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Are You Doing Inventory Wrong?

The way you do inventory matters. It doesn’t just show how well your business is doing, but also determines the price of each dish. It’s a thin line between competitive pricing and losing money, especially in the restaurant industry. Inventory affects how you calculate the cost of goods sold, which informs how much you need to sell each dish for to make a profit. Learn more about calculating COGS.


Photo by Karolina Grabowska from Pexels

You’ll know something is off with your inventory if it varies too much from week to week. Your sales numbers and usage should match up, so fluctuations are a strong indicator that something’s wrong. Doing inventory correctly affects everything else about the way you do business.

Inventory Turns

How do you really know how much product you’re selling, especially when you restock throughout the week to keep sales moving? That’s why business owners need to familiarize themselves with inventory turns. These measure how often you run out of all your ingredients and restock the shelves.

Find inventory turns by adding your beginning and ending inventory together, then dividing by two. Next, divide your usage by your average inventory and there you’ll find your inventory turns.

Make sure the number is accurate by then checking how many deliveries you received from vendors during that time period. This has to match up with your inventory turns; it’s physically impossible to empty your shelves three times but only get deliveries twice. Therefore by finding both these numbers, you can assess how well the business is doing and if your calculations need readjustment. If your inventory turns don’t align with how many deliveries you received during that period, you could be losing money somewhere along the way.

Lower Food Costs

Taking a smarter approach to inventory management also minimizes one of your biggest expenses: Food costs. Why keep potential sales on the shelves? More inventory turns per period mean more profit for that time period too, increasing your total sales per dish relative to what you paid to make it (also known as ideal food cost percentage).

As ingredients linger on the shelves, the likelihood of employee theft or food simply going bad also goes up. Essentially, your efficiency depends on how well you move product. Consistency results in lower food costs to support profit growth in your restaurant.

Inventory and Your Budget

How you do inventory affects every aspect of business. Get a more accurate budget when you properly calculate how much business you do in a given time period. When you identify areas of overspending, you can adjust how much to order or increase menu prices accordingly.

Streamlining your budget and more efficiently managing inventory results in less theft and food spoiling on the shelves. This means more money in your pocket at the end of the day; food waste accounts for a lot of your unnecessary expenses. When you upgrade your restaurant technology to include Point of Sale systems that can handle a lot of these calculations automatically, you’ll perform less manual labor, free up time to focus on more pressing tasks in the restaurant, and save money with a faster-generated, more accurate budget.


NORTHFOLK on Unsplash

Take inventory a better way to lower food costs and get a more accurate vision of each week’s profits with a smart Point of Sale.

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