Updated: May 4
If you own or operate a restaurant, inventory cost is probably your biggest expense, in some cases accounting for as much as 40% of your restaurant cost. On the surface, it might seem fairly simple to manage this particular cost but in reality, it will require a lot of work and effort!!
If you're like most restauranteurs you are very likely basing your inventory cost on how much you spend but we estimate that restaurants can lose as much as 10% of their inventory when they don't count their inventory on a regular basis.
In this article, we'll give you our top 6 quick pitch tips related to counting inventory and calculating cost.
When calculating your inventory cost of goods sold and working to identify problems, it will require a full and complete inventory count of all food and/or alcohol beverages onsite. The calculation requires a beginning count, plus added purchases minus your ending count. The ending result of the calculation is then compared to what was sold and the difference should be the amount of inventory lost during the period.
Step 1: (Beginning Count + Purchases - Ending Count = Inventory Items Used)
Step 2: (POS items sold - Inventory Items Used = Missing Inventory Items)
Always count the items based on how the item was delivered.
When counting raw ingredients, always count the items using the unit of measure in which the item was delivered. For example: if the item was delivered in pounds you'll want to count that item in pounds. If the item was delivered in units or each, you willl want to count the items in units or each.
When creating recipes, try to stay inline with the delivery type.
When creating recipes, try to stay inline with the delivery type which includes volume, units and weight. For example - if your invoice states that you received 40lbs of apples, you should try to make sure your recipe uses a weight metric such as lbs, ounces or grams. If your invoice delivery reads as units such as 50 total apples then your recipe should be in units or portions of a unit such as 1/4 of an apple, 1/2 apple, 3 apples, etc.... Creating recipes based on a volume is okay but converting an item from a unit to a weight or volume will require a more complicated formula.
It's always a good idea to convert all batches to the same metric for servings and counting.
It's always a good idea to convert all batches to the same metric for servings and counting. For example, let's say that you decide to create a large batch of gumbo that can serve 50 people. For this example you might say that a typical serving of gumbo is 6 ounces and a typical batch contains 120 ounces. By weighing the gumbo in ounces and serving it in ounces, its much easier to track it's use. This method is extremely helpful and should help you avoid a more complicated conversion formula.
Try to use a scale as much as possible and when it fits.
Try to use weights as much as possible. The point system breaks down items into the percentage full and is probably the quickest method but it offers the greatest room for error. The argument for using scales is accuracy! In this industry, every percentage counts and not knowing that you're losing .5% - 2% because of an estimated count can be a costly problem.
Perform your count on a regular basis and when inventory is at its lowest.
Counting should be performed on regularily. This could be weekly, bi-weekly, monthly or at least quarterly and it's always best to perform the count on days you have the least amount of inventory on-hand.
Create a restaurant inventory spreadsheet or invest in software.
Counting and creating recipes is only part of the task, now let's put it all together. Typically a spreadsheet can get the job done and your POS will likely have an option for inventory but maintaining a spreadsheet can be an extensive amount of work and your POS will be lagging in features which is why we suggest investing in a dedicated inventory software program like Skrible for restaurants.
Controlling inventory is a challenge but necessary. It also requires doing more than just counting. Bonus Tips:
closely monitor price changes
avoid recipes that don't share ingredients
avoid making too many things from scratch
don't create a large menu
be sure to account for comps and spills
focus on training that produces consistent results and servings
avoid frequent menu changes
always verify deliveries
monitor purchases compared to usage closely
monitor menu items that become stale
If you're all in on this restaurant thing then it will require focusing heavily on its largest expense if it is going to survive!