Food cost percentage is the number that matters most. Take your cost of goods sold (beginning inventory plus purchases minus ending inventory) and divide it by your food revenue. Most restaurants aim for 28% to 35% depending on the concept. If you’re above that range, you’re either overbuying, overportioning, wasting product, or underpricing your menu. You can’t fix what you don’t measure.

Count inventory weekly at minimum. Pick the same day every week, ideally a low-volume day, and physically count every item in your walk-in, freezer, dry storage, and prep areas. Record quantities and assign a cost to each item based on your most recent invoice price. This gives you your ending inventory value, which flows directly into your cost of goods sold calculation. Monthly counts aren’t frequent enough because you can bleed money for four weeks before you notice.

Track every purchase by category. Break food purchases into proteins, produce, dairy, dry goods, beverages, and paper goods. When invoices come in from your distributors, code them to the right category before they hit your books. This level of detail shows you where cost increases are happening. A food cost spike driven by protein prices requires a different response than one driven by produce waste.

Compare actual food cost to theoretical food cost. Theoretical food cost is what your food cost should be if every dish was made with perfect portions and zero waste, based on your recipe costs and your sales mix. The gap between theoretical and actual tells you how much product you’re losing to waste, spoilage, overportioning, theft, or unrecorded comps. A 2% to 3% gap is normal. Anything higher means something needs attention.

Set par levels for ordering. Par levels are the minimum quantity of each item you need on hand to get through a normal period. When you count inventory and an item is below par, you order up to par. This prevents both over-ordering (which leads to spoilage) and under-ordering (which leads to menu outages). Adjust pars seasonally and whenever your menu changes.

Waste tracking is where most restaurants fall short. Create a simple waste log in the kitchen. Every time product gets tossed due to spoilage, a mistake, or overcooking, it gets recorded with the item name and approximate quantity. This feels tedious for kitchen staff but the data is incredibly valuable. You might discover that you’re throwing away $400 in prepped produce every week because prep quantities don’t match actual demand.

All of this needs to connect to your accounting. Your inventory accounting should reflect the weekly counts so your financial statements show accurate cost of goods sold, not just whatever you purchased that month. Purchases and COGS are different things. If you bought $15,000 in food but your inventory went up by $2,000, your actual COGS was $13,000. Recording purchases as expenses without adjusting for inventory changes makes your monthly profit and loss unreliable.

Use your POS system reporting alongside your bookkeeping to reconcile what was sold against what was used. Most modern POS systems can generate a theoretical food cost report based on menu item sales and recipe costs. When that number is meaningfully different from what your books show, dig in to find out why.

The restaurants that stay profitable are the ones treating food cost management as a weekly discipline, not a quarterly surprise. If you need help getting your financial systems set up to support this kind of tracking, professional bookkeeping services can build a chart of accounts and reporting structure that gives you visibility into food costs every week without guesswork.