Inventory management for hospitality businesses
Modern inventory management software is a fundamental part of any sustainable retail business, yet they’re often overlooked by small hospitality outfits. This shouldn’t be the case and here’s why.
When it comes to inventory, the hospitality sector is one of the most overlooked industries yet as we can see from the incredibly competitive food service market, what should matter most to any food business is the effective management of ordering, tracking menu items and overall inventory management.
What is restaurant inventory?
Just like any business, an inventory should list all the property and assets associated with your business.
With restaurants, that inventory should also consist of all the items required to prepare dishes – whether pre-bought ingredients or raw materials.
Managing that inventory would then mean accurately tracking those ingredients from the moment they are purchased until the moment they are sold in a dish.
What do I track?
There are four main items you that should be monitored and tracked in food service venues: sitting inventory, depletion, usage and variance.
Your sitting inventory is the amount of goods you have sitting in your restaurant.
A good rule is to choose one way to log sitting inventory, either by total weight, quantity or dollar amount, and keep this consistent for all items.
Secondly, record your depletion. Using the same measurement you decided on above, track the amount of product you use up over certain time periods, either daily, weekly or monthly.
For busier venues, daily depletion reports may be needed, whereas monthly may work for others.
Next, there’s usage. Usage tells you how long the sitting inventory you have will last. You’re able to calculate this by dividing your sitting inventory by the average depletion time. This simple calculation helps avoid running out of items, over ordering and food wastage.
Finally, record the variance. This is the difference between what you buy and what you sell. Working out how much product is being wasted is important to try and streamline processes and understanding the costs of any wastage is vital to help manage business losses. Any difference or loss here is called a variance.
The above data can be overwhelming to keep track of and as we mentioned above, is often pushed to the side instead of embraced as good business practice.
How does inventory data improve my business?
Tracking your inventory enables you to optimise your supply chain, and that knowing exactly what you need to purchase, at what price and when.
With good inventory management, you’re no longer guessing at your needs. Instead, you know exactly what you need, how much of it, and when to order it.
With food wastage not only being costly but also completely unsustainable environmentally, optimising your food supply and reducing waste should be high up on your list of things to manage better.
As well as reducing expenses and lowering waste, understanding your food costs can help you make more informed decisions when it comes to working out if items on your menu are being charged correctly so that you’re making a suitable profit.
There are also plenty of other things inventory systems can help you calculate and with the help of an internal inventory system and some clever software to support you, you’ll get on top of it in no time.
How do I choose the right inventory software?
When selecting the right system for your business, it’s essential to understand what you need to track for your specific business and why.
A system that tracks food usage is key for businesses who want to track the quantity of food they go through, maintain and understand their stock levels and identify customer buying trends within their venue.
Tracking food usage also helps prevent out of stock items and over ordering, which ultimately affect your bottom line.
Using computerised inventory tracking to determine your food cost allows businesses to be more informed when it comes to choosing wholesalers, setting menu costs, adding new menu items and determining which ingredients are working best from a profit standpoint.
Every business needs to understand if they are making a profit. Being able to quickly and easily calculate the cost of goods sold will give you an accurate profit margin.
Learning more about the costs and profits of your business will also enable you to make more informed decisions about the direction of the venue as a whole.
In the digital era, online ordering is becoming increasingly effective. Many inventory programs now offer direct links with your vendors and some even offer mobile apps that can easily be used from the storeroom or cool room at any time. This not only helps avoid errors when orders are passed ‘up the line’, but also helps avoid errors and over-ordering by entering data directly into the software for checking.
While taking control of your inventory doesn’t sound like much fun, once you have some systems in place and enlist the help of some clever inventory software, you will find that overall, you will be spending less time trying to make sense of the numbers and more time making educated decisions that help grow your business.
Is it high time you began monitoring your stock properly? MYOB offers fully-featured inventory management from within its accounting software, allowing you to keep all your stock and financial data in the one place. Find out more about inventory management software for Australian businesses here or, if you’re a New Zealand business, you can find it here.