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
technology
Measuring performance:

What is profit?

Nature and size of catering operations

Guide to cost and profit levels in percentages
Slide 5
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
technology
Computer systems:

Implementing computer systems
• Analysis
• Design
• Implementation

Considerations
• Costs and benefits
• Compatibility
Slide 8
Use financial record keeping
technology
Computer systems:

Hardware options
• POS systems
• Handwriting recognition
• Staff sharing technologies
• Motion detection
Impact of the Internet and Wi-Fi
Slide 9
Use financial record keeping
technology
Computer systems:

Software options
• Financial control
• Revenue
• Cost control
• Kitchen production
• Other
Impact of the Internet and Wi-Fi
Slide 10
Use financial record keeping
technology
Integrate catering objectives into the financial system:
STUDENT ACTIVITY

What is the financial system?

Revenue:

•
Forecasts
•
Security
Food costs:
•
Menu
•
Standard recipes
Slide 11
Use financial record keeping
technology
Integrate catering objectives into the financial system:

Beverage costs

Inventory:
• Purchasing
• Receiving
• Storing

Labour costs:
Slide 12
Use financial record keeping
technology
Integrate catering objectives into the financial system:

POS systems

Separation of duties

Standardised recipes

Stocktakes

Reconciliations

Kitchen production controls

Labour specific controls
Slide 13
Use financial record keeping
technology
Financial data:


Enter into financial control system
•
Historical data
•
Current data
•
Other information
Reports and schedules
•
Budget
•
Performance reports
Slide 14
Create financial control system
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
Create financial control system
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 system
Percentages:

Common standard for evaluating performance
Part
Whole
Decimal

Part – individual revenue or expense

Whole – Total revenue
100
Slide 17
Create financial control system
The profit and loss
statement
Slide 18
Create financial control system
The profit and loss statement:

Gross profit

Operating expenses

Non-operating expenses

Supporting schedules
Slide 19
Create financial control system
Analysis of the profit and loss statement:

Sales
• Calculation
• Adjust for price
• Interpretation
Slide 20
Create financial control system
Analysis of the profit and loss statement:

Food and beverage expenses
• Percentage calculations
• Beware of Revenue to use
• Interpretation

Food and beverage inventory turnover rate
• Calculation
• Interpretation
Slide 21
Create financial control system
Analysis of the profit and loss statement:

Labour expenses
• Calculation
• Interpretation

Profit
• Calculation
• Interpretation – good or not?
Slide 22
Create financial control system
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 system
Variances are:

Expressed as monetary units, percentages or sales volume

Favourable – beneficial, positive

Unfavourable – need investigation

Evaluated according to the effect on profit
Description
Actual over budget
Actual under budget
Sales and Profit
Improve profit Favourable
Reduce profit Unfavourable
Expenses
Reduce profit Unfavourable
Improve profit Favourable
Slide 24
Create financial control system
2 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
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
Slide 25
Create financial control system
2 main calculations:

Vertical analysis
•
EACH line item calculated as a percentage of sales
•
Budget and actual reports are calculated separately
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%
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%
Advertising
Slide 26
Create financial control system
Inputs
TRANSACTIONS
• TRANSACTIONS
• SOURCE DOCUMENTS
Processing
• JOURNALS
LEDGERS
• LEDGERS
• TRIAL BALANCE
Outputs
• FINANCIAL REPORTS
Slide 27
Create production control system
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
Create production control system

What is the production control system?
• Defined
• Six step process

Maximising financial performance and production
efficiencies
Slide 29
Create production control system
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
Create production control system
Key features continued:

Daily production schedules
• Menu, popularity data, forecasts
Prior day
carry over
Todays’
production
Today’s
sales
forecast
• Margin of error
Slide 31
Create production control system
Key features (continued):

Product issuing
• Forms and documents
• Authorisation
• Returns
• Store person

Beverage issues – other considerations
Slide 32
Create production control system
Key features (continued):

Inventory control
• Stocktakes

Managing food production
• Waste
• Overcooking
• Portion control
• Carryovers
• Make or buy decisions
Slide 33
Create production control system
Key features (continued):

Managing beverage production
• Automated choices

Theft management
• Minimise not eliminate
• Rewards
Slide 34
Create production control system
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 system
Variances are:

Expressed as monetary units, percentages or sales volume

Favourable – beneficial, positive

Unfavourable – need investigation

Evaluated according to the effect on profit
Description
Actual over budget
Actual under budget
Sales and Profit
Improve profit Favourable
Reduce profit Unfavourable
Expenses
Reduce profit Unfavourable
Improve profit Favourable
Slide 37
Create financial control system
2 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
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
Slide 38
Create financial control system
2 main calculations:

Vertical analysis
•
EACH line item calculated as a percentage of sales
•
Budget and actual reports are calculated separately
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%
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%
Advertising
Slide 39
Respond to results from the
established control systems
Identify unacceptable variances:

Remember variance calculations!
• Favourable
• Unfavourable

When is a variance unacceptable?
Slide 40
Respond to results from the
established control systems
Determine the cause of the variance:

Revenue
• Price
• Volume

Expenses
• Rate or Price
• Quantity
Slide 41
Respond to results from the
established control systems
Corrective action:

Food expenses
• Unfavourable, higher than planned

Common approaches to remedy variance
• Portions, recipes
• Product quality and mix
• Revise processes
Slide 42
Respond to results from the
established control systems
Corrective action:

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
Respond to results from the
established control systems
Corrective action:

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
Respond to results from the
established control systems
Corrective action:

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
Respond to results from the
established control systems
Corrective action:

Revenue
• Unfavourable variances

Change to forecast assumptions
• Menu items
• Portion sizes
• Price
Slide 46
Respond to results from the
established control systems
Corrective action:

Revenue is recorded accurately
• Permanent record of sales
• Cash sales counted and authorised
• Reconciliations
• Allocations
Address workplace policies and procedures
Slide 47
Respond to results from the
established control systems
Corrective action:

Adjust prices
• Discounts
• Promotions
• Other offers
Slide 48
Respond to results from the
established control systems
Negotiate with management to change budget:

Role of the budget
• Performance

Preparation process

Revising the budget

Negotiation techniques
Slide 49