Updated: Jul 4
Your restaurant's inventory is one of your biggest expenses consuming as much 40% of your cost in some restaurants. In addition to being one of your highest costs, it can also be the most difficult to control. This is why more and more bars and restaurants are turning to outside auditors as part of their inventory control strategy and here are seven reasons why you should do the same!
THE RESTAURANT INDUSTRY HAS A LOWER PROFIT MARGIN WHICH MEANS THERE IS VERY LITTLE ROOM FOR MISTAKES!
The average profit margin for a restaurant operating in the modern era is just 8% for every $150K in revenue. This means that your restaurant literally can't afford to lose 5% - 8% of your inventory cost.
YOU HIRED YOUR MANAGERS TO CONTROL YOUR INVENTORY COST. YOU HIRE OUTSIDE AUDITORS TO SUPPORT AND CONFIRM!
Having a system of checks and balances is business smarts 101 and that's exactly what your outside auditors can provide.
The role of outside auditors isn't to control your cost, that is why you hired your managers. The role of outside auditors is to simply make sure things are going as they should. You never want the same person who is responsible for managing the cash to also report on the cash without some form of checks and balances.
Having outside auditors visit weekly, bi-weekly, monthly, or even quarterly can really have an impact!
WATCHING YOUR PURCHASES ISN'T ENOUGH TO IDENTIFY PROBLEMS
Simply watching your purchases as a means of determining your cost and identifying problems isn't enough. Although this is method is helpful, it has one significant problem. It can't tell you exactly what you're missing because it can't tell you what is on your shelves.
Monitoring your purchases is good, it's just not enough!
INVENTORY IN A RESTAURANT IS NOT AS EASY AS THEY TELL YOU IT IS
Okay, it's not rocket science to manage your restaurants' inventory but there are some complexities that make it much tougher than simply counting items. The restaurant industry is one of the few industries that combines manufacturing of a product at the same location where you sell the product and doing it all under intense pressure to be fast and accurate.
In addition to the restaurant industry's unique business model, you also have to factor in multiple measuring metrics including volume and weight. You'll also need to understand how to make the conversion, factor in the yield, and pull it all together on one report. If done correctly, this process can take an average of 3-6 hours to complete an audit and that's without the counting.
In short.... if anyone tells you that doing inventory is easy you should beware that they are doing it correctly and not skipping steps.
YOU SHOULD ALWAYS STRIVE TO GET BETTER!
We've seen it countless times. You've spent hundreds of thousands of dollars to build out your dream restaurant. Your sales are up and you're killing it. You're not like those other establishments... you're better than they are. You personally hand-picked your staff so your people are just better! Unfortunately, the reality is that people are people... we're predictable and we're all different. So whether you're managing an upscale bar at the Ritz-Carlton or a dive bar like the Double Wide, problems will happen, your inventory will not be perfect and you will lose money.
Making bad assumptions can be costly especially if you don't regularly verify your numbers.
OUTSIDE AUDITORS CAN HELP RAISE THE BAR WHICH IMPROVES THE BOTTOM LINE AND YOUR TEAM'S PERFORMANCE!
Since grade school we've all somewhat measured our performance based on other people monitoring our performance and even as adults, not much has changed.
Regardless if it's the idea of receiving credit for doing a great job or the threat of losing a job for a poor performance, outside auditors' mere presence can help raise the bar like never before.
USING A GENERIC INDUSTRY BUDGET CAN BE A COSTLY MISTAKE!!
So you own a restaurant and you figured that an 18% - 21% overall alcohol cost is good enough for you. Why did you choose that number..... because someone told you a 20% average was a good number and you listened to them without question. Unfortunately, this can be a costly mistake!
Even if your restaurant is a part of a larger chain of restaurants and they all have the exact same inventory items, with the same cost and selling at the same retail price, your budgets can still be very different. Why... because these aren't the only factors that determine your budget. As a matter of fact, these factors have less of an impact than you think.
The true factor which determines your budget is what your customers are buying! If your customers are buying items that have a lower cost then your budget will be lower and if your customers are buying more items that have a higher cost then your budget will be higher.
We've seen budgets ranging from 13% for a restaurant that sold more well drinks and as high as 24% for a restaurant that sold more high-end drinks. In short, using a generic budget to manage your inventory cost can be costing you thousands in losses.
More and more bars and restaurants are discovering and realizing that outside auditors can help them save thousands on their inventory shrinkage. So whether it's weekly, bi-weekly, monthly, quarterly, or on-call, you've already spent thousands on getting your bar up and running so don't stop investing in it now!
visit www.getskrible.com for more information