Monitor catering revenue and costs
D1.HFI.CL8.08
Trainee Manual
Monitor catering revenue
and costs
D1.HFI.CL8.08
Trainee Manual
Project Base
William Angliss Institute of TAFE
555 La Trobe Street
Melbourne 3000 Victoria
Telephone:
(03) 9606 2111
Facsimile:
(03) 9670 1330
Acknowledgements
Project Director:
Chief Writer:
Subject Writer:
Project Manager:
Editor:
DTP/Production:
Wayne Crosbie
Alan Hickman
Emma Gronow
Alan Maguire
Jim Irwin
Daniel Chee, Mai Vu, Riny Yasin
The Association of Southeast Asian Nations (ASEAN) was established on 8 August 1967. The Member
States of the Association are Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia,
Myanmar, Philippines, Singapore, Thailand and Viet Nam.
The ASEAN Secretariat is based in Jakarta, Indonesia.
General Information on ASEAN appears online at the ASEAN Website: www.asean.org.
All text is produced by William Angliss Institute of TAFE for the ASEAN Project on “Toolbox
Development for Front Office, Food and Beverage Services and Food Production Divisions”.
This publication is supported by Australian Aid through the ASEAN-Australia Development
Cooperation Program Phase II (AADCP II).
Copyright: Association of Southeast Asian Nations (ASEAN) 2013.
All rights reserved.
Disclaimer
Every effort has been made to ensure that this publication is free from errors or omissions. However,
you should conduct your own enquiries and seek professional advice before relying on any fact,
statement or matter contained in this book. ASEAN Secretariat and William Angliss Institute of TAFE
are not responsible for any injury, loss or damage as a result of material included or omitted from this
course. Information in this module is current at the time of publication. Time of publication is indicated
in the date stamp at the bottom of each page.
Some images appearing in this resource have been purchased from various stock photography
suppliers and other third party copyright owners and as such are non-transferable and non-exclusive.
Additional images have been sourced from Flickr and are used under:
http://creativecommons.org/licenses/by/2.0/deed.en
http://www.sxc.hu/
http://www.stockfreeimages.com
File name: TM_Monitor_catering_revenue_&_costs_Final
Table of contents
Introduction to trainee manual........................................................................................... 1
Unit descriptor................................................................................................................... 3
Assessment matrix ........................................................................................................... 5
Glossary ........................................................................................................................... 7
Element 1: Use financial record keeping technology ......................................................... 9
Element 2: Create financial control system ..................................................................... 35
Element 3: Create production control system .................................................................. 49
Element 4: Respond to the results produced by the established control systems............ 61
Presentation of written work ............................................................................................ 73
Recommended reading................................................................................................... 75
Trainee evaluation sheet ................................................................................................. 77
© ASEAN 2013
Trainee Manual
Monitor catering revenue and costs
© ASEAN 2013
Trainee Manual
Monitor catering revenue and costs
Introduction to trainee manual
Introduction to trainee manual
To the Trainee
Congratulations on joining this course. This Trainee Manual is one part of a ‘toolbox’
which is a resource provided to trainees, trainers and assessors to help you become
competent in various areas of your work.
The ‘toolbox’ consists of three elements:

A Trainee Manual for you to read and study at home or in class

A Trainer Guide with Power Point slides to help your Trainer explain the content of the
training material and provide class activities to help with practice

