Goods Sold (COGS).
Furthermore, by using these tools, managers can monitor financial performance in real time, This facilitates immediate strategic adjustments. The ability to visualize data in a clear and intuitive way contributes to the more effective analysis, This allows companies to adapt quickly to market changes. As a result, not only is waste minimized, but also boosts profitability, financial management into an essential competitive differentiator for sustainable success.
Real and Reliable Figures for Decision-Making
To meet the challenges of management, it is essential to obtain real and reliable figures in real time. This approach provides the necessary basis for informed and assertive decisions. What's more, the comparison between realized and budgeted figures enables course corrections to be made quickly and effectively, ensuring that the company remains on the desired path.
In this context, the Teknisa software plays a crucial role in automate the collection and analysis of financial data. With real-time reports, it allows managers to quickly identify discrepancies between what was budgeted and what was realized, facilitating immediate adjustments.
What's more, the technology provides clear visualization of costs and revenues, This allows for more agile decision-making based on accurate information. Companies can thus adapt quickly to market changes, ensuring greater operational efficiency and better control over the Cost of Goods Sold (COGS).
Transition from Spreadsheets to Automatic Records
Transitioning data from manual spreadsheets to automatic records is crucial for ensure the accuracy of information and minimize human error.
Using Teknisa's software, this approach not only ensures that the figures accurately reflect reality, but also optimizes financial management.
In this way, companies can make informed decisions quickly, improving efficiency and effectiveness in day-to-day operations.
The Importance of Agile Processes and Systems for Sustainable Success
In short, the strict management of CMV and costs is vital for the sustainable success of any company.
Thus, adopting processes and agile systems, systems such as Teknisa's are essential. These systems provide reliable figures in real time and a clear overview.
In addition, this approach enables informed decision-making and the agile implementation of corrective actions.
Therefore, by prioritizing these aspects, companies are better positioned to optimize results and direct investments in a strategic and informed manner.
Why calculate COGS?
Calculating COGS makes it possible to dilute business costs among the goods sold. It also guarantees fair pricing and that the product pays for itself. And most importantly, that it makes a profit!
Managing a restaurante means dealing with various factors, both positive and negative, and also analyzing indicators that need a lot of attention. After all, nobody wants to go off schedule.
Why calculate COGS in restaurantes?
In restaurante, o Cost of Goods Sold (COGS) refers to the total price of the products, garnishes and condiments used to prepare the meals on the menu.
The COGS, or Cost of Goods Sold, is an essential metric for restaurantes and food establishments in general. It represents the total amount spent on the acquisition of all food and supplies during a specific period.
Calculating COGS is important for several reasons:
- Cost control: O CMV helps restaurante owners and managers keep a close eye on the costs associated with purchasing goods. In this way, they can identify overspending or inefficiencies in purchases, which allows corrective measures to be taken to improve financial management.
- Profit margin: Knowing the CMV is essential for calculating the gross profit margin. The difference between the selling price of the dishes and the Cost of Goods Sold represents the gross margin, which is an important indicator of restaurante's financial performance.
- Adequate pricing: Based on the COGS and the desired profit margin, you can set more appropriate selling prices for the dishes on the menu. On the other hand, poorly calculated prices can lead to losses or loss of competitiveness.
- Stock and waste: When calculating the CMV, It is also possible to monitor stock levels and assess food waste. Maintaining efficient control of these aspects is therefore fundamental to avoiding the accumulation of perishable products and reducing financial losses.
- Financial planning: Knowledge of CMV is crucial for restaurante's medium and long-term financial planning. Based on this information, it is possible to project future capital needs, optimize purchases and allocate resources more effectively.
- Decision-making: When analyzing the CMV and other financial metrics, managers can make more informed decisions regarding menu changes, suppliers, purchasing strategies, promotions and other operational aspects.
In a nutshell, calculating the Cost of Goods Sold (COGS) is a fundamental practice to ensure the success and sustainability of a restaurante. By calculating COGS, managers can ensure more efficient financial management, set appropriate prices, control stock and minimize waste. In addition, this process supports important strategic decisions for the business.
