Sales? What does that mean?!
Sales. Everybody wants ‘em. Unfortunately, sometimes restaurant owners (although not the only guilty parties) inflate them. They do it to makes their financial statements look better, to please the bank, to please the investors, to please the missus (or the mister, because heaven forbid I get accused of being sexist). Please, please, Puh-LEASE! And perhaps they do it because they don’t know how sales are defined. So let’s define them. Wikipedia’s got nothing on me, besides eight million more eyeballs. Stupid popularity.
It’s appropriate to first identify what sales is not. Sales is not sales tax. It is not coupons/discounts/freebies/giveaways. It isn’t the value of those forty-three extra combo meals you would have sold if only that catering job had come through. Laugh if you want (and I’m right there with you), but I’ve seen it done. All of it. And on the flip side, sales is that catering job for which the customer happened to pay you in cash. Or made a check out to your name instead of “Gyros-R-Us”.
Sales, for appropriate financial statement reporting purposes, not to mention sales tax or income tax reporting purposes, not to mention the right way to do things purposes, is the amount of cash a customer pays you for your oh-so-tasty vittles. It does not include sales or other taxes charged. And while a profit and loss statement (one of those snore-inducing accounting documents which shows a business’s income and expenses for a period) can appropriately include the amount of discounts given, the expenses are measured as a percentage against cash/credit card/check sales only.
Defining sales as what you received in cash/CC/check means that that 30,000 unit, two-for-one coupon mailer you blasted out, which resulted in let’s say $1,300 worth of food/beverage that you basically gave away, doesn’t get counted as sales income. I know what you might be thinking: “Yeah but blogger dude, I just gave away $1,300 of my product that would/should have been sales revenue had I charged them. My lender wants to see SALES. Plus now my food costs, as a percentage of sales, are going to spike up.” Yep, that’s right. And that is exactly how it should be. Pull the customers in with the coupon-carrot, get them to try your newest creation, don’t charge them full price for it, and hope they come back in droves. And meanwhile, your food costs jump in exchange for this. And you don’t count what you gave away as sales.
So, sales = cost a customer pays you (not Uncle Sam or Aunt South Dakota) for your food. Nothing more or less. In the words of master orator Jeff Spicoli: “Learn it, know it, live it.”
