Kitchen stock: using inventory as a lever to manage your business
Taking inventory of kitchen and dining room stock is a tedious and mandatory task for restaurateurs and their employees. Before embarking on this task, it is essential to understand the usefulness of inventories. But also to understand and how to use them to improve the efficiency and profitability of your business. Indeed, the kitchen stock is an excellent management tool for restaurants.
Definition of the inventory
Firstly, the inventory is used to count and value the items in your restaurant's stock. All goods are valued at a given moment in order to estimate the total amount of their value and the quantities of each product. The Commercial Code requires a physical inventory to be carried out and valued once every 12 months at the end of the accounting period. It enables the variation in stocks to be known for the calculation of the result.
It is not this legal requirement that interests us here. Here we will describe more specifically the inventory of raw materials (kitchen stock), i.e. ingredients for the management of ratios and consumption.
This is a good management practice to control the material costs of the restaurant. A physical inventory should be taken to calculate the actual material ratio for a period.
How to value stocks in the simplest way?
- If the restaurant does not keep stock records, the inventory is valued at the last known invoiced price
1- What is the inventory for?
For management control purposes, the inventory is used to calculate the consumption of raw materials over a given period:
For example, for a period of one month:
initial stock + material purchases - final stock = material consumption
Example: bottles of "bordeaux château d'eau".
What is the consumption of this wine in a month?
Initial stock: 12 bottles
Purchase: 12 bottle
Final stock: 3 bottles
Consumption = 12 +12 - 3 = 21
It is impossible to do this calculation without the inventory. It can then be checked that 21 bottles of alcohol were sold during the same period.
2- How to carry out the physical inventory and how to value it?
A list of products is often available to keep track of the quantities in stock. Counting is simple but can be time consuming, you have to count and add up everything: kitchen stock, reserve, bar and room. The most complicated part is to identify the units (kg, litre, box, carton, etc.) in order to value the items correctly.
Therefore, these product lists can be edited by Excel or a stock management software like Koust.
Valuation of kitchen stock
Two techniques can be used to value a stock.
- The weighted average price method
- The last price method
This last price method is simpler in general. In effect, the price of the last purchase invoice is used to value the stock. The process therefore starts when the goods are ordered from the suppliers.
3- Periodic monitoring of ratios and margin
One of the main indicators in the restaurant business is the Ratio or gross margin which defines the percentage of raw materials consumed over sales. Inventory valuation is necessary to establish the gross margin by the restaurant.
Indeed, the ratio between raw materials and turnover must take into account the variation in stock between the beginning and the end of the process. Let's take for example a period of one week:
RATIO = Turnover of the week / (purchases + end of previous week stock - end of week stock)
The calculation of the gross margin is similar
Gross margin = 1 - (purchase in period + stock at end of previous period - stock at end of period) / Turnover in period
4- Management control - consumption variance
The management control will make it possible to check the consumption of ingredients in the above formula:
initial stock + food purchases - final stock = material consumption
Consumption includes 3 entities:
- Products consumed by customers and therefore sales made
- The products offered by the restaurant to customers
- Staff meals
2 Methods for calculating products consumed by customers
Case of the use of cash register software
The products consumed by the customers are either direct sales (drinks) or ingredients processed and used in the recipes developed by the kitchen. All the technical data sheets will therefore have been drawn up beforehand to calculate the products consumed by the customers.
products consumed by customers = number of sales * data sheet
ACTUAL CONSUMPTION = PREVIOUS MONTH'S INVENTORY + INVOICES FOR THE MONTH +
PERSONAL AND OFFERED MEALS - END OF MONTH INVENTORY
THEORICAL CONSUMPTION = EXPORT CASH x TECHNICAL DATA SHEETS
The case of collective catering
Another system, the control of consumption is done simply by calculating the material cost per person
Calculation of material cost per person = Consumption / Number of meals sold
Here the management is different, in order to set up such a system it is necessary:
- count everything that came out of stock every day
- then count the number of sales per day
Stage 1 - Starting stock
The first inventory defines the starting stock
Step 2 - Add all purchases
The quantities of orders, i.e. foodstuffs purchased, are added to the stock of the previous step
Step 3 - Stock removal
Then, every day during the preparation of the meals, we count the stock withdrawals.
Example: 53kg of chicken, 20kg of rice ...
To simplify the work, some commodities are counted in packets. For example, instead of counting the daily consumption of salt, a bucket of salt is counted on the day it is opened.
Step 4 - Calculation of average cost
Finally, every day, the average cost per seat is assessed
Material cost per place = Consumption / Number of sales
Step 5 - Kitchen stock control
A physical inventory is carried out periodically.
The difference between the book inventory and the inventory is used to check that everything has been counted every day. In other words, we check that the process has been carried out correctly. It is a tool to help the restaurant management to know if there are no internal problems. The control of deviations in material quantities and costs mainly concerns the overdosing of ingredients. In this way, the restaurant owner can see whether the quantity indicated in the recipe cards is respected by his employees. In this way, he avoids food waste but also unnecessary loss of money simply by managing his costs more precisely.
5- Restaurant management software
The fluctuating prices, the amount of data and the number of people involved in the process require the use of management software. Connected software on which employees can take inventory by filtering by storage area without the need to perform calculations. The manager or controller will then be able to monitor his or her stocks and analyse discrepancies to reduce waste and measure the quantities of food required.
The advantages of an adapted software
- Be able to analyze data over different time periods
- Interconnection of data, prices, data sheets, invoice details, product sales details
- Sorting out the biggest variances in quantity or cost to focus on what is more profitable. In fact, only 20% of the products are responsible for 80% of the variances according to Pareto's law.
By carrying out the inventory and studying the stock variance, it will be possible to target the items concerned and thus adjust the management of the company's goods stocks.