The procedure below allows you to record your food cost and manage your food purchases by adequately measuring your stock turnover rate on a daily and monthly routine in order to maximize profit on the margin.
F&B Managers, Executive Chefs, Chefs, Controllers or Revenue Managers.
Manage your food purchases in order to achieve optimal purchasing patterns to reduce waste and food costs. The food purchase needs to be recorded by lump sum and not itemized, and can usually be found in the delivery slips.
It is also necessary to plan when you will sell at an accurate price without penalizing the margin.
- Understand how the Kitchen Labor Cockpit works and switch to the Food Cost View.
- Create a Food Cost Budget & Forecast.
- Determine a Food Cost percentage strategy based on historical figures and your forecast.
1. Enter Username and Password.
2. Click the PMI R&P Menu, then select the Cockpit Module.
3. Once in the Cockpit Module, select Food Cost under the Cockpit view.
4. Review your total sum for each delivery invoice and input that information into the “Purchases” section on a daily basis.
5. Determine if you need to make early purchases for a group party and if early cooking preparations are necessary. If that is the case, input this information into “Inventory” instead (especially applicable if event takes place in one month while purchase is made the previous month).
6. After entering the “Purchases” and “Inventory”, make the proper adjustments for the month and decide the appropriate “Closing” for your monthly “Purchases” and “Inventory”.
7. Click on the “Save” button on the top right hand corner of the screen, making sure the green save button turns gray
8. It is recommended that you analyze your historical figures and use the food cost equation below before determining the Food Cost percentage for the month.
To determine the Food Cost percentage, follow the equation below:
- OI = Opening Inventory
- CI = Closing Inventory
- Purchase = Food purchase of the month
- Sales = Food Sales of the month
- Food Cost % = (OI – CI + Purchase) / Sales
The term “Turnover Days”
The term Turnover Days displayed in our Food Cost Cockpit as well as in the Management Perspective basically shows us how many days it takes us to turn our inventory over, or put in another way, how many days it takes us to empty the store so that we can fill it again and start selling over again. All experience shows that there is a clear link between “turnover days” and “food cost”. Being able to empty your store fast, meaning you do not purchase much more than you have plans for, will have a low number of turnover days as a consequence, as well as reduced loss and lower food cost.
What is behind “turnover days”? How do we calculate?
- Calculate Average Inventory using this formula: (OI + CI) / 2 = Average Inventory
- Determine the consumption for the period (Consumption = Cost of Goods Sold): OI + period purchase – CI = COGS
- Formula for calculating Inventory Turnover: COGS / Avg Inventory = Inventory Turnover (how many times in the period do you empty your stock?)
- To turn this into turnover days: Days in period / Inventory turnover
The picture below shows this procedure on a practical example (simple, but efficient):