The Wonders of Control Mechanisms for Restaurant Business
THERE’S no argument that the restaurant business is a flick. However, many are living on the wrong impression that running one equates to instant success. All successful restaurants embark on measures in a place aptly referred to as the “control mechanism of a restaurant business.”
With food as the heart and soul of a restaurant business, it is rather impossible to get past a day without having sold whatever is available in the pantry. While the selling aspect of this business is crucial, you must also check the other aspects of a restaurant business – even before you get to put up one.
Those who have been able to start their own restaurant businesses are aware of the complexity of operating without control mechanisms in place.
The Truth in Restaurant Business
The restaurant industry should not be seen as plain and simple selling of food. It also embarks on services and a system to make it profitable. Consider control mechanisms of a restaurant business.
The absence of a system for the control mechanism of the restaurant business translates to poor business set-up, thus financial losses. It is a must to have control mechanisms seen to put every aspect of the business in its proper perspective, specifically on cash flow and profitability.
Thus, the need to tap the services of the experts who knew only too well the ins and outs of the internal aspect of the restaurant business.
About Control Mechanisms
All successful businesses, including those into restaurants, have four fundamental corners — planning, leading, organizing and controlling.
These controlling fundamentals involve business plan, assessment, funds, budget outlay, auditing and pricing. It also delves into communications and training modules; performance assessment and employee incentives.
- Business Plan – It is an inherently strategic description of one’s business future, hinting plans covering the desired number of years and the supposed methodology.
- Assessment – It is a systematic procedural analysis identifying key performance indicators for a given period. It is through this that restaurant operators would determine whether or not business is doing good.
- Funds – It is an essential element in any business. Funds, in layman’s terms, equate to money.
- Budget Outlay – It’s basically money that has been set aside for a particular purpose.
- Auditing – It is a mechanism ensuring check-and-balance on revenue and expenditure. Auditors jot down opinions on financial statements and from there make recommendations as to how to address discrepancies, if any.
- Pricing – This process determines the cost at which the restaurant would want to sell products or services. More often than not, prices significantly contribute to salability.
These measures are crucial in optimizing business performance.
Below is simplified prose on the five pillars of the Control Mechanism of the Restaurant Business:
This is basically the use of modern cash registers that would put in place a systematic picture on how the restaurant sales have been doing so far. Legitimate businessmen would refer to this payment control as Point of Sale (POS) System. This is primarily designed to record every bit of transactions, including goods sold to and payments made by customers.
Aside from the cash flow, it also easily identifies best-selling products, daily sales and availability of stocks. It also significantly reduces fraud and human error. Likewise, the system has the capability to directly send financial data to both the in-house and outsourced accountants. Interestingly, maintaining an outsourced accountant service does not only reduce management workload but also ensures accuracy in the books of accounts, especially during audit seasons.
This is a mechanism that requires the preparation of three purchase-related forms for each and every transaction. It is also aptly referred to as the Three-Way Matching System. In layman’s terms, the system embarks on the need to fill up triplicate forms. With a purchasing control mechanism in place, restaurant businesses worry less about cash flow, stock levels, and balance sheet discrepancies.
The three-way matching system embarks on purchase order (PO), proof of payment and delivery and the bill as reflected in the invoice. All these documents detail the goods, quantities, prices. Most importantly, purchasing control mechanisms reduce potential error and fraud while providing a paper trail for purposes of bookkeeping and auditing.
Food Cost Planning
This mechanism determines margins of profitability for each of its products being sold. A slight change in the cost of the raw ingredients automatically alters net and gross proceeds. As such, it is essential to be cautious on the prevailing market prices of goods required by a restaurant business. The inability to get on top of this control mechanism usually results in wastage of resources and spoilage of perishable stocks.
Simply enough, Payment Reconciliation is the collection it gets from clients on a day-to-day basis. Restaurant goers use a wide array of payment methods. Some pay in cash, others use credit cards, debit cards, checks, among many other forms of payment. It is important to have a payment reconciliation system in place if only to determine the actual funds being transferred to a restaurant. This control mechanism prevents discrepancy. This complicated aspect of the restaurant business requires legitimate accountants.
Inventory Management embarks on the “right product, at the right time, in the right place, at the right cost, and in the right quantity.” This process is a widely practiced system even outside the restaurant business engaged in both buying and selling goods. Interestingly, restaurant businesses seemed to have a hard time dealing with perishable products being a critical consideration. A properly outsourced inventory management effectively reduces overstocking and food wastage which translates to storage issues and disposal costs. A consistent check on its purchase and inventory prices is a must to enable sustained profitability.
Sheer knowledge alone on the ins and outs of the restaurant business may however be short of delivering results. It requires professionals to do a time-consuming tough job. At 3E Accounting, we can provide business setup services in the Philippines even under tight conditions, because that’s what we do best.
Why spend long hours of your time when you can actually delegate legitimate accountants to do the job while you earn more focusing on the actual operation of your restaurant business. For professional help, please contact us.