Periodic monitoring: The basis for calculating COGS
To calculating COGS efficientlyz, it is essential to carry out regular monitoring of all operational areas and the purchasing department, especially with regard to incoming and outgoing invoices.
In the foodservice market, the Cost of Goods Sold takes into account the cost of the stock (food and non-food) of all the branches or cost centers that produce meals or even services. However, the COGS excludes all other active and passive expenses, such as labor, rent and energy bills.
Step-by-step calculation of COGS
- Define the period of analysis: Choose a specific period to calculate the CMV, as this will allow a more accurate analysis of the costs and performance of the restaurante during that time interval.
- Picking up purchases of goods: Compile all the records of food and input purchases during the chosen period. Make sure you include all suppliers and items purchased, from main ingredients to condiments and packaging materials.
- Calculate the initial stock: Determine the total value of the stock of goods at the start of the period under review. This value should include the ingredients and inputs already in stock before any new purchases are made.
- Calculate net purchases: Subtract the value of the initial stock from the purchases of goods made during the period. This will give you the total amount of goods actually used during the period. Formula: Net Purchases = Total Purchases - Opening Stock.
- Calculate the closing stock: Check the total value of the stock of goods at the end of the period analyzed. This value includes the ingredients and inputs remaining after the end of the period.
- Calculate the COGS: Finally, use the following formula to calculate the Cost of Goods Sold: COGS = Net Purchases + Opening Stock - Closing Stock.
Result of the COGS calculation
The result is the total value of the Cost of Goods Sold during the chosen period. This figure represents the direct costs associated with producing the dishes sold at restaurante during that period.
Precise control for accurate CMV
It is important to emphasize that accurate control and recording of all purchase and stock transactions is fundamental to the accuracy of the calculation of the CMV. In addition, the integration of management software or systems of point of sale can facilitate this process, making it more efficient and less prone to errors.
We invite you to download our e-book on purchasing optimization. Find out how you can reduce costs through intelligent procurement strategies, helping to balance the Cost of Goods Sold (COGS) in corporate restaurantess too! Enjoy!
How to calculate COGS?
In order to calculate the COGS, it is essential to periodically monitor the entire operational area and the purchasing department, especially with regard to the incoming and outgoing invoices.
With this integrated management, the manager obtains the figures needed for the calculation. The formula is quite simple, as we'll see below.
Data you need to calculate your COGS
- Initial stock: product you have in stock;
- Purchases (or Invoices): amounts referring to the products that were purchased during the period;
- Closing stock: merchandise left in your stock after the sale of your product.
Now, read the following example and find out how it works in practice:
- Suppose your monthly turnover is 100 thousand;
- You started the month with R$ 40,000 worth of products in your stock;
- You then buy another R$ 20,000 and close the month with R$ 30,000 left in stock.
In other words:
In monetary terms, its CMV is R$ 30 thousand. However, it is important to represent this metric as a percentage, taking monthly turnover as a reference.
To make the calculation easier, use the classic rule of three.
Calculate the CMV should be part of any restaurante manager's routine. This is because the practice minimizes market influences on the project result and ensures that the company's growth does not negatively affect the result.
Remember:
Having good control and management of your stock is essential if the COGS calculation is to be accurate and generate profit. It's not enough just to use the formula - you also need strict management.
Is there an ideal CMV for your restaurante?
This is a question often asked in restaurantes management. However, the answer is not so simple. Each establishment has its own particularities that directly influence the Cost of Goods Sold.
The Ideal CMV According to Experts
O SEBRAE, The ideal CMV for a restaurante generally varies between 30% and 40% of revenue.
Staying below this range is excellent, while exceeding it can represent a risk to the financial health of the business.
Leandro de Assis' vision of the CMV
Leandro de Assis, commercial director of Teknisa, has an enriching point of view on the subject. According to him,
“A CMV The effective performance remains in line with the predefined target, with minimal margins of variation. The manager must monitor the CMV, A reliable system is essential to help you,” says Assis.
In addition, Assis warns of the need to be aware of fluctuations in the CMV over time.