An Assessment Manual which provides your Assessor with oral and written questions
and other assessment tasks to establish whether or not you have achieved
competency.
The first thing you may notice is that this training program and the information you find in
the Trainee Manual seems different to the textbooks you have used previously. This is
because the method of instruction and examination is different. The method used is called
Competency based training (CBT) and Competency based assessment (CBA). CBT and
CBA is the training and assessment system chosen by ASEAN (Association of SouthEast Asian Nations) to train people to work in the tourism and hospitality industry
throughout all the ASEAN member states.
What is the CBT and CBA system and why has it been adopted by ASEAN?
CBT is a way of training that concentrates on what a worker can do or is required to do at
work. The aim is of the training is to enable trainees to perform tasks and duties at a
standard expected by employers. CBT seeks to develop the skills, knowledge and
attitudes (or recognise the ones the trainee already possesses) to achieve the required
competency standard. ASEAN has adopted the CBT/CBA training system as it is able to
produce the type of worker that industry is looking for and this therefore increases
trainees’ chances of obtaining employment.
CBA involves collecting evidence and making a judgement of the extent to which a worker
can perform his/her duties at the required competency standard. Where a trainee can
already demonstrate a degree of competency, either due to prior training or work
experience, a process of ‘Recognition of Prior Learning’ (RPL) is available to trainees to
recognise this. Please speak to your trainer about RPL if you think this applies to you.
What is a competency standard?
Competency standards are descriptions of the skills and knowledge required to perform a
task or activity at the level of a required standard.
242 competency standards for the tourism and hospitality industries throughout the
ASEAN region have been developed to cover all the knowledge, skills and attitudes
required to work in the following occupational areas:

Housekeeping

Food Production

Food and Beverage Service
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Introduction to trainee manual

Front Office

Travel Agencies

Tour Operations.
All of these competency standards are available for you to look at. In fact you will find a
summary of each one at the beginning of each Trainee Manual under the heading ‘Unit
Descriptor’. The unit descriptor describes the content of the unit you will be studying in the
Trainee Manual and provides a table of contents which are divided up into ‘Elements’ and
‘Performance Criteria”. An element is a description of one aspect of what has to be
achieved in the workplace. The ‘Performance Criteria’ below each element details the
level of performance that needs to be demonstrated to be declared competent.
There are other components of the competency standard:

Unit Title: statement about what is to be done in the workplace

Unit Number: unique number identifying the particular competency

Nominal hours: number of classroom or practical hours usually needed to complete
the competency. We call them ‘nominal’ hours because they can vary e.g. sometimes
it will take an individual less time to complete a unit of competency because he/she
has prior knowledge or work experience in that area.
The final heading you will see before you start reading the Trainee Manual is the
‘Assessment Matrix’. Competency based assessment requires trainees to be assessed in
at least 2 – 3 different ways, one of which must be practical. This section outlines three
ways assessment can be carried out and includes work projects, written questions and
oral questions. The matrix is designed to show you which performance criteria will be
assessed and how they will be assessed. Your trainer and/or assessor may also use
other assessment methods including ‘Observation Checklist’ and ‘Third Party Statement’.
An observation checklist is a way of recording how you perform at work and a third party
statement is a statement by a supervisor or employer about the degree of competence
they believe you have achieved. This can be based on observing your workplace
performance, inspecting your work or gaining feedback from fellow workers.
Your trainer and/or assessor may use other methods to assess you such as:

