What Formula Is Used To Calculate Percentage In Excel Restaurant Financial Management Issues

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Restaurant Financial Management Issues

Restaurant owners, while knowing the financial management of their businesses, can be involved in solving the day-to-day problems that keep things running smoothly. Unfortunately, a financial accountant is a luxury that many small restaurant owners cannot afford. This article will address the six main accounting problems that restaurant owners often encounter and how to prevent them from happening or how to solve the problems when they do happen. Being a small business owner is always challenging and the restaurant business is financially complex.

This article will focus on issues that can be solved with the right computational skills and programming methods. By teaching restaurant owners how to detect financial issues before they arise, an accountant, can help the owner to correct or improve the financial methods used to control profits and reduce any avoidable losses. The six issues discussed here will focus on:

First Problem – Lack of Accounting System

Problem Two – When Gross Operating Expenses Are Higher Than Total Sales

Problem Three – Menu Delivery

Problem Four – Food and Beverage Inventory

Problem Five – Issues that occur when inventory is higher than sales

Problem Six – Using the Balance Sheet and Profit and Loss at the end of the Month

By researching these issues, which are common problems for restaurant owners, managing these issues and solving them before the restaurant gets out of financial control is possible and can help the owner to use accounting methods.

First Problem – Lack of Accounting System

The first thing a restaurant owner should deal with when trying to avoid accounting issues is investing in a good piece of computer software that will help keep track of all transactions. Nessel, an owner and financial advisor to restaurant owners, recommends using QuickBooks to maintain a General Ledger of all financial transactions that occur in the restaurant. All financial transactions must be recorded in the General Ledger to maintain accurate records. Without checking this, the owner will not be able to run the restaurant without keeping the ledger accountable. Nessel continues, “My experience is that how well a business is managed is directly related to how the owner manages his “books”. to ensure that the business is doing well financially. Lack of accounting and financial management is the main reason that many businesses fail and if the restaurant is in trouble this is the first issue to fix. It is recommended by many accountants as a guide to help set up a good accounting system.

Problem Two – When Gross Operating Expenses Are Higher Than Total Sales

The statistics say, “Restaurant food and beverage purchases and labor costs (wages and employer taxes and benefits) account for 62 to 68 cents of every dollar in restaurant sales.” These are referred to in accounting terms as “Prime Cost” in the restaurant industry and are where most restaurants encounter their biggest problems. These costs are manageable unlike utilities and other fixed costs. The owner can control the purchase and handling of the product and select the menu and prices. Other controllable production costs in a restaurant include hiring staff and scheduling staff in a cost-effective manner. “If the percentage of Prime Cost of the restaurant exceeds 70%, a red flag is raised. Unless the restaurant can compensate these high costs by, for example, a very favorable rental cost (eg less than 4% of the sale) it is very difficult. , and maybe impossible , to make a profit.”

The cost of renting a restaurant (if one includes taxes, insurance and other expenses that may fall into this category such as any organizational fees) is the highest expense a restaurant will incur after “Primary Expenses.” Average rent is about 6-7% of restaurant sales. Since it is in the range of fixed costs it can only be reduced by the increase in sales. If the price is above 8% it will be useful to divide the occupancy price by 7% to determine what level of sales will be required to keep the rental costs under control so as not to put the restaurant out of business.

Problem Three – Menu Delivery

Most of the offers in the menu are appreciated by the owner after visiting other competitors of the restaurant, looking at their offerings and menu prices. However, menu pricing should not be made by simply looking at competitors’ menus. Menu prices must be created (and sometimes revised as vendor costs fluctuate) and documented in software manuals. Some math skills will come in handy as the menu converts product prices from purchase to cooking units. A restaurant owner needs to know the cost of making a recipe to know how much it costs. This means knowing what ingredients and how much each recipe costs. There is software available to help with this and Microsoft Excel can be used to create menu values ​​while linking to available items.

Some of the things an owner can do to help with a manageable menu budget would include:

– Menu prices for minimum wage increases.

– Using value added food to increase profits.

– Re-introducing price increases while maintaining your customer base.

The menu should be updated periodically as the vendor’s costs change. This can be good or bad according to the seller. Either way, menu items can be adjusted at the retailer’s expense with math and other help from tracking software.

Problem Four – Food and Beverage Inventory

It is a common mistake for restaurant owners to review the Profit and Loss Statement and assume that what they spent on food can be divided by sales during that period to get cost of goods sold. This is a mistake. Inventory at the beginning and end of the period must be known in order to calculate food costs accurately. “For a restaurant with food sales of $50,000/month, a difference in inventory of $1000 between the beginning and the end of the month, can translate into a difference of 2%. This difference represents half of the annual profit of a full service restaurant.” Simply put, one cannot control food costs if he does not keep records of what he eats. Changes in inventory are important to note when calculating profit and loss.

Microsoft Excel spreadsheets can be used to track inventory and document prices and know all inventory totals when it comes to food and beverages. Tracking this with Excel will prevent errors.

Problem Five – Issues that occur when inventory is higher than sales

When the food inventory is too high, the cost will be too high and waste is inevitable. Calculating inventory needs is absolutely necessary to prevent food from going bad, being over-reciped or even stolen. “A full service restaurant should not have 7 days of inventory.”

There is an equation that can be used to determine how much inventory is needed for a restaurant to operate efficiently. The equation is:

Step 1) Multiply your average monthly food sales by your food expenses.

Step 2) Divide the number (your average monthly food consumption) by 30 (days/month)

By using this formula and keeping records of all beginning and ending inventory the problem of losing money due to wasted food costs is reduced or eliminated.

Problem Six – Using the Balance Sheet and Profit and Loss Statement

For a restaurant to be successful it must be run as a large business by the owner as possible. At least a weekly report is required. The composition of the report should be categorized. Inventory, suppliers, employees and sales should all have a start and end time. Fixed costs such as rent and electricity should be broken down to fit the statement if they occur weekly, or daily. It is not recommended to wait until the end of the month to calculate the report as changes occur quickly in the restaurant industry.

It is a very important point that the start and end date should be included in the report and the fixed costs should be divided in order to calculate the net profit for the week. As mentioned earlier, Microsoft Excel and other tracking software can be used for inventory and other expenses, and for planning which profit. Without keeping accurate track of inventory, balance, schedule, menu prices, differentiation and all that has been covered in this study, it can cause the restaurant to be underperforming. A restaurant owner should take the first step in setting up simple accounting methods. It may seem like a restaurant owner has to do it all; however, with the right software and a systematic approach put in place to keep the restaurant on track financially it will create the financial returns it deserves.

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