Why do I need to manage inventory?


How do you know if you are properly managing your inventory?  Do you have employees stealing? Do you have product that is going bad before you can use it? Studies show that restaurant managers do not reconcile inventory as often as they should, in some cases never. Mismanagement of inventory can be a costly mistake. Here are some tips to consider:

  • Your cost of goods sold, or COGS, is the single largest expense for your restaurant.
  • Your inventory is money on the shelf. You must control how much product you have on hand. The more product you have could lead to waste and theft.
  • Proper inventory management allows your customers to receive the freshest product which will ensure your customers return again and again.

What is the key to good inventory management? As a Manager, you must find the balance between having enough product and too much product on the shelves. It’s this balance that can be the difference between a successful or failing restaurant business. How do you know if you have inventory issues? Below are trends that should alert you that something just isn’t right:

  • The same person takes inventory every week or month.
  • Inventory is increasing month to month while your COGS are declining.
  • Your days of inventory is higher than 7 days for most products.
  • You have drastic decreases in your inventory while your COGS are increasing.
  • You consistently run out of product.

Keeping a closer eye on inventory and implementing inventory management process and tools will allow you to control your inventory loss.

Want to learn how to better manage your restaurant inventory? Check out the PeachWorks Inventory App to take all the guesswork out of inventory.  

Already using our Inventory App? Start adding items and get a better hold on your inventory today!

A handy overview on paying tipped employees

Understanding how to manage and pay tipped employees can be confusing - especially for folks opening a restaurant for the first time.  Here's a great guide we found that may help.

And as this points out, you'll probably want to to use a back-of-house system to tie your receipts or hours worked to each employee to ensure proper tax reporting.  We can help.

The benefits of a cloud POS are magnified by mobile back-of-house

Here's a nice article we saw highlighting the benefits of a cloud POS system (in this case, Revel, but we love Square, and Toast, and Breadcrumb, too) to restauranteurs.  We agree with all of that, but would also add that the real benefit is from having your data in the cloud.  Being able to take an order from your iPad in your living room isn't all that helpful.  But having the order data from your restaurant available in real-time (along with your inventory, checklists, etc.) combined with powerful reporting tools can really simplify your job.

That's why every Peach app is available 24/7 from your phone.  Because who hasn't wanted a real-time sales update while getting a haircut, or an alert about an employee approaching overtime while watching your daughter's ballet recital?

Cooking your raw POS data into valuable information - Part 2 (Coupons)

If you read Part 1 of this article, you learned how a great back-office system can turn data on voids into actionable information about a problem in your restaurant (and possibly a very expensive one!) In this part, we see what we can learn from coupon usage.

Everyone has coupons - whether in mailers, papers, mobile apps, or ones we just hand out, coupons are used as a marketing strategy to drive sales. So coupons are good. I always loved seeing coupons coming in; if marketing had placed them right it meant I was bringing in some new business, and maybe encouraging my repeat customers to start coming in a little more regularly. 

Although, coupons are good, there are a few things that you should always be aware of. You want to watch the overall percentage you are discounting by.  And if you are able watch for the percentage byserver, even better.  I know sounds paranoid, but using your reports will help you identify when coupon use might not be as valuable as you want it. 

True story time – major coupon drop, coupon percentage increased, "Hooray! We are making some good progress building sales!"  But hang on, my projected coupon usage was only supposed to be 3%, but I am running 5%. Time to put my Scooby Doo cap on again, and yep - coupons had been delivered to the restaurant, and my very generous front counter had been giving almost every customer a coupon for their meal. Not quite the intended purpose. 

I love discounts, and guess what?  So does everyone else.  Watching your discounts is going to very quickly help you identify when things may not be on the up and up. Remember Mary, our coleslaw girl.  As we learned last time, everyone loves Mary, who works 25 hours per week. If Mary gives away one BOGO (everyone loves a good BOGO Coupon) every hour for a $4.99 Burger, that is $125 per week, or nearly $6,300 in FREE FOOD every year….Ohhhh, Mary! 

Reports are just numbers, and you will only ever get value by diving more deeply into your data to really understand what's going on. And that means logical, clear reports that highlight just the data you need, with the ability to easily produce one-off custom reports to answer the questions raised when your standard reports pick up a whiff of a problem.  Does your back-office software do that?

Cooking your raw POS data into valuable information - Part 1 (Voids)

All that data that is collected in your POS contains some pretty powerful information.

Yes, of course it will show you how many smoothies or burgers you sold today and, yes, that is certainly valuable. It will show you that your total sales for the day were $2500, and also tell you that only $2475 was deposited and you have a shortage of $25 that day - again valuable.

But your data is so so much more valuable than just the first set of numbers that you see. Think of your data as one of the onions in your kitchen, most will only ever look at the skin of the onion, while there are so many more layers.

Over the next couple of blog posts, we'll dig a little deeper with some examples. Today, we'll start with voids: every day your POS can send your restaurant management system a list of voids.  But what does a void tell you?

The obvious answer is that maybe the server made a mistake entering the order and needed to remove the item.  Sure, that could be it.  But here are a few other reasons that could be happening:

  • I'm sure you don’t want to hear it, but let’s just put this out there - it could have simply been taken off so the customer did not have to pay for it.  There - I said it.  No wants to think this is happening, but it does and probably is.
  • How about if you are seeing the same item voided over and over again?  This could indicate several different issues: a problem in the kitchen, a problem with the server entering the orders, or even a problem with the product or recipe - maybe the customers simply don’t like it.  Look for patterns.

A true-life example from a restaurant I was managing (no names to protect the innocent): 

I was trying to build my sales, especially on Sundays.  My sales were always very low on Sundays, and when I did have sales, it was usually larger family dinners.  My inventory had not been good, so I was doing daily counts - my food cost was showing variances, but my sales were only slightly above what they had been.  Using my reports, I started to look at the individual tickets, and noticed that I had tickets showing 10 guests, sitting for 90 mins, but the ticket size was only $1.98.  Hmmmmmm, that didn't make any sense!  Digging a little further, I discovered that items had been wrung in but then voided off.  

After putting on my Scooby Doo hat, and a lot of digging through sales reports, I started to see each time I found this type of ticket, there was pattern:

  • It was always late night
  • It was always the same server and 
  • It was always the same team leader.

A final investigation determined that I had a lazy manager, who late at night would sit and talk to their friends while the crew ran the show. The server would take a large order, and if they paid cash, remove all of the items except for a cup of coffee or two, and was making some very handsome tips.  True story….it happens.

No matter how you slice this onion, voids are bad, bad, bad, and if you’re going to use one, there should always be a documented reason why you're using it.  A void means you are not getting any inventory credit, no sales are being driven from it, and always indicates a problem.

Next time, we'll look at coupons!