Management accounts for hospitality

Weekly figures and monthly accounts

Management accounts are the figures you use to run the business between one set of annual accounts and the next. In hospitality they come in two layers. Each week, a short set of figures from the till, the rota and the bank: sales, covers, spend per head, labour cost, and for rooms, occupancy and rate. Each month, a full profit and loss account with gross profit by department, overheads, and a balance sheet showing what the business owes.

The weekly figures come from systems you already run, so they can be ready on Monday for the week before. The monthly accounts need a stock count, the supplier invoices for the month, and adjustments for costs that arrive late, so they follow within two or three weeks of the month end.

Sales, covers and spend per head

Every figure starts from sales without VAT. Food and drink eaten on the premises carries 20% VAT, so £120 taken at the till is £100 of sales and £20 owed to HMRC. Cold takeaway food is zero-rated, so the same £120 of cold takeaway is £120 of sales. Your till's eat-in and takeaway totals give you the net figure.

Keep tips and service charges out of sales. An optional service charge is outside the scope of VAT, and tips paid out through a tronc belong to the staff. Leaving them out of both sales and labour keeps the percentages comparable from week to week.

Split sales by department: food, drink, rooms, and anything else, such as private hire or retail. Each has its own costs, and a total hides which part of the business moved.

A cover is one customer served a meal. Sales per cover, or average spend, is net food and drink sales divided by covers. £20,000 of sales from 640 covers is £31.25 a cover. A quieter week of £15,000 from 520 covers is £28.85.

The two numbers move sales in different ways. Covers count the customers served, and spend per head measures what each of them bought. A fall in covers points to bookings, footfall or opening hours. A fall in spend per head points to the menu, the prices, upselling, or a change in who is coming in. Track both by session, such as lunch and dinner, and by day of the week.

Gross profit percentage

Gross profit is sales less the cost of the food and drink sold. The gross profit percentage, or GP%, is gross profit divided by sales. Cost of sales for a period is the opening stock, plus purchases, less the closing stock. It needs a stock count at the start and end of the period, done on the same day of the month and at the same time each time.

Gross profit for a restaurant month

• Food sales £60,000; cost of sales £2,100 + £20,400 − £2,300 = £20,20066.3%
• Drink sales £26,000; cost of sales £3,000 + £7,700 − £3,100 = £7,60070.8%
• Gross profit on £86,000 of sales: £58,20067.7%

GP% and markup are different calculations. A dish priced at £18.00 including VAT is £15.00 net. If the ingredients cost £4.50, the gross profit is £10.50: 70% of the selling price, which is the GP%, and 233% of the cost, which is the markup. Menu pricing works on GP%, and suppliers and staff sometimes quote markup, so check which one a figure is.

Report food and drink separately. Drink carries alcohol duty inside the price you pay the brewer or wholesaler, and its gross profit moves with supplier prices and the mix of draught and bottled lines. Food gross profit moves with waste, portion sizes, staff meals, and prices from suppliers. A gap between the GP% your recipe costings predict and the GP% the stock count gives is the figure to investigate: it is made up of waste, over-portioning, items given away or not rung through, theft, and counting errors.

Labour percentage

Labour percentage is total labour cost divided by net sales. Total labour cost is gross pay, holiday pay, employer National Insurance and employer pension contributions, for everyone who works in the business that week, salaried managers included. A salaried head chef on £39,000 a year adds £750 a week to gross pay before employer costs.

Employer National Insurance is 15% above £5,000 a year per worker in 2026/27, and 0% for staff under 21 up to £50,270. Rolled-up holiday pay for irregular-hours staff is 12.07% of their pay. Leaving these out understates the true cost of each hour on the rota.

Labour cost as a share of sales in two weeks

• Busy week: £6,250 of labour on £20,000 of sales31.3%
• Quiet week: the same rota on £15,000 of sales41.7%

Labour percentage rises when sales fall, because the rota does not fall with them. Compare labour hours and cost to sales by day and by session, and set next week's rota from the forecast sales. Use the labour cost calculator to cost one shift pattern.

