MONITOR CATERING REVENUE AND COSTS D 1 HFI

MONITOR CATERING REVENUE AND COSTS D 1. HFI. CL 8. 08 Slide 1

Introduction Monitor catering revenue and costs � Classroom schedule � Trainer contact details � Assessments � Resources: • Calculator, pen and paper Slide 2

Introduction Unit comprises four elements which are covered in this sequence: � Use financial record keeping technology � Create financial control system � Create production control system � Respond to the results produced by the established control systems Slide 3

Use financial record keeping technology � Develop computer hardware to implement internal controls for catering operations � Develop computer software to implement internal controls for catering operations � Integrate catering revenue and cost objectives and requirements into existing control systems � Enter catering financial data into control systems � Manipulate catering financial data into control systems Slide 4

Use financial record keeping technology Measuring performance: � What is profit? Revenue Expense Profit � Nature and size of catering operations � Guide to cost and profit levels in percentages Slide 5

Use financial record keeping technology � Defined � Measures • Safeguard assets • Promote efficient operations • Maintain accurate and reliable accounting records • Compliance with policies and procedures Slide 6

Use financial record keeping technology � Internal controls in catering operations: • Menu design, recipes and costs • Staffing needs, rostering and costs • Ordering, receiving and storing food and beverage stock or inventory • Preparation of food and beverages for resale Slide 7

Use financial record keeping technology Computer systems: � Implementing computer systems • Analysis • Design • Implementation � Considerations • Costs and benefits • Compatibility Slide 8

Use financial record keeping technology Computer systems: � Hardware options • POS systems • Handwriting recognition • Staff sharing technologies • Motion detection Impact of the Internet and Wi-Fi Slide 9

Use financial record keeping technology Computer systems: � Software options • Financial control • Revenue • Cost control • Kitchen production • Other Impact of the Internet and Wi-Fi Slide 10

Use financial record keeping technology Integrate catering objectives into the financial system: STUDENT ACTIVITY � What is the financial system? � Revenue: � • Forecasts • Security Food costs: • Menu • Standard recipes Slide 11

Use financial record keeping technology Integrate catering objectives into the financial system: � Beverage costs � Inventory: • Purchasing • Receiving • Storing � Labour costs: Slide 12

Use financial record keeping technology Integrate catering objectives into the financial system: � POS systems � Separation of duties � Standardised recipes � Stocktakes � Reconciliations � Kitchen production controls � Labour specific controls Slide 13

Use financial record keeping technology Financial data: � � Enter into financial control system • Historical data • Current data • Other information Reports and schedules • Budget • Performance reports Slide 14

Create financial control system Two performance criteria: � Develop or confirm an existing financial control system to monitor performance in the catering department � Input financial data into the catering financial control system Slide 15

Create financial control system Monitoring performance: � Uniform Systems of Accounts � Cost classifications • Fixed and variable • Controllable and non-controllable � Activity - When is each classification used? Slide 16

Create financial control system Percentages: � Common standard for evaluating performance Part Whole Decimal � Part – individual revenue or expense � Whole – Total revenue 100 Slide 17

Create financial control system The profit and loss statement Slide 18

Create financial control system The profit and loss statement: � Gross profit � Operating expenses � Non-operating expenses � Supporting schedules Slide 19

Create financial control system Analysis of the profit and loss statement: � Sales • Calculation • Adjust for price • Interpretation Slide 20

Create financial control system Analysis of the profit and loss statement: � Food and beverage expenses • Percentage calculations • Beware of Revenue to use • Interpretation � Food and beverage inventory turnover rate • Calculation • Interpretation Slide 21

Create financial control system Analysis of the profit and loss statement: � Labour expenses • Calculation • Interpretation � Profit • Calculation • Interpretation – good or not? Slide 22

Create financial control system Other performance measures: � Budgets: • Department • Expense • Variances • Performance to budget � Break-even analysis • Fixed and variable costs • Sales? Expenses? Profit Slide 23

Create financial control system Variances are: � Expressed as monetary units, percentages or sales volume � Favourable – beneficial, positive � Unfavourable – need investigation � Evaluated according to the effect on profit Description Actual over budget Actual under budget Sales and Profit Improve profit Favourable Reduce profit Unfavourable Expenses Reduce profit Unfavourable Improve profit Favourable Slide 24

Create financial control system 2 main calculations: � Horizontal analysis • Actual results and budgeted numbers for EACH line item are compared • Actual minus budget = Variance in monetary unit • Variance divided by budget x 100 = Variance percent Line item Budget Actual Variance % Favourable Unfavourable Sales 56, 000 58, 200 2, 200 3. 93% Favourable Food costs 16, 800 18, 900 2, 100 12. 5% Unfavourable Slide 25

Create financial control system 2 main calculations: � Vertical analysis • EACH line item calculated as a percentage of sales • Budget and actual reports are calculated separately Line item Budget Variance Actual Variance Sales 56, 000 100% 58, 200 100% Food costs 16, 800 30. 0% 18, 900 32. 47% Wages 11, 000 19. 64% 11, 000 18. 9% 560 1. 0% 800 1. 37% Total Expenses 28, 360 50. 64% 30, 700 52. 75% Profit or Income 27, 640 49. 36% 25, 300 43. 47% Advertising Slide 26

