Inventory costs are often a hidden cost that quietly eats away at your profit. Many restaurant owners know their food cost, but forget that money is tied up in the cooler and stock. In this article you'll learn exactly how to calculate inventory costs as a percentage of your revenue.
What exactly are inventory costs?
Inventory costs are the money tied up in all ingredients you've purchased but haven't sold yet. This is your groceries in the cooler, freezer, dry storage and bar.
💡 Example:
Restaurant De Buurman currently has in stock:
- Meat and fish: €2,400
- Vegetables and fruit: €800
- Dry storage: €1,200
- Beverages: €1,600
Total inventory value: €6,000
The formula for inventory cost percentage
You calculate inventory costs as a percentage of your monthly revenue with this formula:
Inventory cost % = (Total inventory value / Monthly revenue) × 100
Note: use your revenue excluding VAT for an accurate picture.
💡 Example calculation:
Restaurant De Buurman:
- Inventory value: €6,000
- Monthly revenue excl. VAT: €45,000
- Calculation: (€6,000 / €45,000) × 100 = 13.3%
This restaurant has 13.3% of its revenue tied up in inventory.
What is a healthy inventory percentage?
A typical inventory value for restaurants is between 8% and 15% of monthly revenue. This depends on your type of cuisine:
- Fast food/pizza: 6-10% (few fresh products, mostly shelf-stable)
- Casual dining: 10-15% (mix of fresh and shelf-stable)
- Fine dining: 12-18% (lots of fresh, expensive ingredients)
- Fish restaurant: 8-12% (daily fresh purchases, minimal stock)
⚠️ Watch out:
Above 20% becomes dangerous. Then you have too much money tied up in inventory that might be perishable or not rotating fast enough.
Why high inventory costs are dangerous
Too much inventory costs you money in three ways:
- Cashflow: Your money is tied up instead of working for you
- Spoilage: Products go past their expiration date
- Space: Your cooler is full, you lose track of what you have
💡 Impact calculation:
If your inventory percentage goes from 20% to 12%:
- Monthly revenue: €50,000
- Difference: 8% of €50,000 = €4,000
- You can use this money for marketing, renovations or just cashflow
How often should you count inventory?
For a good picture of your inventory costs, count your complete inventory at least once a month. Many restaurants do this at the end of the month, just before the new order arrives.
Practical tip: take photos of your inventory while counting. Then you can double-check things later without having to count again.
Digital vs. manual inventory tracking
Many kitchens still work with Excel or even paper. This takes a lot of time and mistakes slip in easily. A system like KitchenNmbrs helps you automatically track inventory values and see your inventory percentage right away.
The advantage: you see immediately if your inventory gets too high, instead of finding out at the end of the month when you count.
How do you calculate inventory cost percentage? (step by step)
Count your complete inventory value
Go through your entire kitchen: cooler, freezer, dry storage and bar. Write down everything you have and what it cost. Include partial packages too (estimate the percentage remaining).
Determine your monthly revenue excluding VAT
Take your revenue from last month and subtract the VAT. At 9% VAT: divide by 1.09. This gives you an accurate picture of your actual revenue.
Calculate the percentage
Divide your inventory value by your monthly revenue and multiply by 100. For example: €8,000 inventory / €60,000 revenue × 100 = 13.3% inventory costs.
✨ Pro tip
Check every week which products have been in your inventory for a long time. Put those on a special menu or use them in daily specials before they spoil.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Was this article helpful?
Frequently asked questions
Should I include VAT in my inventory calculation?
No, always calculate excluding VAT. Your inventory doesn't contain VAT (you only pay that when you sell) and you calculate your revenue excluding VAT too for a fair comparison.
What if my inventory percentage comes out above 20%?
Then you've probably ordered too much or have products that aren't selling fast enough. Check what's been sitting around and temporarily stop ordering those products until your inventory drops.
How often should I check my inventory percentage?
At least once a month, but weekly is better. That way you see trends and can adjust before you tie up too much money in inventory that might spoil.
Do half bottles and jars count too?
Yes, everything that has value counts. Estimate the percentage remaining. A half bottle of wine worth €20 counts as €10 in your inventory.
What's the difference between inventory costs and food cost?
Food cost is what you spend on ingredients per dish sold. Inventory costs are the money tied up in ingredients not yet sold. Both are important for your cashflow.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
Manage inventory without spreadsheets
Always know what you have in stock and what it's worth. KitchenNmbrs connects inventory to recipes and purchasing for complete oversight. Start your free trial.
Start free trial →