For my first article I want to talk about something that is integral to the success of any restaurant. Although anyone in the restaurant business has heard of it, it is amazing how many independent restaurants do not do inventory at all. Its a fact that most independent restaurants do not or never have done inventory since day one.
Everyone that's ever done inventory knows it is a tedious, time consuming task but a necessary evil. I think the two main reasons why it gets neglected is that either they don't know how to do it or they don't realize how important it is. Inventory is essential to having your finger on the pulse of your business.
Here are some of the safeguards we monitor when doing inventory:
- Maintaining proper stocks
- Having a front seat perspective on what you are paying for your products
- Catching possible theft
- Monitoring over ordering so as to not hurt cash flow
- Determine accurate Cost Of Goods sold to contain profitability
- Maintain freshness and quality with proper rotation of products
- Know how much you are spending by category in your business
As the list above is important, there is a more important reason for coming up with an accurate ending inventory number. Please look at the excerpt from a generic Profit and loss statement. In the first column is what most restaurants log into there profit & loss statement without the offsetting of your inventory number. As you can see in the second column the difference of offsetting the inventory figure.
Just to make sure it is clear, in the second column the math goes purchases + Beginning inventory - Ending inventory= Cost of sales. Some points to notice, with the proper inventory procedure it gives this restaurant a 12% decrease in cost of goods which means a 12% increase in profit which puts an extra $3,000 in your pocket.
Until next time ......
See ya on the flip side.