Create financial control system Inputs TRANSACTIONS • TRANSACTIONS • SOURCE DOCUMENTS Processing • JOURNALS LEDGERS • TRIAL BALANCE Outputs • FINANCIAL REPORTS Slide 27

Create production control system Two performance criteria: � Develop or confirm an existing production control system to monitor performance in the catering department � Input production data into the catering financial control system Slide 28

Create production control system � What is the production control system? • Defined • Six step process � Maximising financial performance and production efficiencies Slide 29

Create production control system Key features: � Menu design and recipes � Ordering, receipt and storage of supplies • Clear descriptions • Checking goods received • Timely work practices • Knowledge of storage requirements Slide 30

Create production control system Key features continued: � Daily production schedules • Menu, popularity data, forecasts Prior day carry over Todays’ production Today’s sales forecast • Margin of error Slide 31

Create production control system Key features (continued): � Product issuing • Forms and documents • Authorisation • Returns • Store person � Beverage issues – other considerations Slide 32

Create production control system Key features (continued): � Inventory control • Stocktakes � Managing food production • Waste • Overcooking • Portion control • Carryovers • Make or buy decisions Slide 33

Create production control system Key features (continued): � Managing beverage production • Automated choices � Theft management • Minimise not eliminate • Rewards Slide 34

Create production control system Input production data: STUDENT ACTIVITY � Food production • Recipes, Supplies � Production schedules � Labour costs • Direct, indirect � Inventory Slide 35

Respond to results from the established control systems � Take action to address unacceptable expense figures � Take action to address unacceptable revenue figures � Negotiate with management to revise budgeted figures Slide 36

Create financial control system Variances are: � Expressed as monetary units, percentages or sales volume � Favourable – beneficial, positive � Unfavourable – need investigation � Evaluated according to the effect on profit Description Actual over budget Actual under budget Sales and Profit Improve profit Favourable Reduce profit Unfavourable Expenses Reduce profit Unfavourable Improve profit Favourable Slide 37

Create financial control system 2 main calculations: � Horizontal analysis • Actual results and budgeted numbers for EACH line item are compared • Actual minus budget = Variance in monetary unit • Variance divided by budget x 100 = Variance percent Line item Budget Actual Variance % Favourable Unfavourable Sales 56, 000 58, 200 2, 200 3. 93% Favourable Food costs 16, 800 18, 900 2, 100 12. 5% Unfavourable Slide 38

Create financial control system 2 main calculations: � Vertical analysis • EACH line item calculated as a percentage of sales • Budget and actual reports are calculated separately Line item Budget Variance Actual Variance Sales 56, 000 100% 58, 200 100% Food costs 16, 800 30. 0% 18, 900 32. 47% Wages 11, 000 19. 64% 11, 000 18. 9% 560 1. 0% 800 1. 37% Total Expenses 28, 360 50. 64% 30, 700 52. 75% Profit or Income 27, 640 49. 36% 25, 300 43. 47% Advertising Slide 39

Respond to results from the established control systems Identify unacceptable variances: � Remember variance calculations! • Favourable • Unfavourable � When is a variance unacceptable? Slide 40

Respond to results from the established control systems Determine the cause of the variance: � Revenue • Price • Volume � Expenses • Rate or Price • Quantity Slide 41

Respond to results from the established control systems Corrective action: � Food expenses • Unfavourable, higher than planned � Common approaches to remedy variance • Portions, recipes • Product quality and mix • Revise processes Slide 42

Respond to results from the established control systems Corrective action: � Inventory turnover • Unfavourable, higher than planned � ! Common approaches to remedy variance t • Processes and procedures for food storage • Waste minimising practices e g a m M i in e is s a w • Security measures • Staff training Slide 43

Respond to results from the established control systems Corrective action: � Labour or payroll costs • Monetary amounts • Hours worked � Common reasons for variance • Unplanned overtime • Inefficient work practices • Staff qualifications not matched to position Slide 44

Respond to results from the established control systems Corrective action: � Other expenses • Unfavourable variances � Action that can be taken • Correct allocation of expenses to catering department • Maintenance programs changed • Implement a bid process for suppliers Slide 45

Respond to results from the established control systems Corrective action: � Revenue • Unfavourable variances � Change to forecast assumptions • Menu items • Portion sizes • Price Slide 46

Respond to results from the established control systems Corrective action: � Revenue is recorded accurately • Permanent record of sales • Cash sales counted and authorised • Reconciliations • Allocations Address workplace policies and procedures Slide 47

Respond to results from the established control systems Corrective action: � Adjust prices • Discounts • Promotions • Other offers Slide 48

Respond to results from the established control systems Negotiate with management to change budget: � Role of the budget • Performance � Preparation process � Revising the budget � Negotiation techniques Slide 49