Feature: Inventory Level Tracking
The only PROVEN method for computing ACCURATE PRIME COST on a weekly basis is to take physical inventories EVERY WEEK.
Many operators believe that what they SPEND on food and beverage purchases is their cost of sales. While this may be true in the long run, for weekly analysis it is inaccurate. The correct formula for calculating the cost of sales portion of prime cost is this:
Beginning Inventory + Purchases - Ending Inventory = Cost of Sales
Operators that take inventories and calculate their cost of sales each week are FAR MORE PROFITABLE than those that don't - taking anywhere from 2% - 10% more profit to the bottom-line. The reasons are two-fold:
1st - by calculating the cost of sales weekly, operators can quickly identify problems, giving them the opportunity to react immediately rather than wait an entire month - and lose even more profit.
2nd - maintaining tight control on inventory levels ensures that your cash is in the bank and not on the shelf in the form of excess inventory - or even worse, susceptible to spoilage and waste.
Weekly or End-of-Period Data Entry
You may be thinking, "but I don't have time to take weekly inventories." Although we strongly recommend that you do, the truth is this - by using the Prime Cost Wizard - even when you don't take weekly inventories - you will still be able to spot negative cost trends and make corrections. Our Prime Cost 6-Week Trend report gives a snapshot over a longer period of time, therefore minimizing the effect of inventory variances from one week to another. Even so, we recommend you take a physical inventory at least once a month.
Updating the Prime Cost Wizard with ending inventories is simple. Keep using the forms you already have to calculate the amount of inventory on hand for food. liquor, beer and wine. Then simply enter those values into out online inventory forms that match your inventory categories - regardless of how detailed they may be.
Inventory Turnover Analysis
Aside from accurate cost of sales, taking weekly inventories helps you keep inventory at their optimum levels. As you enter sales, purchases and weekly ending inventory values into the Prime Cost Wizard, the PCW automatically calculates inventory turnover and number of days on hand for each area - food, liquor, beer and wine - or any other values you may want to track such as paper or supplies. Here is a quick-reference guide to optimum inventory turnover rates:
Food - 4-6 times per month (5-7 days product on hand)
Liquor - 0.25-1.5 times per month (Varies among concept/sales mix)
Bottle beer - 2-3 times per month
Draft beer - 1-2 times per month (Varies with number on tap/concept)
Wine - 0.75-1.5 times per month (Varies with size of wine list/sales mix)