Journals

Oral presentations

Role plays

Log books

Group projects

Practical demonstrations.
Remember your trainer is there to help you succeed and become competent. Please feel
free to ask him or her for more explanation of what you have just read and of what is
expected from you and best wishes for your future studies and future career in tourism
and hospitality.
2
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Unit descriptor
Unit descriptor
Monitor catering revenue and costs
This unit deals with the skills and knowledge required to Monitor catering revenue and
costs in a range of settings within the hotel and travel industries workplace context.
Unit Code:
D1.HFI.CL8.08
Nominal Hours:
35 hours
Element 1: Use financial record keeping technology
Performance Criteria
1.1 Identify and use, where appropriate, computer systems to facilitate implementation
of identified purchasing, ordering and financial controls
1.2 Identify and obtain, where appropriate, effective and user-friendly software to
underpin the initiation and/or use of identified computer systems
1.3 Integrate identified catering revenue and cost objectives and requirements into
existing financial control systems, where applicable
1.4 Enter catering financial data into established control systems
1.5 Manipulate catering financial data into established control systems
Element 2: Create financial control system
Performance Criteria
2.1 Develop, or confirm an existing, effective financial control system to record and track
the performance of the catering department
2.2 Input financial data into the catering department computerised control system
Element 3: Create production control system
Performance Criteria
3.1 Develop, or confirm an existing, effective production control system to record and
track the performance of the catering department
3.2 Input production data into the catering department computerised control system
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Unit descriptor
Element 4: Respond to the results produced by the established
control systems
Performance Criteria
4.1 Take action to address expenditure figures that are deemed unacceptable
4.2 Take action to address revenue figures that are deemed unacceptable
4.3 Negotiate with management to obtain revised budget figures
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Assessment matrix
Assessment matrix
Showing mapping of Performance Criteria against Work Projects, Written
Questions and Oral Questions
Work
Projects
Written
Questions
Oral
Questions
Identify and use, where appropriate, computer
systems to facilitate implementation of
identified purchasing, ordering and financial
controls
1.1
2,3,4,5,6
1
Identify and obtain, where appropriate,
effective and user-friendly software to underpin
the initiation and/or use of identified computer
systems
1.1
3,4,5,7
2
Integrate identified catering revenue and cost
objectives and requirements into existing
financial control systems, where applicable
1.2
1,2,8
3
1.4
Enter catering financial data into established
control systems
1.2, 1.3
1,9,10,11,12
4
1.5
Manipulate catering financial data into
established control systems
1.3
1,9,10,11,12
5
1.3, 2.1,2.2
13,14,15,16
6
2.1, 2.2
9,13,14,17
7
Element 1: Use financial record keeping technology
1.1
1.2
1.3
Element 2: Create financial control system
2.1
2.2
Develop, or confirm an existing, effective
financial control system to record and track the
performance of the catering department
Input financial data into the catering
department computerised control system
Element 3: Create production control system
3.1
3.2
Develop, or confirm an existing, effective
production control system to record and track
the performance of the catering department
3.1
Input production data into the catering
department computerised control system
3.2
18,19,20,21
22,23,24
18,21,22,25
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9
5
Assessment matrix
Work
Projects
Written
Questions
Oral
Questions
Element 4: Respond to the results produced by the established control systems
4.1
Take action to address expenditure figures
that are deemed unacceptable
4.1
26.27
10
4.2
Take action to address revenue figures that
are deemed unacceptable
4.1
28.29
11
4.3
Negotiate with management to obtain revised
budget figures
4.2
30,31
12
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Glossary
Glossary
Term
Explanation
Assets
An item of value that is owned by an organisation or
business
Cash
Any legal form of payment including but not limited to,
notes and coins, cheques, credit card payments,
electronic transfers and vouchers
Expense
Costs incurred in the normal course of operations to
support the production of revenue
Fraud
Fraud is intentional deception for personal gain
General ledger
The collection of accounts that capture all the financial
activities of an organisation
Invoice
List of goods ordered and received by the customer that
includes with prices charged and the total amount owing
Journals
A record of all initial financial transactions is kept in a book
or similar system called a journal
Labour
Work, especially physical work
Liabilities
A debt or obligation which is owed and must be settled
Portion control
A standard recipe will yield a set number of serves;
portion control requires that number of serves to be
attained
POS system
Refers to the system used to process customer or guest
sales
Revenue
Total amount of earnings received by a business for
providing goods and services for a certain period
Source documents
A paper based or computer record that provides evidence
that a transaction has occurred
Standard recipe
List of ingredients and methods of cooking to produce a
set quantity of food at a specific standard
Subsidiary ledgers
A group of individual accounts that support the total
balance of a general ledger account
Trial balance
A statement listing all the accounts in the general ledger
and their debit and credit balances
Yield testing
How much usable product is obtained from a set amount
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Glossary
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Element 1: Use financial record keeping technology
Element 1:
Use financial record keeping
technology
1.1 Identify and use, where appropriate, computer
systems to facilitate implementation of
identified purchasing, ordering and financial
controls
Introduction
The hospitality and tourism industry is a diverse industry consisting of many different
types of food service operations. Food services may be the focus of the entire business
(stand-alone) or part of an establishment that provides other services. Common examples
are:

Restaurants

Cafes

Clubs

Canteens

Contract catering services

Accommodation venues such as hotels

Resorts.
Regardless of the size and nature of the business, to be successful the balance between
money earned (revenue) and money spent (expenses) must be controlled. In addition to
this, the quality of the product must ensure that the customer or guest feels that excellent
value was received for the money that was spent.
What is profit?
It is important to remember that costs are incurred when providing goods to customers or
guests. Managers consider whether these costs are too high or too low given the quality
of the product and the goals of the business.
One of these goals is always profit which is expressed as:
REVENUE – EXPENSES = PROFIT
Profit is calculated by deducting from revenue or sales, all the expenses a catering
operation incurs.
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Element 1: Use financial record keeping technology
In a stand-alone operation, it is not just purchases that are expenses but all monies spent
to convert purchases to the final product. When a catering operation is part of an
establishment such as an accommodation venue, profit goals need to consider covering
the costs of areas that do not generate revenue or sales such as maintenance.
A general rule is often used throughout the hospitality industry to guide businesses on
costs and profit levels. Expressed as a percentage of revenue:

Food costs should be between 20-28%

Staff costs should be kept below 27%

Other costs will range from 35 -43%

Profit will be around 10%.
This does depend on the size of the establishment and other
variations such as the owner working in the business (this would
reduce staff costs and increase profit).
With respect to revenue, there are two ways to price menu items.
One way is to charge customers a small monetary amount per item
and have a high number of customers. The other is when there are
fewer customers or guests so menu items feature higher monetary
amounts. The pricing strategy is influenced by the size and nature of
the business and the market in which it operates. For example,
street vendors charge less for items but have a high number of
customers whereas fine dining restaurants charge higher prices but
have fewer customers.
Internal controls
Monitoring revenue and costs relies on implementing control mechanisms in the catering
operation. These mechanisms are called internal controls and consist of all the measures
used by a business to:

Safeguard its assets

Promote efficient operations

Maintain accurate and reliable accounting records

Encourage and promote compliance with business policies and government
regulations.
These measures also ensure that the flow of information through all aspects of the
operation is:

Accurate

Reliable

Complete

Timely.
Particular internal controls processes and procedures for monitoring catering revenue and
expenses focus on areas such as:

Menu design, recipes and costs

Staffing needs, rostering and costs
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Element 1: Use financial record keeping technology

Ordering, receiving and storing food and
beverage stock or inventory

Preparation of food and beverages for resale

Service and quality control

Stocktakes

Audits

Budget and financial controls.
The nature and scope of the controls for each operation depends on the size of the
business. In a smaller operation, such as an independent restaurant, the owner may be
present and can watch over many of the functions. In larger establishments, this becomes
impractical so the owner relies on the internal controls to help manage and control
operations.
Internal control measures can feature both manual and electronic processes and
procedures. For example:

The food service manager may use a standard paper based form to organise staff
requirements for the week. This is displayed for staff a few days ahead of time.
Alternatively, a computer program can allocate the roster according to information
given and each employee notified by electronic means

Supplies may be ordered by contacting suppliers by telephone and an order placed or
the order sent through number of electronic options

Standard recipes can be handwritten and calculated manually or electronic options
can be chosen to perform this function

Reports comparing actual revenue and costs to planned costs can also be prepared
on manually or a computer program can provide the information.
Individual catering operations will assess and implement the control measures that are
most appropriate for their organisation. However with advancements in technology and
the need to produce information in a timely, effective and efficient manner, many
establishments will review their processes and consider implementing computer systems
to replace manual processes.
It is important to remember that computers can only be programmed to imitate food
service control processes that are already implemented and understood.
If your workplace already utilises computer technology facilities in its catering operations,
you may wish to refer to section 1.3 Integrate identified catering revenue and cost
objectives and requirements into existing financial control systems, where applicable at
this time.
Implementing computer systems
In today’s fast paced business environment, many catering operations utilise or are
exploring the use of computer systems. Two significant information-sharing developments
have influenced the use of this technology. The first of these is the use of the internet to
store and retrieve information and the second is Wi-Fi (Wireless Fidelity) to transfer
information. The application of these two technologies influences the manner in which
catering operations:

Control the purchase and ordering of supplies

Organise the production of food and beverages
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Element 1: Use financial record keeping technology

Gather, store and report sales and cost information - the financial control system.
The size and nature of the catering operation influences the type of computer systems
that are best suited to the business. There are two aspects of a computer system to
consider:

Computer hardware

Computer software.
Computer hardware is the physical elements of a computer system.
This includes the terminals, keyboards, data storage and printers –
all the items that you can actually touch. Computer software are the
programs that direct certain operations to be performed. Some
software comes built into the computer and enables it to operate and
other software called application software uses the computer system
to perform specific functions.
To identify the most appropriate computer hardware and software
options for a catering operation, a three-step process, systems
analysis, systems design and system implementation and review can
be followed.
Systems analysis
This first step of the implementation process requires a study of the organisation to gather
facts that will provide a thorough understanding of the organisation’s information
requirements and sources of information. The different functions within the catering
operation are analysed to determine the best or optimal combination of people, forms,
records, procedures and equipment for the computer system.
It is important that computer systems are integrated throughout the business. This means
that the systems implemented in the different areas of an establishment must work
together to store, retrieve and transfer information. The larger the organisation, the more
complex these systems may need to be.
Systems design
The new system is designed based on the facts gathered during the analysis phase.
There is often a team of relevant personnel involved depending on the nature and scope
of the new system. Systems design should always take care to consider:

Personnel and their job descriptions that required to operate the new or changed
system

Source documents that record activities or events

Records and procedures to process data

Reports to be generated.
The basic concern of the systems design phase is to ensure that the flow of information is
efficient and reliable internal controls are developed.
Systems implementation and review
This is the final step in the development the computer system. Policy and procedure
manuals are updated as a formal description of the procedures required for the new
system or new process. The personnel needed to operate the system are trained and
supervised closely to ensure they understand the new or revised functions. Any new
documents, records or equipment are also purchased or the designs released.
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Selecting the right computer system
Cost versus benefits
There are a number of important considerations when
implementing a computer system. The first of these is cost
versus benefits.
The value of the benefits of any new or revised computer system
usually comes from the output of the system. This can be
measured by the timely, reliable and relevant information
provided for decision-making and the capacity to report to
interested parties. The costs of design, analysis and implementation must be balanced
appropriately with these benefits.
Compatibility
All computer systems must be compatible with the particular characteristics of the
business. This includes:

Size and nature of the business

Qualifications and competencies of staff

Location such as local, regional, national and international.
To ensure appropriate compatibility, it is necessary to have a thorough understanding of
the business and the industry.
Flexibility and Adaptability
No business is static and over time, the size, scope and nature of organisations change.
New products or services are offered and the internal structure of the business changes.
The computer system must be developed to adapt to these changes.
Internal control
Every computer system must have adequate controls built in to the system. This means
that the system must protect the inputs – the data, process the data through timely,
reliable and accurate procedures and provide output that meets the needs of decision
makers, also in a timely, accurate and reliable manner.
Computer hardware options
The following are some of the most recent concepts and technological advances for
catering operations.
Internet-Based POS System

POS systems are electronically connected for sharing data and serve as both a POS
terminal and an Internet connection

