Whether you are just opening a restaurant or you are years into owning a restaurant, revamping your inventory process can be a monumental move to generate a greater profit.
Effective restaurant supply inventory does not only mean counting how much of each product you have. It also means keeping track in real time of any ingredients that are deducted from your inventory and why. It’s important to be able to account for all of your ingredients and restaurant products. This way, you could note if there are ways to conserve and lower your inventory cost, which helps maximize your net profit.
Below we provide tips to improve your inventory process along with a guide to taking successful restaurant inventory. We also explain how restaurant supply inventory is connected to your profit.
Tips to Improve Your Restaurant Inventory
Your restaurant inventory will only be useful if it is accurate. Below we provide you with essential tips for managing and utilizing your restaurant inventory.
- Create a schedule for taking inventory. Regularity is important in order to know how much of each item you use in a designated time period, so make sure to take inventory at the same time and/or day of the week. Depending on the type of item and the demand for certain items, you’ll take inventory accordingly. For example, you’ll likely check perishables or popular ingredients daily, and you might count non-perishables once or twice a week.
- Designate a few staff members for inventory. It is easier to note discrepancies when the same people are going through your inventory. Similarly, staff members will grow accustomed to the nuances and issues that are specific to your restaurant’s inventory. Additionally, consider the following ways to increase the accuracy of your restaurant inventory:
- Offer bonuses to employees in response to inventory savings
- Explain how inventory impacts your restaurant on a large scale
- Use the First In, First Out (FIFO) method. The items that you receive first should be utilized first, particularly for food items. This means you are using the newest ingredients first, minimizing the chance that food will go bad. Organize your areas (cooler, dry storage, freezer, and more) according to FIFO. This will eliminate the number of ingredients that are used or wasted for a reason other than restaurant sales, which is an overall goal of taking restaurant inventory.
- Use inventory to know how much and what to order. By keeping accurate inventory, you will know exactly what amount of ingredients you need to order. It can prevent over-ordering and also enable you to see if you can order even less of certain ingredients.
How Do You Take Restaurant Inventory?
To take inventory, you’ll want to set up your chosen method for recording your items and be consistent across the board. Below we go through how to set up a table to record inventory and how to calculate the total cost of each item.
1) Decide on your inventory method. Many mobile systems, like POS systems and apps, can keep track of the amount of dishes sold, giving you clear numbers at the end of the night. While these systems can tell you how many items have been sold (and therefore ingredients used) based on customers’ orders, they don’t provide the complete picture. A number of factors might alter your actual numbers that will not be reflected in the POS system: food that goes bad, meals sent back by customers, free employee meals, etc.
As a result, you’ll most likely do much of the actual counting by hand, though you can record your inventory in the following ways:
- On paper
- App on tablet/POS system
- Computer program, like Excel
2) Set Up Your Table. Create the following five rows on your restaurant inventory sheet, generic spreadsheet, or customizable inventory management program.
- Unit of Measure
- Inventory Amount
- Unit Price
- Total cost
3) Items. List all of your inventory items in the Items column. This will include edible ingredients along with dinnerware, disposables, cleaning items, and more.
4) Unit of Measure. In the Unit of Measure column, specify the units that you will use to keep track of every item. For example, you might write “ounce” for kale, “gallon” for milk, or “case” for paper towels.
5) Inventory Amount. Next, count or measure how much of each item you have, and record this in the Inventory Amount column. This column will simply have numbers without units, as you have already described the units in the Unit of Measure column. For example, you might write 10 for kale, 3 for milk, or 2 for paper towels.
6) Unit Price. Document your unit prices based on what your restaurant last paid for each item. Depending on the vendor and item, prices might change from week to week. Changes in cost of goods sold (COGS) might be accounted for by price changes as opposed to spillage, sales, or another reason.
7) Total cost. If you want to gather the cost of your inventory for accounting purpose, you can calculate your total cost by multiplying the unit price of each item by the number in the Inventory Amount column. For example, if you have 3 gallons of milk that each cost $2, your total cost is $6.
Pro Tip: Create Another Sheet for Food Waste
A food waste sheet tracks ingredient waste in your kitchen that may not be identifiable through sales alone. While inventory can show you accurate numbers, a food waste sheet shows you the reasoning behind some of those numbers. Aside from sales, other potential losses of your ingredients may come from the following:
- Food spoiling
- Inefficient or incorrect food or drink preparation processes
- Resolving customer complaint.
- Staff meals
Why Use a Food Waste Sheet?
A food waste sheet will provide you with the complete picture of where your ingredients are going. You will be able to see if you can remedy any of the reasons why excess ingredients are lost or wasted. For example, chefs or prep cooks may need to be more careful when making certain drinks or food items, or servers may need to double check the orders they put in. You also may be able to purchase less of certain food and beverage items if they’re going bad because customers are not ordering them.
How to Make a Food Waste Sheet
To make a food waste sheet, include the following columns:
- Reason for Waste
- Employee Initials
All employees and staff members should understand the food waste sheet and how it works, so everyone can update it as necessary.
How Does Restaurant Inventory Relate to Net Profit?
Restaurant inventory is a literal part of the equation that forms your net profit. Your inventory comprises COGS, or Cost of Goods Sold. COGS refers to the cost required to create each item on your menu.
Your restaurant supply inventory and your waste sheet can show you if there is a way to better conserve ingredients and ultimately lower the cost of goods sold (COGS). A lower COGS can help yield greater net profit, and below we show you how:
In a periodic inventory system, COGS is calculated in the following way:
Beginning inventory + Purchased Inventory – Ending Inventory = Cost of Goods Sold (COGS)
Restaurant profit and loss statement:
Gross profit (Total Sales-COGS) – Labor Cost + Total Operating Cost = Net Profit
Looking at the second equation above, we can see that the lower the COGS is, the less is subtracted from your total sales, and the more that can be multiplied by gross profit. So, inventory tracking is inextricably connected to your net profit.
Superior Restaurant Inventory Can Improve Your Bottom Line
Ultimately, you will save money and yield a greater profit by finding ways to 1) conserve more ingredients and 2) buy fewer ingredients. Taking inventory and updating waste sheets will show you the exact avenues to accomplish these goals. By following our tips for effectively managing your restaurant inventory, you can more accurately create and plan your menu, calculate COGS, identify areas of waste, understand how many ingredients and products to order, and ultimately increase your bottom line.
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