Rooms

Hotels, inns and B&Bs report rooms with three linked figures, each worked out on room revenue net of VAT and without breakfast or other meals:

• Occupancy is rooms sold divided by rooms available. A 20-room hotel has 140 rooms available in a week.
• Average daily rate, or ADR, is room revenue divided by rooms sold.
• Revenue per available room, or RevPAR, is room revenue divided by rooms available. It equals occupancy times ADR.

Two weeks for a 20-room hotel

126 of 140 rooms sold at £80

Occupancy 90%. Room revenue £10,080. Revenue per available room:

£72

105 of 140 rooms sold at £96

Occupancy 75%. Room revenue £10,080. Revenue per available room:

£72

The two weeks above earned the same room revenue in different ways. The first filled more rooms at a lower rate, which brings more breakfast and bar sales and more cleaning and laundry cost. The second sold fewer rooms at a higher rate. Set room revenue against those costs as well as RevPAR. Long stays of more than 28 days change the VAT, which changes net room revenue; see VAT on long hotel stays.

The monthly pack

A monthly management pack for a hospitality business contains:

• a profit and loss account by department, with gross profit for food, drink and rooms;
• overheads including rent, business rates, utilities, insurance, card fees, repairs and the cost of the booking and till systems;
• accruals for costs that belong to the month but have not been invoiced, such as utilities, and prepayments for costs paid in advance, such as insurance;
• a balance sheet showing VAT, PAYE, pension contributions, tips owed to staff, gift vouchers not yet used and deposits held;
• a comparison with the budget and with the same month last year; and
• a cash forecast for the next 13 weeks, with the VAT quarter, rent days and the PAYE dates in it.

Takings arrive before the VAT, PAYE and tips due out of them are paid, so part of the bank balance is owed to HMRC and to staff.

Cash in the bank against what is already owed

• Bank balance at month end£42,000
• VAT for the quarter so far−£11,500
• PAYE and National Insurance due on the 22nd−£6,200
• Card tips owed to staff−£2,300
• Gift vouchers sold and not yet used−£3,000
• Deposits held for future bookings−£1,800
• Cash the business can spend£17,200

Reading the figures

Read each figure against three comparisons: the plan for the period, the same period last year, and the trend over the last six to eight weeks. Look for movement in the same direction over several weeks before changing prices or the rota.

• Sales down, covers down and spend per head steady: fewer customers. Look at bookings, opening hours, weather and local events.
• Sales steady, covers up and spend per head down: customers are buying less each. Look at the menu mix and pricing.
• GP% down with sales steady: costs per plate have risen. Check supplier prices, waste records and the stock count.
• Labour percentage up with sales steady: more hours were worked. Check the rota against the forecast.
• Occupancy up and RevPAR flat: rooms were sold more cheaply. Check discounting and the channels the bookings came through.

Records and deadlines

The monthly cycle runs alongside the tax deadlines it feeds. Payroll is reported on or before each payday and PAYE paid by the 22nd of the next month. Tips are paid out by the end of the month after the customer paid. VAT returns and payment are due one calendar month and 7 days after each quarter ends, so the VAT figure in the monthly accounts should match the return.

Keep stock sheets, rota and payroll exports, till reports and supplier statements with each month's pack. A company keeps its accounting records for 6 years from the end of the financial year they relate to.

Common mistakes

• Reporting sales with VAT in them, which overstates sales by up to a fifth and flatters every percentage.
• Working out GP% from purchases without a stock count.
• Leaving salaried managers, holiday pay or employer National Insurance out of labour cost.
• Counting tips and service charges in sales.
• Reading RevPAR without the cost of the extra rooms sold.
• Treating the bank balance as profit while VAT, PAYE, tips and vouchers are still owed.

How we help

Business Pulse sets your sales, labour, gross profit and cash against your budget, with monthly or quarterly management accounts and a review with Peter Allen, our Finance Director. It starts from £375 + VAT a month for quarterly reporting and from £499 + VAT a month for monthly reporting. See Business Pulse for hospitality, or an outsourced finance team from £750 + VAT a month.