Internet-based POS systems have advantages such as reducing hardware costs,
multiple user access levels, data security and integrity, and are always accessible.
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Element 1: Use financial record keeping technology
Handwriting Recognition System
With wireless handwriting recognition systems, servers can write down orders that are
then sent directly to the kitchen without ever having to leave the guest’s table. Servers
write the order and then send it to the kitchen with the touch of a stylus on their handheld
order pad.
Voice over Internet Protocol (VoIP)
This is an emerging technology that transmits voice (telephone calls) over the Internet
instead of over traditional telephone lines. This reduces international phone charges.
Staff Sharing Technology
This two-way interactive video device allows staff to “see” and talk directly with employees
and guests at other locations.
Paperless Paycheck Systems
This system allows employees, to have instant access to their cash on payday, without
paying unnecessary check cashing fees that are charged in some countries or locations.
All employees with the ability to access the Internet could utilise a special log-in code to
view, in their own language, details about their wage earnings and withholdings.
Motion Detection/Intelligent Systems Software
This is a combination of hardware and software that detects the number of people
entering the establishment and can use historical sales data for that time of day to predict
the number and type of menu items these guests are likely to order.
It is important to remember that technological improvements can encompass everything
from advances in simple cash registers to property specific, internet delivered information
in many languages if necessary.
Computer software options are discussed next.
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Element 1: Use financial record keeping technology
1.2 Identify and obtain, where appropriate,
effective and user-friendly software to
underpin the initiation and/or use of identified
computer systems
Considering software programs
To complement the computer hardware options, appropriate software programs need to
be considered depending on the function and the control measures that the program will
replace or enhance. These software solutions should aim to simplify the administration of
the business.
The systems analysis process described above identifies
the areas of operations where software solutions may be
implemented. The systems design step is where the most
appropriate software programs will be considered and
chosen.
When considering the various software options available to
support the management of catering operations, the issue
of access to information must be kept foremost in mind. An
executive chef for example would certainly need to have
information on food costs. At the same time, they should not
have access to information about other areas that, while it
certainly affects costs, should only be shared by those that need to know.
In the current business environment, all catering operations should at least have some
form of basic word processing program to write menus and business documents that can
be formatted to specific business requirements. Spreadsheet applications can be used
where any calculations are required such as budgets, menu costing and standard recipe
cards.
Computer software options
Examples of the types of software that an establishment might consider are listed below
by the different functions in catering operations. The choice of systems depends on a
number of factors such as:

The size of the business

The type of catering operation

The level of reporting and analysis required

The expertise of staff using the system

Recommendations from experts such as accountants in regard to the financial
system.
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Element 1: Use financial record keeping technology
Financial control software
Most business owners, even without a detailed knowledge of accounting, can use basic
accounting systems. There are a range of products with options to integrate payroll,
inventory, production and POS systems.
More extensive accounting systems are usually used in larger
hospitality organisations where catering operations are one of
many departments. Financial software systems link departments
such as front office and the restaurant to enhance controls.
For example, the restaurant records food and beverages served to
a guest and the guest requests their account to be charged.
Computer software updates the guest account in both the
restaurant and front office systems. This means that revenue is
recorded accurately. In a manual environment, restaurant staff may
forget to pass a list or other paper-based document to front office to
record the charge and therefore the business loses the revenue.
Financial control software also provides tools that management can use to plan and
analyse revenue, expenses and profit. Software in this area can be quite advanced and
the choice of particular programs is many. Most catering operations will benefit from
programs that offer at least the following:

Analyse operating trends over time

Analyse food and beverage costs

Interface with production and POS systems

Compare actual and budgeted results as well as results of previous periods

Evaluate profitability of individual menu items

Perform break-even analysis

Budget revenue and expense levels

Budget profit levels.
Revenue software
Regardless of the type of catering operation, the security of revenue as highlighted above
is important. Protecting sales revenue from theft requires strict internal control processes
and procedures. POS systems provide catering operations with sales histories that are
used to forecast and control revenues. Most software programs can perform some or all
of the following options:

Track sales by guest, date and time

Maintain products sold histories

Compare actual to budgeted and prior period sales

Forecast future sales in a variety of increments – daily, meal period, portions

Provide average check or spend data.
Where establishments rely on reservations to control bookings, software can track repeat
guests, purchase preferences and total amount spent. It also provides the opportunity to
develop programs such as frequent dining rewards or allow guests or customers to make
their own bookings using internet connections.
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Reconciliations are also a key internal control process to protect revenue. Software that
can support this process includes programs that:

Maintain daily cash balances

Reconcile stock used with stock issued

Balance daily bank deposits with daily sales revenue

Reconcile guest check or bill totals with revenue totals

Create over or short computations from the cash register or drawer by employee, shift
and day.
Food related cost control software
Food related costs could be controlled by using software options in the areas of
purchasing, receiving, storing and issuing. The amount of information that can be
collected and generated is vast so you should focus on the options that suit the needs of
your particular operation. Some of the options for each area are listed here.
Recipe software

Maintain and cost standard recipes

Compute recipe quantity conversions

Maintain and supply dietary information

Create ingredient lists for ordering and issuing from the storeroom

Create purchase orders

Calculate selling prices based on costs.
Menu programs

Create and print menus

Produce production schedules and equipment usage
plans based on selected menus

Produce purchase orders based on selected menus

Forecast revenue and expenses based on menus
and forecast sales.
Purchasing software