“When the CMV varies constantly and the results show significant differences day after day, this can be indicative of management problems that require immediate analysis and action,” Assis emphasizes.
How to keep COGS within target
O CMV The ideal is not a fixed figure, but one that is in line with the targets set, remaining stable and within the parameters that guarantee the sustainability of the business. For this reason, constant vigilance and the use of tools to help make decisions based on reliable data are fundamental.
Identifying problems with CMV
If the CMV index is too high, it may indicate some important problems, such as:
- High prices when buying goods;
- Excessive waste in the kitchen;
- Misplacement of goods in stock.
On the other hand, if your COGS is too low, this could also mean other problems, such as:
- Use of low-quality raw materials;
- Final product falls short of customer expectations;
- Final product priced too high in relation to market value.
The COGS and profitability of the restaurante
This metric is crucial to the profitability of your restaurante, because you can subtract the CMV value from the gross sales revenue. This way, you understand how much gross profit each dish on the menu is bringing to restaurante.
Experts in the sector and the Ideal CMV
Experts in the foodservice sector say that a good Cost of Goods Sold (COGS) varies between 28% and 31%. However, some companies allow rates of up to 35%, depending on the sector. Therefore, each case must be analyzed individually.
Remember: your restaurante is unique and its numbers reflect the particularities of your business. Therefore, consider these differences when evaluating the CMV.
Tips for better control of COGS
Now that we know the importance of monitoring CMV, here are some tried and tested tips for reducing and controlling this index in your restaurante:
Tip 1 - Plan your purchases
A poorly planned purchase directly affects the results of your CMV. It is therefore essential to identify the value of each product and qualify your supplier. This process is an excellent strategy for guaranteeing quality raw materials for your business.
During the quotation, you will evaluate several brands with varying prices. At this point, know-how is essential! After all, some product features directly influence the decision between one and the other.
Cíntia Rios, Market Director at Teknisa, points out that the lowest price should not always prevail. For example, certain types of rice have different yields. It will therefore be more consistent to choose the one that gives the best result
“In the case of frozen meats, you need to analyze the amount of water contained in the products after thawing, because you may be paying more for the ice than for the meat. This is the so-called control of loss after cleaning applied to meat and fruit and vegetables,” adds Cíntia Rios.
Tip 2 - Reduce waste
Unfortunately, waste is still a reality in many restaurantess. Therefore, combating it is crucial to ensuring profitability.
A great way to achieve this is by taking good control of your technical sheets. When organized and up-to-date, these sheets allow for more efficient stock management, helping to identify waste quickly and enabling actions to be taken to avoid it.
By identifying waste, you can think of several ways to reduce it:
- Carry out a centralized planning according to the products of the time;
- Avoid producing more than you need or buying more expensive products;
- Analyze, observe and measure - this will increase your profits;
- Use software to manage orders with satisfaction survey;
- Adopt intelligent methodologies that reduce expenses and avoid leftovers.
Tip 3 - Keep technical data sheets up to date
Food datasheets are essential because they guide many decisions. They contain crucial information, such as how to prepare dishes, the ingredients needed and their possible substitutes.
That's why you should create technical sheets for each dish or drink and keep them up to date. After all, they are extremely useful both inside and outside the kitchen, whether for management, stock control or product pricing.
Tip 4 - Use technology to your advantage
Say yes to technology
Management software is the best way to calculate the Cost of Goods Sold. This is because the system integrates all areas of your establishment, from the entry of invoice until it matches the purchase order.
Advantages of using management software
The technology, through efficient management software, uses the complete history of the establishment's entire production process. In addition, it produces customized reports according to the needs of your operation, calculating and calculating the data automatically.
This makes the management process more precise and agile.
What if you don't have a system?
Using spreadsheets may seem like a practical solution at first, but it's a strategy that can be costly in the long run. This is because spreadsheets are prone to errors, require extra labor and may not contain all the information needed to correctly calculate your final product.
Thus, keeping track of everything manually becomes a challenge, especially for managers who run more than one establishment.
