Restaurant Financial Control Trouble? Here’s Why

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financial control

financial control

 

A robust control system is a critical success factor for any restaurants. The article highlights areas of concerns

1.  No structure profit and loss statement

2.  In ability to read one

3.  No financial forecasting

4.  No standard recipes

5.  No measure of variance.

6.  No inventories

7.  No revenue control, system

8.  No cost control system

9.  No payment control system

10. No bank reconciliation

11. No cashier control

Mango Kurry Kitchen & Restaurant Consultant in Mumbai India can establish , review your restaurant control system. A strong control system can highlight areas of improvement and enable the restaurant to be more efficient.

You’re in trouble with the absence of restaurant financial controls

Mango Kurry is a kitchen and restaurant consultant in Mumbai, India. using a process based methodology all the control needs can be mapped and a system formed. Strong controls is a critical success factor for any restaurant.

There are clear lack of benchmarks in our industry. The industry is fragmented but below are some of the control system a restaurant must have to prevent leakages or shrinkage.

These are hygiene factors. Which means that if you have them its ok but you still have sales to build but if you don’t you will be in trouble.

A strong clearly defined process helps you to have more time to more relevant restaurant sales building activities.

The areas of concerns

1.  No structure profit and loss statement

2.  In ability to read one

3.  No financial forecasting

4.  No standard recipes

5.  No measure of variance.

6.  No inventories

7.  No revenue control, system

8.  No cost control system

9.  No payment control system

10. No bank reconciliation

11. No cashier control

1.  No structured profit and loss statement

USAR or uniforms system of accounting for restaurants as established internationally by NRA has set out some pragmatic standards which allow for comparison.

Poorly structured statements don’t allows for easy comparison over periods. The statement schedules must relate to multiple index of variability like occupancy, capacity and area.

The central idea is that we learn by identifying patterns. Can you recognise yours.

 

2.  In ability to read one

The restaurant owner must be able to read the statement. Must have a budget in mind for each schedule and how is responsible. In a sense the profit and loss statement is an appraisal for your plan for profits.

 

3.  No financial forecasting

Restaurant owners need to be able to see the future. Its no use to have a quarterly review. Everyday you need to know how your quarter will end. Are you making it. Too often its too late to do anything.

 

4.  No standard recipes

The magnanimous chef creating his new dishes but has not time to document them. Its a cardinal sin! Restaurant Owners need to know how the dish is made and how much does it costs. The implication are tremendous. You may be hitting your desired food cost but may have the potential for a lower base. Without knowing your costs you cannot have a creative pricing strategy. Nor can you plan for profit.

 

5.  No measure of variance.

Whats is your potential food cost and what is your actual and what item have been consumed in excess.

This same line of thought can be used to compare every line item in the schedule. How much soap solution budgeted versus actual. This will give you time to raise red flags. It will make you ask the fundamental questions how do you budget for consumption of liquid soap. How does the vendor quote the rate to you, what the dilution ratio.

6.  No inventories

I have come across so many restaurants who do not take inventories. Liquor inventory has to be done on a daily basis. There have to be month end inventories. Need to be aware of the shrinkage, theft, pilferage and the amount of money stuck in inventories. Your slow moving and fast moving. Your expired food stuffs.

 

7.  No revenue control, system

How do you make sure that there is no leakage form the amount of money you are supposed to make. What are the control of kitchen order ticket, do you have many open items in your POS.

 

8.  No cost control system

How do you ensure you are not paying more for your inventory. Do you vendor selection procedure. Do you ensure that food is being served at a known cost. Do have a contractual review system.

 

9.  No payment control system

How do you ensure that you don’t pay double or more to any vendors. Is there a process where a controller can check if the vendor is approved, does have a contracted rate, where the goods received, have the rates been agreed to, is the bill accurate, has the accountant made the entries.

 

10. No bank reconciliation

Bank reconciliation not done. Its the most important tool to check the accuracy of your accounting data. The more delay, the bigger the variance, and bigger the problem.

 

11. No cashier control

Restaurants deal in cash and in the realm of great service their are cancellations, amendments to bills. More money can be lost at this point than any other. Do you have a defined cashier control system which will prevent him to abuse his position.

 

No amount of controls can replace a restaurant loosing money on account of bad food and service or poor marketing to get the volume of business. How ever, it is still of great significance. In fact it can prevent you to reach a stage where you are loosing money.

 

Please do give your feedback.

As a kitchen a restaurant consultant in Mumbai,India I can set up a process based control system which can place you and your restaurant on a strong footing.

About the author 

Sartaj S Bedi

With 20-year restaurant industry expertise, offering insights and expertise in strategy, operations, and quality. He employs a holistic approach to guide clients towards strategic success.

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