If you run a dark kitchen business in Australia, it’s imperative that you know how to read profit and loss statements. Also known as an income statement, a profit and loss statement shows the profitability of your business over a specific period. It tells you how much revenue you earned, expenses you incurred, and profit or loss you made.
A profit and loss statement is useful for monitoring your business performance, making informed decisions, and planning for the future. It can also help you comply with tax obligations and attract investors or lenders.
If you’re interested in learning more, read on as we explain the main components of a profit and loss statement, how to calculate them, and what they mean for your dark kitchen business. We will also show you how to use a profit and loss template to create your own statement easily.
Revenue is the starting point of your profit and loss statement. It indicates how much money you make from selling your food products or services, reflecting your business’s potential to generate profit.
To determine your revenue, you multiply the number of orders by the average order value. For example, with 1,000 orders at AU$25 each, your income is AU$25,000. You can boost your revenue by attracting more customers, adjusting prices, or expanding your product range, but you need to weigh the associated costs and risks.
Cost of goods sold (COGS)
COGS is the next line of your profit and loss statement. It reveals how much money you spend producing or delivering your products or services, including direct costs like food ingredients, packaging, delivery fees, and commissions.
You can calculate your COGS by adding up all direct costs incurred. For instance, if you spent AU$10,000 on food ingredients, AU$2,000 on packaging, AU$3,000 on delivery fees, and AU$1,000 on commissions in a month, your COGS would be AU$16,000. You can lower your COGS by finding cheaper suppliers, negotiating better deals, minimising waste, or improving processes without compromising product quality and safety.
Gross profit is the difference between your revenue and your COGS. It tells you how much money you have left after covering your direct costs and exposes your business profitability before accounting for other expenses.
Compute your gross profit by subtracting your COGS from your revenue. If your revenue was AU$25,000, and COGS was AU$16,000 in a month, your gross profit would be AU$9,000. To increase your gross profit, boost your revenue, and lower your COGS while maintaining a balance with customer satisfaction and loyalty.
Operating expenses are the costs of running your business that are not directly related to your sales. They include indirect costs necessary for your business operations, such as rent, utilities, salaries, marketing, insurance, and taxes.
To identify your operating expenses, add up all indirect costs incurred. For example, if you paid AU$4,000 for rent, AU$1,000 for utilities, AU$3,000 for salaries, AU$2,000 for marketing, AU$500 for insurance, and AU$1,500 for taxes in a month, your operating expenses total AU$12,000. You can reduce your operating expenses by finding cheaper alternatives, cutting unnecessary costs, or streamlining your operations while being consistent in terms of quality and efficiency.
Net profit is the final line of your profit and loss statement. It displays how much money you keep after paying all your expenses and represents your business profitability after accounting for everything.
You can calculate your net profit by subtracting your operating expenses from your gross profit. If your gross profit was AU$9,000 and operating expenses were AU$12,000 in a month, your net profit would be -AU$3,000, indicating an AU$3,000 loss. To improve your net profit, work on increasing your gross profit, reducing your operating expenses, and keeping an eye on your business’s long-term sustainability and growth.
Profit and loss template
A profit and loss template is a spreadsheet that helps you create your own statement. It has all the formulas and calculations: you just enter your revenue, COGS, and operating expenses to get your gross and net profit.
You can get a free profit and loss template from business.gov.au, which is specially made for Australian businesses that follow the Australian Accounting Standards. You can also pay for cloud-based accounting software to create and manage your profit and loss statement. These tools are often connected with your bank accounts, delivery platforms, and other apps to track your income and expenses. They can also give you reports and insights to help you analyse your business and plan ahead.
Optimise your profit and loss statement with Chef Collective
A profit and loss statement is vital for any dark kitchen business owner who wants to keep track of their financial performance and make informed decisions. Knowing how to read a profit and loss statement allows you to make smarter decisions, pay your taxes, and get investors or lenders.
If you want to start or grow your dark kitchen business in Australia, join Chef Collective, powered by CloudKitchens™. Chef Collective is a network of dark kitchens that give you ready-to-go facilities, a large customer base, and technology to run your operations, helping you cut costs, boost revenue, and grow your business at your speed.
To learn more about Chef Collective and how we can help you, contact us today or schedule a tour of our locations.