Down for the count

Most people get depressed at the thought of taking a physical inventory. It can be downright boring, time consuming and burdensome, especially since we rarely take the time to correctly set up and systematize the process.

No wonder many operators don't even bother to take inventory. They feel it's a waste of time... time better spent dealing with the day-to-day operational tasks of producing quality food, keeping guests happy, and putting out fires. Important tasks, but they don't ensure that you're keeping costs in line and reaping the maximum profit potential from your operation.

Some operators take inventory just because their accountant or bookkeeper needs the information to generate financial statements. Again, this is important but it's not the best reason to take inventory. Performing a physical inventory can both identify and discourage theft, increase awareness of the habits of employees with regard to organization, rotation, storage and usage of products, as well as provide information about current stock levels for more efficient purchasing.

The problem with monthly inventories
Most food and beverage operations perform inventories on the last day of the month (or accounting period). It may take between 5 and 10 days to close out the month and calculate the cost of goods sold. Information that is five weeks old is fairly useless. It's difficult, if not impossible, to locate the cause of any problems. And even if it can be identified, it's usually too late to correct it. The result? You lose money.

Conduct weekly inventories
To eliminate the lag time in detecting inventory and cost problems, I strongly recommended taking physical inventories weekly, at the close of business Sunday evening or early on Monday morning before opening for business. If most of the relative information has been properly recorded during the previous week, it should be easy to generate food and beverage costs by noon every Monday... in plenty of time to correct any problems or adjust purchases. By the way, I recommend the same weekly system for labor costs, too! Check out Act Now Before It's Too Late for details on weekly flash reporting.

Finally, once your weekly inventory has been taken, you can calculate your Inventory Turnover Ratio (ITR) — the measurement of the relationship between food inventory on hand and food products consumed. According to Peter Drucker, "If you can measure it, you can manage it." And good inventory management means a lower inventory, less waste and spoilage, and a lower total food cost.

We've provided some guidelines for setting up a weekly inventory system , as well as inventory set-up sheets for both food and beverage . For a complete inventory guide, including forms and automated count sheets, the Trade Secrets Food & Beverage Inventory Manual is available on-line at http://store.yahoo.com/tradesecrets/foodbevinman.html.

See also:
Act now before it's too late
The meat goes on


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