12.3. Prime Cost and the Impact of Business Expenses

Every business expense you enter in Ritapos flows into Prime cost analysis. Not every expense affects prime cost in the same way. In this lesson you learn which expenses count toward prime cost, which ones only reduce the remaining amount, and how to read the results correctly. The tool itself is covered in 5.7. Prime Cost Tool.

Open Reports & Tools > Tools > Prime cost analysis. Choose a date range and click Generate report. At the top, Target prime cost has the Very low, Low, Medium, High and Very high buttons and a slider. The report fields fill in as Net income with tax (from sales), Personnel expenses (from expenses) and Other operating expenses (from expenses). Cards show Actual prime cost (with a status label such as On target), Suggested sales for target and Remaining. Below you see the Cost stack chart and the Expense categories breakdown table on the same screen (Group, Type, Amount, Count, Expense share, Revenue share).

12.3.1. What prime cost covers

Prime cost is the cost of goods sold plus labor cost. Overhead such as rent, utilities and equipment is not part of prime cost (Sage, 2024). Ritapos makes the same split:

• Prime cost = Food cost + Personnel expenses
• Actual prime cost % = Prime cost / Net income with tax x 100
• Remaining = Net income with tax - Food cost - Personnel expenses - Other operating expenses

Food cost does not come from expenses. It comes from the product cost copied onto the order line at the time of sale. So an expense you enter on Expenses > Expenses does not change food cost.

12.3.2. Expenses fall into two types

Ritapos puts every expense in the selected period into one of two types:

• Personnel expenses: Added to prime cost. When you enter one, both the prime cost amount and the Actual prime cost ratio go up.
• Other operating expenses: Not added to prime cost. They do not change the ratio; they only reduce Remaining.

An expense counts as a staff expense if its group name or title contains one of these words: personel, çalışan, maaş, ücret, SGK, bordro, prim, bonus, salary, employee, labor, wage or payroll. The full rule is in 12.2. Business Expenses.

12.3.3. Example: same amount, different effect

Example (sample data, same starting point as the example in lesson 5.7):

• Net income with tax 1,000,000.00₺, food cost 300,000.00₺, personnel expenses 280,000.00₺, other operating expenses 250,000.00₺
• Prime cost: 300,000 + 280,000 = 580,000.00₺, ratio 58%. Remaining: 170,000.00₺

Now imagine you add one more expense of 20,000.00₺ in the same period.

• If it is an SGK payment in the Personel group: Personnel expenses become 300,000.00₺. Prime cost becomes 600,000.00₺ and the ratio 60%. Remaining becomes 150,000.00₺.
• If it is in the Rent group: Other operating expenses become 270,000.00₺. Prime cost stays at 580,000.00₺ and the ratio at 58%. Remaining also becomes 150,000.00₺.

In both cases the remaining amount drops by the same sum. The difference is the prime cost ratio. A staff expense raises the ratio and changes how you compare against your target. Other expenses only affect the remaining amount.

12.3.4. Which expenses fall into which period

Prime cost analysis looks at the Date field on the expense form. Expenses dated inside the selected range are counted. The date written on the form counts, not the day you paid.

• Date monthly expenses such as salaries and SGK in the correct month.
• Read the report by month for these expenses. A short period can show a monthly salary payment as a ratio that is too high, and a period without the payment can show one that is too low.
• Enter all expenses for the period. Missing staff expenses make the prime cost ratio look too low; missing other expenses make the remaining amount look too high.

12.3.5. Naming expenses correctly and saving them

We recommend a group named Personel for staff payments. Take care when naming other expenses too. For example, a shipping or courier expense whose title contains ücret counts as a staff expense even if it is in another group. Give such expenses short titles like Kargo or Kurye.

For a lasting record, open Expenses > Expenses and use the green + to open the New expense panel. The form has Expense category, Title, Description, Amount, Payment method, Payment source, Is recursive?, Date, plus Cancel and Save.

On Expenses > Expense categories, you manage group names. The table has only Name and Actions columns; there is no Type column on this page.

In the Expense categories table on the Prime cost analysis screen, the Type column reflects only the group name; check staffing with the From expenses value under Personnel expenses.

12.3.6. Correcting values on screen

You can change the values in the Personnel expenses and Other operating expenses fields on screen. This lets you see the result with an expense you have not entered yet. The change does not alter your expense records. When you build the report again, the fields fill from your recorded expenses. For a lasting result, enter the expense on Expenses > Expenses.

Sources

• The BC Cook Articulation Committee (2015). Basic Kitchen and Food Service Management. BCcampus. Chapter: The Basic Calculation of Operating Costs. opentextbc.ca
• Fuesz, B. (2024). What every restaurant operator needs to know about prime cost. Sage Advice US. sage.com