AI Can Spot That Your Food Cost Went Up. What Happens Next?

By ProfitWise - a Visa Business Plans company

A restaurant owner looks at his monthly financials and sees that food cost has gone from 29% to 34%.

That’s a significant change. And today, technology can make it easier than ever to spot it.

But before the owner starts raising menu prices or calling suppliers, there’s something else we need to know.

Is 34% actually the right number?

That’s where the conversation about AI and bookkeeping gets more interesting.

Technology can do an incredible amount of the work that once had to be done manually. But restaurant bookkeeping still requires judgment because not every transaction is as straightforward as it appears.

Suppose the restaurant replaced a refrigerator that month. If that purchase ends up in the wrong expense category, the financial statements may tell a very different story. The same can happen with vendor credits, refunds, or purchases that aren’t part of the restaurant’s normal food costs.

Before you can ask why food cost went up, you need to know that it actually did.

That’s one reason we don’t see bookkeeping as simply entering transactions into QuickBooks. At ProfitWise, we want to understand the business behind those transactions. When something looks unusual, we investigate it because the analysis that comes afterward is only useful if the numbers we’re starting with are reliable.

Now let’s assume the books are correct and food cost really did increase to 34%.

That’s when the next conversation begins.

Maybe the restaurant’s biggest supplier increased prices and nobody realized how much those increases were adding up. Perhaps the kitchen has gradually become more generous with portions. There may be more waste than usual, or the mix of what customers are ordering may have changed.

Consider a steakhouse where customers suddenly start ordering significantly more of a popular steak entrée that has become more expensive to produce. Sales could be strong while the restaurant’s overall food cost percentage quietly moves in the wrong direction.

A report can show us the change. Understanding what’s happening inside the restaurant requires looking further.

This is where experience becomes particularly valuable.

At ProfitWise, when we meet with our restaurant bookkeeping clients each month, we don’t simply hand them financial statements. We go through the numbers together. If something has changed, we want to understand what was happening in the business at the same time.

Sometimes the explanation is simple. An ingredient price increased temporarily, and there’s nothing the owner needs to do.

Other times, the discussion leads somewhere more important. Maybe several menu items haven’t been repriced in years. Perhaps portions need to be reviewed with the kitchen. Or the restaurant may discover that some of its most popular dishes aren’t producing the margins the owner assumed they were.

Knowing that food cost increased is useful.

Knowing why it increased gives the owner something they can actually work with.

And knowing what to do about it requires another level of judgment.

Raising menu prices may seem like the obvious solution, but that doesn’t mean increasing every item by the same percentage makes sense. The owner may be better off adjusting a few dishes, changing portions, negotiating with a supplier, reducing waste or simply monitoring the situation for another month before making any changes.

There isn’t a formula that produces the right answer for every restaurant.

That’s why we see technology and experience working together rather than competing with each other. Technology can help us work faster and identify information that deserves attention. Good bookkeeping makes sure the information we’re looking at is reliable. Then experience, judgment and a real conversation with the owner help us understand what those numbers mean for that particular restaurant.

Seeing that food cost went from 29% to 34% is only the beginning. The useful part is figuring out what happened along the way.

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