Pizza Today - January 2021 - 35

making money. Finally, the smartest
among us discover the fourth purpose
of accounting; to grow our business.
Let us begin with the basic tools
needed in this classroom/office. We will
need a bookkeeper, and accounting program (i.e. QuickBooks), an accountant,
and a payroll company.
After we have our basic tools, we
will need a system. This consists of a
weekly check run to pay bills, weekly
or monthly inventory, payroll reporting,
monthly bank reconciliation, monthly
P&Ls, and quarterly Balance Sheet.
With these tools and systems, you are
now paying your bills, paying your
taxes, and you know if you are making
money.
I have met very few business owners who have graduated to the next
level. These few are the most successful
businesspeople I know. The next level
is using these financials to grow your
pizzeria business.
I began by saying the P&L is like a
report card. It tells you how your pizzeria (the Student) is performing during
that period. The measure is profitability.
Did your pizzeria get an 'A', 'B', or some
lesser grade? However, the report card
does not tell you everything. Enter the
Balance Sheet, aka your (the Parent's)
report card. Your accountant (the
Teacher) should produce both for you
each month. It is the study of this data
that will help you graduate to the next
level of business management.
The P&L
First, look at your sales. Are your
sales trending up, down or static? How
do they compare to the same period of
the previous year?
Next, look at your COGS (Cost of
Goods Sold). These are your food and
labor costs, also known as your 'variable'
or 'controllable' costs. You have direct
control of these dollars spent. A pizzeria should run anywhere from
50 percent (an A+) to 65 percent (a
passing C-).
Following your COGS are the
EXPENSES, also known as 'non-

variable' or 'fixed' costs. These include
all your business expenses after COGS.
'Fixed' is really a misnomer as you do
have control over these costs. Is the
air-conditioner programmed correctly?
Do you have cash shortages? Are you
maintaining your equipment? Although
you have control over these costs, the
expression 'Chasing the pennies while
the dollars fly away' applies here. The
expenses are the pennies. Control the
expenses by looking at them monthly
but focus on where the dollars are. Food
& Labor costs make or break pizzerias.
The Balance Sheet
Only one number flows from the
P&L's to the Balance Sheet. The 'Net
Income', the bottom line. So, what are
all those other numbers on the Balance Sheet all about? Good question.
Like you, I am the Parent, the pizzeria
owner.
I first learned how to read a P&L
because I had to. I knew that if I did
not have a positive number, a profit,
on the bottom line of the P&L, then I
would not be able to pay my bills. The
Balance Sheet was more difficult. At
first it did not seem very important.
Come tax season, my accountant
would print the Balance Sheet and start
asking questions about my business.
They were not profitability questions.
The questions were about equipment,
remodeling, inventory, loans and credit
card debt. When I decided to open a
second pizzeria, the landlord asked for
my current Balance Sheet. The Balance
Sheet began to seem important.
Your accountant will teach you how
to read the Balance Sheet. I have always
believed that to succeed, you must surround yourself with experts. The expert
is the accountant, your Teacher. We are
the Parent of the pizzeria. What has
this Parent learned?
The Balance Sheet is a snapshot of
the business at any moment. It has
three parts: Assets, Liabilities and
Equity.
Assets shows how much money you
have 'on the shelf '. This includes cash in

the bank and in your till, food, supplies, equipment, autos and building
improvements.
Liabilities shows the money you owe.
Equity shows where the money came
from.
The Office
KPI is an acronym for Key Performance Indicator. By identifying key
financial areas that you need to measure
performance, you will set your business
on the road to success.
Each month your accountant should
print a set of P&Ls for the month. Set
a monthly appointment with yourself
and a key manager to review your
P&L KPIs. Quarterly, meet with your
accountant to review both your P&L
KPIs and your Balance Sheet KPIs. I
recommend the following KPIs:
From the P&Ls
1. Sales. How are the sales trending?
What needs to change?
2. COGS. What are the food and
labor cost percentages? How can they
be improved?
3. Bottom line. Do you have a profit
or loss? What needs to change?
From the Balance Sheet
1. What is the Quick Ratio?
2. What is the Working Capital?
3. What is the Debt-to-Equity
Ratio?
These Balance Sheet metrics are what
banks and landlords look at. They are
not critical to your day-to-day operations but are a good measure of the
health of your business.
OK, office time is up. Back to doing
what you do best; satisfying customers
with the best pizza on the planet. But
remember, sometimes you must step
away from the pizza. Come back to
the office regularly to make your life's
investment profitable! n
DAN COLLIER is the founder of Pizza
Man Dan's in California and a speaker at
International Pizza Expo.
J A N UA R Y 2 0 2 1 / P I Z Z AT O D AY. C O M / 3 5