Benefits of an integrated system
That's why relying on technology is a great alternative! The ERPs software aimed at the food service sector can help you in many ways:
- Precise stock control, by cross-referencing merchandise information with product data sheets and sales levels;
- Automatic shopping list generation, considering stock levels, average sales and technical data sheets;
- Automatic calculation of COGS, based on the information recorded in the system;
- Complete control of all sales made during the period, This helps managers make strategic decisions.
Real savings with a management system
An integrated system can help identify unnecessary spending or even generate simple savings. For example, if you buy meat for R$200,000 or R$300,000 a month and manage to make savings, your purchasing volume could improve. P
On the other hand, if you only pay 5 cents more per item, the CMV may increase, requiring you to pass on or absorb this value in the final product.
Management software detects those “5 cents” that could be overlooked in manual work. This way, with a complete breakdown of financial transactions, you can compare this increase with the planned turnover and adjust your strategies.
Nice to meet you, Teknisa!
If you still don't know who to count on to reduce your CMV, count on Teknisa! We offer the best technological management solutions for the Food Service market, with almost 30 years of experience in this sector.
Our Cost reduction works on the basis of comparative parameters of competitiveness, analyzing Process Failures vs. Control Failures.
To understand this better, take a look at the results of our Cost Reduction Service applied to one of our clients over 6 months.
Teknisa service consultancy results: Impact on COGS
Analysis of the data below reveals the significant impact that the partnership with Teknisa Service has had on the financial and operational performance of the business:
Reduction of CMV over 6 Months
- January: Turnover of R$ 4,755,340.86 and reduction in COGS to R$ 2,262,476.33 (representing 47.58%). The reduction was 1.42% compared to the initial figure.
- June: Turnover of R$ 5,057,588.80 and COGS reached R$ 2,254,697.79 (representing 44.58%). The reduction was 4.42% compared to the initial CMV (49%).
- At the end of 6 months, The half-year turnover was R$ 29,280,154.89 and the COGS totaled R$ 13,366,790.95 (representing 45.65%). The final reduction in COGS was 3.35%, which represented R$ 980,484.95 in savings
Benefits of partnering with Teknisa
These results reflect the synergy between well-defined processes and the assertive use of Teknisa management software. In this way, good practices in the foodservice market, enhanced by the integration of these systems, have made it possible to manage resources more intelligently and effectively, resulting in a notable reduction in costs.
So the conclusion is clear: the combination of Teknisa Service's expertise, its technological tools and the market's best practices has enabled a significant reduction in CMV.
COGS calculator
Calculate your business's Cost of Goods Sold
Overcoming the “patchwork quilt” with an integrated system
Having a complete system, without the need to purchase third-party systems, offers numerous advantages for the efficient management of a restaurante.
Unfortunately, many restaurantess face the challenge of dealing with a fragmented infrastructure, a veritable patchwork of systems acquired from different suppliers over time.
Although they mean well, this scenario often hampers data analysis, as crucial information can get lost between systems, leading to errors and poor decisions.
Reliable and accurate data: The pillar of good management
This is where the power of integrated systems from A to Z for restaurantes. Imagine the efficiency of having a single system that manages all aspects of the operation, from stock control to sales tracking, team management and financial analysis.
With this approach, youyou centralize data and guarantee consistency, eliminating the need to use different platforms and minimizing the risk of human error. In this way, reliable and accurate data becomes the backbone of any successful business strategy.
With an integrated system, data analysis is more agile and accurate, allowing management to fully trust the information presented. This empowers the team to make strategic decisions, boosting operational efficiency, optimizing resource allocation, identifying consumer trends and improving the overall customer experience.
Long-term savings with an integrated system
Eliminating third-party systems not only reduces complexity, but also generates long-term savings. An integrated system minimizes errors and maximizes growth opportunities, resulting in a more efficient and profitable operation.
Teknisa Systems: Boosting turnover and optimizing costs
Teknisa Retail's restaurantes commercial automation systems are boosting turnover and optimizing costs in the restaurantes sector, including valuable collaboration to calculate the COGS (Cost of Goods Sold) and provide essential reports for decision-making.
