Monthly Food Inventory

My wife works for a chef,ACF certified, who doesn't feel it is necessary to do a monthly food inventory and calculates his monthly F.C. by dividing purchases by revenues. Can anyone tell me of literature that may spell out why it is important to do monthly inventories. Or tell me I'm crazy and he's accurate.

By Chefgbs (Chefgbs) on Thursday, May 02, 2002 - 09:50 am: Edit

No, you're not crazy. He's hiding something. They way he's calculating food cost will give him an overblown food cost. In no way will it be accurate.

This is how food cost is usually broken down:

Opening inventory (last month's or whenever)
+Purchases
+Transfers in (like liquor from the bar)
-------------------------------------------------- Total available stock
-Closing inventory (this month's)
-Transfers out (credits like food given away)
--------------------------------------------------
Cost of sales for food

Then divide cost of sales for food by the food sales and that will give you your food cost. Some folks will divide the cost of sales for food by the total sales(including liquor and other non food items).

What's the importance of doing an inventory? It's all about control. Controling spending. Looking for excess usage which may indicate theft. It is a good indicator of profitability. The average food cost is 33%. The rational behind a 33% food cost is that with all other expenses, it should leave a net profit of 6% - 10% if everything is done correctly.

The only reason I can think of other than he's trying to hide something is that he is too lazy to do inventory. It is NOT one of life's more pleasant tasks.

Hope this helps.

Ciao for now

By Cheftim (Cheftim) on Thursday, May 02, 2002 - 10:01 am: Edit

In the long run there is no difference in calculating food cost from purchases and sales. In the short term it's not as accurate e.g. If you get a large order in on the day you do calculate your inventory that can move you food cost by several percentage points. But that will even out in the next cycle.

I can't figure out how a chef could hide something this way.

It's much easier to hide a bad food cost by inflating your inventory.

By Chefspike (Chefspike) on Thursday, May 02, 2002 - 10:49 am: Edit

I think you guys are both right.
Doing it one way allows stuff to be hidden, but it catches up to you months down the road.
One way is not as accurate, but...it takes a $1000.00=1%, right?...,so if he does it one way as apposed to the other, whats the difference in lost profit? Cause thats what your talking about here, profit. Who cares if you have more points one month than the other, it's all about what your putting in your pocket. I've always heard that high food costs were the result of inaccurate booze inventory(and give-a-ways,theft) and waste. Is that not true. Answers people, we need answers.

By Point83702 (Point83702) on Thursday, May 02, 2002 - 10:57 am: Edit

Thanks. It seems as though there isn't exactly a unanimous sentiment here. It seems to me that correcting problems becomes easier with historical data. This restaurant has been open less than a year, is extremely busy and one of the two most expensive in town. It also maintains an F.C. in the high thirties to low forties. I'm going to tell my wife to stick by her guns and recommend an accurate monyhly inventory if F.C. is going to be corrected. I appreciate your insights.

By Chefgbs (Chefgbs) on Thursday, May 02, 2002 - 08:15 pm: Edit

Hi Cheftim,

When I said he was hiding something, I meant that he was probably the one who was stealing.

By Chefspike (Chefspike) on Thursday, May 02, 2002 - 10:52 pm: Edit

Man, I'd be careful saying that.

By Gayle (Gayle) on Thursday, May 02, 2002 - 11:09 pm: Edit

umm. Well he doesn't have to be stealing but he might be covering up alot of things. Alot of waste and/ or poor buying is what pops into my mind. I see alot of guys who are very careless in their ordering but I see more who just throw away alot of food. If the chef isn't keeping track of rotation for instance. It takes just one dishwasher or prep being to lazy or to tired or to ignorant to rotate when he puts an order away to create a mess
The thing about a careful inventory is that it can alert you to a problem before it gets away from you. I usually do a full inventory every monday. (Or I did when I was employed!) I knew exactly what I had at any given point. Knowledge is power.

By Cheftim (Cheftim) on Thursday, May 02, 2002 - 11:33 pm: Edit

Again, I can't think of a way to cheat doing the straight purchase and revenue ratio, there probably is a way I just can't think of one.

Gayle is right inventory can be a good control. On the other hand that same control can be achieved when ordering, in some places that is done several times a week.

There are good and bad points about both methods. In the end it comes done to what the owners and bean counters want.

By Chefgbs (Chefgbs) on Friday, May 03, 2002 - 06:59 am: Edit

Hi Cheftim,

Unfortunately, I have seen a chef do his purchasing for his own catering company through a restaurant. He was stupid enough to brag about it.

No disrespect, but figuring out FC by dividing purchases by revenue tells you nothing about usage or waste or theft. Isn't that the point of taking an inventory? Have I been brainwashed all these years to believe in an abstract number?

However, if you can convince me that taking inventory is pointless, I would love you forever.

By Chefmanny (Chefmanny) on Sunday, May 05, 2002 - 05:30 pm: Edit

FC, FC, FC, a favorite all time topic......
I personally believe in a quick daily food cost, this will give you a guide where you are on a daily basis for the month. Of course you will have high FC on purchase days and less on non purchase days, you learn to deal with that after a while.
Some establishments have a fairly steady inventory number, this place is new I think was said. When you have a steady inventory you can just do spot checks on the big $$$ products, are they up, down, adjust and plug in the right numbers.
Inventories will not show theft or poor cutting by a prep cook, it will just show a high cost, it is up to a smart administrator to realize where the food is going, he/she has to check portions, security...ect.
Inventory, I believe should always be at a minimun, especially if you own the place because that's $$$ on the shelf instead of your pocket. I believe in ordering daily, unless I work for a large hotel then I want anything I will need on hand!
So,
I think it all depends on your ideals and situations whether you do inventory or not, I have worked in both types of establishments and it worked fine in both, with inventory and without.

By Chefferd (Chefferd) on Thursday, May 09, 2002 - 12:11 am: Edit

The only real difference in counting inventories and dividing purchaces by revenues is that the Chef is assuming that he has approximately the same amount of food (in dollars)on hand all the time. That would make beginning and ending about the same each month.
(Beginning inventory + Purchaces) - Ending invetory divided by food sales = food cost.
So saying beginning and ending are always the same in dollars, then purchaces divided by food sales will give you an approximate food cost.
A month to month invetory is great if your inventory flucuates or you want to compare your costs on a month to month basis. If your main concern is to establish a track record to show profits or growth.
Since most Chef's I know are bonused off food cost numbers, we all do weekly inventories to stay on top of ever changing numbers.
By the way 1000.00 = 1% is true if you're doing 100,000.00 in food sales, but it varies with less sales.

By Pastrycrew (Pastrycrew) on Saturday, May 18, 2002 - 12:38 am: Edit

Point 83702,

Here's a link that sells books on food cost.

http://www.amazon.com/exec/obidos/ASIN/0471293253/inktomi-df1-2-20/104-3330584-0218327

hope this helps,

bt