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http://www.PIZZATODAY.COM

Pizza Today - January 2021

Table of Contents for the Digital Edition of Pizza Today - January 2021

Pizza Today - January 2021
Commentary
Digital
Conversation
Mike’s Monthly Tip
Man on the Street
Building Blocks
Tony’s Trending Recipe
Knead to Know
Destinations
Business Forecasting
Cleaning Protocols
Studying the Numbers
Lasagna
Small Market Menus
Chicken Pizzas
COVID-19 Mental Fatigue
New Year’s Business Resolutions
Product Showcase
Pizza Today Yellow Pages
The Marketplace
Expo Spotlight
Pizza Today - January 2021 - CT1
Pizza Today - January 2021 - CT2
Pizza Today - January 2021 - Pizza Today - January 2021
Pizza Today - January 2021 - Cover2
Pizza Today - January 2021 - Commentary
Pizza Today - January 2021 - 4
Pizza Today - January 2021 - 5
Pizza Today - January 2021 - 6
Pizza Today - January 2021 - 7
Pizza Today - January 2021 - Digital
Pizza Today - January 2021 - 9
Pizza Today - January 2021 - Conversation
Pizza Today - January 2021 - 11
Pizza Today - January 2021 - Mike’s Monthly Tip
Pizza Today - January 2021 - 13
Pizza Today - January 2021 - Man on the Street
Pizza Today - January 2021 - 15
Pizza Today - January 2021 - Building Blocks
Pizza Today - January 2021 - 17
Pizza Today - January 2021 - Tony’s Trending Recipe
Pizza Today - January 2021 - 19
Pizza Today - January 2021 - Knead to Know
Pizza Today - January 2021 - 21
Pizza Today - January 2021 - 22
Pizza Today - January 2021 - 23
Pizza Today - January 2021 - Destinations
Pizza Today - January 2021 - 25
Pizza Today - January 2021 - Business Forecasting
Pizza Today - January 2021 - 27
Pizza Today - January 2021 - 28
Pizza Today - January 2021 - 29
Pizza Today - January 2021 - Cleaning Protocols
Pizza Today - January 2021 - 31
Pizza Today - January 2021 - 32
Pizza Today - January 2021 - 33
Pizza Today - January 2021 - Studying the Numbers
Pizza Today - January 2021 - 35
Pizza Today - January 2021 - 36
Pizza Today - January 2021 - 37
Pizza Today - January 2021 - Lasagna
Pizza Today - January 2021 - 39
Pizza Today - January 2021 - Small Market Menus
Pizza Today - January 2021 - 41
Pizza Today - January 2021 - Chicken Pizzas
Pizza Today - January 2021 - 43
Pizza Today - January 2021 - COVID-19 Mental Fatigue
Pizza Today - January 2021 - 45
Pizza Today - January 2021 - New Year’s Business Resolutions
Pizza Today - January 2021 - 47
Pizza Today - January 2021 - 48
Pizza Today - January 2021 - 49
Pizza Today - January 2021 - Product Showcase
Pizza Today - January 2021 - 51
Pizza Today - January 2021 - Pizza Today Yellow Pages
Pizza Today - January 2021 - 53
Pizza Today - January 2021 - 54
Pizza Today - January 2021 - 55
Pizza Today - January 2021 - 56
Pizza Today - January 2021 - 57
Pizza Today - January 2021 - The Marketplace
Pizza Today - January 2021 - 59
Pizza Today - January 2021 - 60
Pizza Today - January 2021 - 61
Pizza Today - January 2021 - 62
Pizza Today - January 2021 - 63
Pizza Today - January 2021 - 64
Pizza Today - January 2021 - Expo Spotlight
Pizza Today - January 2021 - 66
Pizza Today - January 2021 - Cover3
Pizza Today - January 2021 - Cover4
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