Simplified CMV management with Teknisa
With Teknisa systems, COGS management becomes much simpler and more efficient. The fully integrated system automatically records all purchases of goods and controls stock precisely. You can thus calculate the COGS automatically, giving you a clear view of the direct costs associated with producing the dishes sold in your restaurantess.
Management reports for strategic decisions
The detailed management reports that Teknisa systems provide offer crucial information for making strategic decisions. As a manager, you will have access to sales reports, plate performance analysis, purchase history, cost variations and other relevant data.
This information makes it possible to identify trends, opportunities to reduce costs and adjust prices to improve profitability.
Performance comparisons for restaurantes networks
In addition, Teknisa solutions make it easy to analyze the individual performance of each restaurante within a network. In this way, you can make comparisons and identify the establishments with the best results. This way, you can implement successful practices throughout the network, boosting the growth of your business
Teknisa: Partner in profitability and success
Teknisa is committed to providing you with the essential tools to maintain efficient financial control and optimize the management of your restaurantess. So count on us to increase the profitability of your restaurante, build customer loyalty and achieve the success you deserve!
To find out more about the work carried out by Teknisa, read our e-book “Well-defined processes in corporate restaurantes”. With it, you'll be able to identify the critical points to ensure cost reduction and high productivity in your corporate restaurante!
Conclusion
This article discusses the importance of calculating Cost of Goods Sold (COGS) in restaurantes, the correct way to make this calculation and how to reduce the related costs. This information is valuable for the financial management of any restaurante, since COGS is a key indicator that directly impacts profitability and overall business performance.
This article covers the following topics:
- Definition of CMV: Explaining what Cost of Goods Sold is and how it is a crucial financial indicator for restaurantes, related to operational efficiency and profitability.
- Importance of CMV: Detailing why COGS control is essential for restaurante's financial health, influencing profit margins, menu prices and stock management.
- Cost reduction and optimization of CMV: Addressing the challenges faced by restaurantess in controlling expenses and how to adopt strategic solutions to ensure financial efficiency and sustainable growth.
- Integrated Systems and Software: Highlighting the importance of integrated systems and specialized software to facilitate the calculation and monitoring of COGS in real time.
- How to calculate COGS: Introducing the basic formula for calculating the Cost of Goods Sold, which involves opening stock, purchases and closing stock.
- Determining an Ideal CMV: Exploring the concepts of ideal COGS and how it can vary according to the sector and the specific restaurante.
- Tips for Reducing CMV: Providing practical suggestions for reducing COGS, including conscious purchasing, stock control, up-to-date technical data sheets and the use of management systems.
- Technology and Reports: This highlights the importance of using technology, such as management software, to automate the process of calculating and analyzing COGS, providing complete and reliable reports.
Comprehensive guide for restaurantes managers: Optimize your CMV
This article serves as a comprehensive guide for restaurantes managers and owners who want to better understand how COGS affects their business. In addition, it provides guidance on how to optimize this indicator to improve profitability and operational efficiency.
The importance of integrated systems and management software
The article also highlights the importance of integrated systems and management software to facilitate financial management. With these tools, it is possible to improve informed decision-making, always based on accurate data.
Applying best practices to calculate COGS
If you're looking to apply best practices to calculate COGS and reduce costs, this article is for you, restaurantes manager. It contains comprehensive tips and an in-depth analysis on how to control your cost of goods sold, from keeping a close eye on incoming and outgoing stock to understanding how suppliers impact your costs.
Effective strategies for dealing with costs
In addition, we cover effective strategies for dealing with costs, such as setting appropriate prices, constantly monitoring CMV to take preventive action and identifying more affordable substitutes for more expensive ingredients.
Don't underestimate the power of accurately calculating COGS
Don't underestimate the power of calculating the Cost of Goods Sold accurately and implementing smart changes. These practices will help not only to reduce costs, but also to increase the operational efficiency and profitability of your restaurante.
Contact us for personalized advice
If you need further guidance or additional information, please contact us. We're here to help restaurantes managers achieve their goals in a sustainable way. See you next time!
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