Food and Beverage Cost Control
Introduction
There are four main categories of costs that any food and beverage service manager must concern himself with. Food cost is one of the largest expenses and refers to the costs associated with the actual production of the foods on the menu. Beverage costs on the other hand refer to costs related to the sale of alcoholic beverages like wine and beer. Ingredients needed to come up with these beverages are also included in the beverage cost. Labor costs refer to the cost of all the employees needed for the smooth running of the restaurant/business. Overhead costs are all other costs that are neither food, beverage nor labor costs. They include rent, electricity and water bills.
Main Body
The most effective labor cost tool is the assessment of the business. One should know the trend that has been in the business and how long the business operates. This way he will be able to know how many employees, permanent or temporary are needed in a day or per shift. The number of employees per shift should be in comparison with the workload that is expected to be covered in a specified duration. For example to know the number of staff needed in a restaurant the manager should have a rough estimate of how many customers they get in a day or better still per meal (breakfast, lunch, dinner) from the three meals he should estimate when the customers are the most and calculate the number of employees that will be required for the lunch or dinner shift. To further save on labor costs, the manager should also look for employees that can multitask such that instead of hiring two employees for two distinct tasks, he can have one employee that can do both tasks at alternating shifts. Hayes 2010 The manger can also cross train his staff over time such that they all can perform more than one task in the business.
Most food service operators scrutinize their labor costs by comparing projected and actual sales with estimated payroll percentage and actual payroll costs. This entails the preparation of the employees’ schedules and the calculation of their wage or salary which will include benefits like medical benefits. These calculations enable the management to come up with realistic labor cost percentage that can be summed up with the food and beverage cost percentage to come up with a prime cost.Employee inadequate performance can not only be attributed to the employees but also to the poor management performance. They include improper working materials, lack of required tools, lack of adequate training or lack of adequate managerial supervision. Keefe.2008
Revenue collection is important to all business and each business should therefore know the amount of revenue to be collected. When the revenue is unknown shortages will likely occur and they will go on unless the manager identifies the cause of shortage and the time that it occurs and if possible can trace the cash shortage to a specific individual. The manger should also be keen to account for any small shortages as with time they would accumulate to a large sum of money that he will not be able to trace thereby running the business at a loss. Hayes 2006The employees should be notified not to undercharge as this will result to the business not achieving the budgeted revenue expected. Undercharging will also result to the product and labor costs going up as compared to if the customers were being correctly charged. Undercharging will also significantly reduce the cash flow and the profit margins set will not be achieved.
Overcharging on the other hand will result to a decline in the customers once they discover the pricing is too high in comparison to other similar businesses/restaurants. The employees can also devise mischievous means of overcharging the staff and pocketing the extra cash as a way of increasing their income. Overcharging generally puts the reputation of the business/restaurant in jeopardy.To establish an effective control system, the business/restaurant should note all purchased items with their correct quantities and with the correct pricing as indicated in the price list. The total sum of all the items purchased by the customers should also be indicated. In most business this can be effectively done through receipting of the items purchased where the customer and the business retains a copy each. The main goal of revenue collection is to have the correct revenue collected and properly transacted. It is therefore advisable to identify one employee to do that work so that the cash can be adequately reconciled at the end of the day.
To prevent falsification of bank deposit totals the managerial office should ensure daily deposits are made and ensure completed bank reconciliations are done every month in comparison to the daily bank deposit records or bank statements. To reduce the time spent during verification of the baking activity the manager can opt can use on-line banking features instead.. It is also advisable to frequently employ a n external auditor who will examine the accuracy of the deposits and bank account activities over time.
Conclusion
In conclusion, the management should ensure that the business has effective internal revenue controls and that this controls are not limited to one or two individual but are rotated over time. It’s also necessary to prescreen employees before hiring them to ensure only those with integrity are hired. Any modification done to the revenue reports should be re-checked and confirmed by another manager.
References
Hayes, D.K. food and beverage cost control. John wiley and sons.2010
Keefe D.J., Dittmer, R.P. principle of food, beverage and labor cost controls. John wiley and sons.2008
Miller, A., Hayes, D.K. revenue management for the hospitality industry. John wiley and sons.2010
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