D1.HFI.CL8.08 Slide 1. Introduction Monitor catering revenue and costs Classroom schedule Trainer contact details Assessments Resources: Calculator,

MONITOR CATERING REVENUE AND COSTS

D1.HFI.CL8.08

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 technologyMeasuring performance:

What is profit?

Nature and size of catering operations

Guide to cost and profit levels in percentages

Slide 5

Revenue Expense Profit

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 technologyComputer systems:

Implementing computer systems

• Analysis

• Design

• Implementation

Considerations

• Costs and benefits

• Compatibility

Slide 8


Hardware options

• POS systems

• Handwriting recognition

• Staff sharing technologies

• Motion detection

Impact of the Internet and Wi-Fi

Slide 9


Software options

• Financial control

• Revenue

• Cost control

• Kitchen production

• Other

Impact of the Internet and Wi-Fi

Slide 10

Use financial record keeping technologyIntegrate catering objectives into the financial system:

STUDENT ACTIVITY

What is the financial system?

Revenue:

• Forecasts

• Security

Food costs:

• Menu

• Standard recipes

Slide 11


Beverage costs

Inventory:

• Purchasing

• Receiving

• Storing

Labour costs:

Slide 12


POS systems

Separation of duties

Standardised recipes

Stocktakes

Reconciliations

Kitchen production controls

Labour specific controls

Slide 13

Use financial record keeping technologyFinancial data:

Enter into financial control system

• Historical data

• Current data

• Other information

Reports and schedules

• Budget

• Performance reports

Slide 14


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


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 systemPercentages:

Common standard for evaluating performance

Part – individual revenue or expense

Whole – Total revenue

Slide 17

Part Whole Decimal 100


The profit and loss statement

Slide 18


The profit and loss statement:

Gross profit

Operating expenses

Non-operating expenses

Supporting schedules

Slide 19


Analysis of the profit and loss statement:

Sales

• Calculation

• Adjust for price

• Interpretation

Slide 20



Food and beverage expenses

• Percentage calculations

• Beware of Revenue to use

• Interpretation

Food and beverage inventory turnover rate

• Calculation

• Interpretation

Slide 21



Labour expenses

• Calculation

• Interpretation

Profit

• Calculation

• Interpretation – good or not?

Slide 22


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 systemVariances are:

Expressed as monetary units, percentages or sales volume

Favourable – beneficial, positive

Unfavourable – need investigation

Evaluated according to the effect on profit

Slide 24

Description Actual over budget Actual under budget

Sales and Profit Improve profit Favourable Reduce profit Unfavourable

Expenses Reduce profit Unfavourable Improve profit Favourable

Create financial control system2 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

Slide 25

Line item Budget Actual Variance Variance %Favourable

Unfavourable

Sales 56,000 58,200 2,200 3.93% Favourable

Food costs 16,800 18,900 2,100 12.5% Unfavourable


2 main calculations:

Vertical analysis

• EACH line item calculated as a percentage of sales

• Budget and actual reports are calculated separately

Slide 26

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%

Advertising 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%


Inputs

Processing

Outputs

Slide 27

TRANSACTIONS

LEDGERS

•TRANSACTIONS

•SOURCE DOCUMENTS

•JOURNALS

•LEDGERS

•TRIAL BALANCE

•FINANCIAL REPORTS


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


What is the production control system?

• Defined

• Six step process

Maximising financial performance and production efficiencies

Slide 29


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


Key features continued:

Daily production schedules

• Menu, popularity data, forecasts

• Margin of error

Slide 31

Prior day carry over

Todays’ production

Today’s sales forecast


Key features (continued):

Product issuing

• Forms and documents

• Authorisation

• Returns

• Store person

Beverage issues – other considerations

Slide 32



Inventory control

• Stocktakes

Managing food production

• Waste

• Overcooking

• Portion control

• Carryovers

• Make or buy decisions Slide 33



Managing beverage production

• Automated choices

Theft management

• Minimise not eliminate

• Rewards

Slide 34


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 systemVariances are:

Expressed as monetary units, percentages or sales volume

Favourable – beneficial, positive

Unfavourable – need investigation

Evaluated according to the effect on profit

Slide 37

Description Actual over budget Actual under budget

Sales and Profit Improve profit Favourable Reduce profit Unfavourable

Expenses Reduce profit Unfavourable Improve profit Favourable

Create financial control system2 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

Slide 38

Line item Budget Actual Variance Variance %Favourable

Unfavourable

Sales 56,000 58,200 2,200 3.93% Favourable

Food costs 16,800 18,900 2,100 12.5% Unfavourable


2 main calculations:

Vertical analysis

• EACH line item calculated as a percentage of sales

• Budget and actual reports are calculated separately

Slide 39

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%

Advertising 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%

Respond to results from the established control systemsIdentify unacceptable variances:

Remember variance calculations!

• Favourable

• Unfavourable

When is a variance unacceptable?

Slide 40

Respond to results from the established control systemsDetermine the cause of the variance:

Revenue

• Price

• Volume

Expenses

• Rate or Price

• Quantity

Slide 41

Respond to results from the established control systemsCorrective action:

Food expenses

• Unfavourable, higher than planned

Common approaches to remedy variance

• Portions, recipes

• Product quality and mix

• Revise processes

Slide 42


Inventory turnover

• Unfavourable, higher than planned

Common approaches to remedy variance

• Processes and procedures for food storage

• Waste minimising practices

• Security measures

• Staff training

Slide 43

Minim

ise wasta

ge!


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


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


Revenue

• Unfavourable variances

Change to forecast assumptions

• Menu items

• Portion sizes

• Price

Slide 46


Revenue is recorded accurately

• Permanent record of sales

• Cash sales counted and authorised

• Reconciliations

• Allocations

Address workplace policies and procedures

Slide 47


Adjust prices

• Discounts

• Promotions

• Other offers

Slide 48

Respond to results from the established control systemsNegotiate with management to change budget:

Role of the budget

• Performance

Preparation process

Revising the budget

Negotiation techniques

Slide 49

Documents

D1.HFI.CL8.08 Slide 1. Introduction Monitor catering revenue and costs Classroom schedule Trainer contact details Assessments Resources: Calculator,