Forget the monthly approach to cost control. By the time you actually receive your food, beverage and labor cost figures, it's already too late. It's impossible to correct operational problems like spoilage, theft, incorrect portioning, over-pouring, and scheduling problems that occurred last month.
Instead of the normal monthly reporting format, try a 4-week accounting period. The 4-week system requires weekly reporting of prime costs—food, beverage and direct labor. Those numbers represent close to 60% of sales in the typical full service restaurant. This system gives you weekly food and beverage inventories and direct labor cost reconciliations in real time — that means in time to do something about it.
When bar, dining room, and kitchen supervisors manage their inventories and schedules weekly, their management focus and day-to-day priorities change. They tend to develop a proactive mindset, and are less susceptible to performing in a reactive and disorganized manner.
Four-week accounting periods allow you to make meaningful comparisons of your costs and performance from period to period, or from year to year. No more wondering why labor costs were so high one month and low the next. Each period has 4 Saturdays, 4 Sundays, 4 Mondays — you get the idea.
End each weekly cycle at the close of business Sunday night. Busy weekends leave product levels at their lowest. First thing each Monday morning, take a complete food and beverage inventory. Lower inventory means less to count and more accurate results.
Reconciling your weekly labor cost is similar. A Sunday night cutoff works well with labor costs, too. Payroll becomes biweekly instead of semi-monthly, and each payroll will have two weekends... and only two weekends. You'll be able to plan your cash flow to accommodate the impact of payroll on your monthly bank balances. You'll also avoid weekend paydays, distribute paychecks on the same day at the same time every two weeks, and employees will appreciate the regularity and predictability.
Keep your finger on the pulse of your business. Know your food, beverage and labor cost by noon each Monday. If you do nothing else this year, I guarantee your profitability will improve.
Be forewarned. Your accountant won't like this system... but your bank balance will look much better. It's your decision. We use the Weekly Flash Report to measure performance and we've included one for you to use. Download a form that's ready to reproduce and be filled-in by hand, or a Microsoft Excel worksheet that does some of the calculations for you.