Understanding Costs: Expenses vs Ingredients

• Learn the difference between Purchase Orders (for ingredients) and Expenses (for operating costs)
• Understand how both systems feed into your Profit & Loss statement
• Avoid double-counting costs that would skew your financial picture

Why This Matters

BakeOnyx tracks your bakery's money in two separate ways because ingredients and operating costs behave differently. When you buy flour, it becomes part of your recipe cost. When you pay rent, it's an overhead expense. Your P&L Dashboard brings both together to show your true profit — but only if you use the right system for each purchase.

Using the wrong system for a cost doesn't just create messy records. It can double-count expenses and make your financial reports unreliable. This guide will help you know exactly which system to use for every purchase.

System 1: Purchase Orders for Ingredients

Use Purchase Orders when you buy anything that goes into a recipe — flour, sugar, butter, milk, eggs, chocolate, nuts, or any ingredient that becomes part of your baked goods.

How Purchase Orders Work

1. Go to /dashboard/purchase-orders
2. Create a new Purchase Order with your supplier details and ingredient list
3. When the order arrives, mark it as Received
4. BakeOnyx automatically updates your ingredient stock and records the cost
5. When you fulfill a customer order that uses those ingredients, the recipe cost is calculated and added to Cost of Goods Sold (COGS) on your P&L

System 2: Expenses for Operating Costs

Use Expenses for everything else — the costs of running your business that don't go into recipes.

Common Expense Categories

• Rent — your bakery space
• Utilities — electricity, gas, water
• Insurance — business liability, equipment
• Marketing — social media ads, flyers, website
• Delivery — fuel for your delivery van
• Equipment — ovens, mixers, display cases
• Professional services — accounting, legal advice
• Labour overhead — payroll taxes, training

How to Record an Expense

1. Go to /dashboard/expenses
2. Click Add Expense
3. Enter the amount and select the appropriate category
4. Add a description (e.g., "Monthly rent — 123 Main St")
5. Save

These expenses appear as Operating Expenses on your P&L Dashboard and reduce your net profit.

The Gray Area: Packaging and Small Supplies

Some items might seem to fit both categories — like packaging boxes, labels, or small ingredient purchases you don't want to track in inventory.

• Packaging boxes: Can be recorded as an Expense (packaging category) or tracked via Purchase Orders if you want inventory control
• Small incidental ingredients: Can use the "Ingredients" expense category for one-off purchases you don't need to track in inventory
• Supplies: Use the Supplies category under Expenses

Choose based on whether you want to track inventory. For regular, bulk purchases, use Purchase Orders. For occasional, small purchases, use Expenses.

Seeing Your Complete Financial Picture

Both systems feed into your P&L Dashboard at /dashboard/reports → Profit & Loss. Here's what you'll see:

• Revenue: Money from customer orders
• COGS (Cost of Goods Sold): Ingredient costs from Purchase Orders, plus labour and overhead
• Gross Profit: Revenue minus COGS
• Operating Expenses: All expenses from your Expense entries
• Net Profit: Your actual profit after all costs

For a deeper look at ingredient costs, use the Food Cost Report. For operating cost breakdown, use the Expense Report.

Next Steps

• Reports Overview — Learn how to read all your financial reports
• Adding and Managing Ingredients — Set up your ingredient inventory
• Business Profile Settings — Configure your bakery details for accurate reporting