Create supplier summaries based on forecast ingredient needs

Use summaries to select suppliers based on best cost and value

Maintain supplier invoices, details and purchase histories

Establish minimum and maximum values for each ingredient

Create purchase orders and interface with other software such as the financial system
to enhance controls

Purchase directly from suppliers using supplier designed software solution.
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Receiving software

Prepare a daily receiving report that interfaces with other software such as the
production and financial system

Compare products received with purchase orders by checking weight, quantity, quality
and price

Maintain receiving histories.
Stock or inventory assessment programs

Maintain inventory values by food categories

Create ordering lists by comparing stock to production schedules

Report daily issues and product usage including variances

Report cost of goods sold.
Cost of goods sold programs

Compare historical, forecast and actual cost of goods sold data

Maintain employee meal records where relevant.
Beverage control software
For catering operations that serve a significant amount of alcoholic beverages, there are a
variety of programs designed to support internal control measures. These focus on
discouraging theft and the careful control of sales and expenses by the following:

Calculating actual and targeted pour percentages

Monitor product sales and inventory usage

Adjust product costs for specials and transfers to the kitchen

Generate purchase orders

Maintain appropriate inventory levels

Schedule staff needs based on forecasted sales

Create and print beverage lists

Maintain sales histories

Maintain beverage recipe files

Project the impact of sales mix on beverage cost percentages.
Some beverage related software may be dependent on hardware options such as
automatic dispensing machines and other software will be designed to operate in
conjunction with POS systems and financial management systems
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Labour control software
The control of labour costs is important to the profit
performance of all catering operations, whether stand
alone or as a department of an establishment that
provides other services. The use of software helps
managers to:

Maintain employment records

Maintain training records

Compute employee turnover rates (the number of employees that leave the
establishment over a given period of time)

Maintain employee availability records

Develop employee schedules that operate in conjunction with time recording hardware
options

Monitor overtime costs

Develop and maintain productivity reports.
Kitchen production software
In the past, businesses have been slow to install technology tools in kitchen areas where
production could easily use them. However, responsibilities for controlling operations are
increasingly shared between managers and production staff. Software that is available to
support this includes:

Nutrition related analysis of menu items

Develop production schedules based on forecast sales

Create product requisition lists based on forecast sales

Estimate and calculate daily food cost and ideal costs based on product issues

Compare portions served to portions produced

Suggest usage for carryover or cut off products

Conduct make versus buy calculations.
Other expense related software
The unique needs of the catering operation will influence the software options that would
be helpful in controlling other expenses. Financial management software includes the
ability to compare actual, budget and forecasting options as well as producing key
financial reports that allow expenses to be analysed and controlled.
Of particular interest to hospitality and tourism establishments that promote themselves
as environmentally aware or friendly may be software that assists with minimising energy
costs such as electricity and water.
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1.3 Integrate identified catering revenue and cost
objectives and requirements into existing financial
control systems, where applicable
What is the financial control system?
A financial control system consists of the controls and checks a business puts in place to:

Safeguard its assets

Promote efficient operations

Maintain accurate and reliable accounting records

Encourage and promote compliance with policies
and regulations.
It also includes the processes to establish:

Clear financial and other operational goals

Key performance measures and indicators

A philosophy of continual improvement and using industry best practice across all
areas of the business.
These controls, checks and processes include the recording, verification, processing and
reporting of all activities or events that affect revenue, expenses, assets and liabilities of
the business. This includes catering operations. As was discussed earlier, computer
hardware and software solutions support the financial control system to meet these
demands.
It is therefore necessary to ensure that catering revenue and cost objectives and
requirements are clearly identified so that they can be effectively integrated into the
financial control system.
Identify catering revenue and cost objectives and requirements
The main objective of any business is to achieve satisfactory performance. This can mean
financial performance such as profits, meeting quality standards or requirements,
maintaining staff and other performance measures that may be important for the
business. For catering operations, there are specific revenue and cost objectives to be
considered.
Revenue objectives and requirements
All catering operations need to make enough money to pay for all their expenses, while
leaving enough for a reasonable profit. For accommodation venues that offer food
services, expenses often include the costs of non-income producing areas such as
maintenance.
Forecast revenue
The first question asked in catering operations is very simple – how many guests or
customers will I serve today, this week or this year?
The answer to such questions will provide the revenue from which expenses will be paid
and profit remains.
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To forecast or plan revenue, it is necessary to determine actual sales for a current time
period. The POS system or other automated cash register or terminal will provide specific
sales information. This is transferred on a daily basis to create a sales history. The sales
history is then analysed in a number of different ways to forecast or plan revenue.
It is therefore important that records of actual sales are kept and reported accurately as
they are the key to predicting sales in the future.
Revenue security
Typically, revenue is earned in establishments offering food services from activities that
require the use of cash. Cash is defined as a method of payment and includes notes and
coins, cheques, credit card payments, vouchers, electronic transfers and any other legal
forms of payment. It is the asset most susceptible to theft. Cash can be readily transferred
into another asset, it is easy to transport and conceal, it is difficult to distinguish cash that
belongs to the establishment from cash the employee may already have on hand and is
very desirable. It is important that appropriate procedures are reflected in the financial
control system to protect cash that is received (cash receipts) and cash that is paid out
from the business (cash payments).
There are also threats to revenue from guests or customers that leave the food service
operation without paying the bill or paying with counterfeit money or invalid credit cards.
This revenue is never received. In addition, the cost of producing the menu items can
never be recovered.
For these two reasons, controls in the financial system should
ensure the security of revenue from catering operations.
Cost objectives and requirements
Managing the cost of food
The cost of food is one of the highest expenses for a catering operation. Good cost
controls can influence the quality of the food products provided to customers and guests
and the profit the business makes.
Menu forecasting
Consider the situation if sales forecasts predicted 300 guests for a meal sitting. It would
be unwise to produce 300 servings or portions of every item on the menu as the unsold
items would go to waste and food costs would be high. Deciding the ‘right’ amount of
servings or portions to produce for each menu item is the first step in effective cost
control.
POS systems provide menu item sales histories that enable a popularity index to be
calculated which can predict the number of portions or servings for each menu item. This,
combined with consideration of other factors such as sales histories and outside
influences such as weather and holidays can be used to plan production. As mentioned
above, it is necessary for financial controls to ensure accurate sales records are kept.
Standardised recipes
Standardised recipes control both the quality and the quantity of the goods the kitchen will
produce. Catering operations require standardised recipes to be integrated into the
financial control system because:

Accurate food costs can be calculated for each menu item

Decisions about quantities to purchase of each ingredient can be made
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
Matching food produced to cash sales is possible

Quality of food produced is consistent and meets management requirements.
Determining actual food expense
Cost of Goods Sold is the name given to the calculation that provides the actual food
expense for a given period in catering operations. The basic formula is:
Cost of Goods Sold = Opening inventory PLUS Purchases LESS Closing Inventory
Expressing Cost of Goods Sold as a percentage of revenue gives the portion of revenue
from food sales that was spent on food expenses. Most catering operations monitor their
food costs in short time periods such as daily or weekly. This requires a financial control
system that can record and report both daily sales and purchases and provide information
on inventory levels, whether that be periodic estimates or actual data.
Managing the cost of beverages
Managing the cost of beverages also requires good cost controls. The nature and scope
of these controls depends on the type and value of beverages available for sale. The goal
is to manage beverages so that adequate but not excessive levels of products are on
hand. In a similar manner to food, sales forecasts are made, standard recipes and
portions are set and beverage cost expense can be determined.
In all ASEAN countries, there are special laws that apply to the sale of alcoholic
beverages. You must be aware of those that apply in your workplace. These laws place
additional requirements on the financial control system in terms of the storing and security
of beverage products.
Managing inventory
Inventory or stock is made up of all the food and beverage products the catering operation
holds to produce or accompany the menu items that are served to customers or guests.
Purchasing
With the knowledge of what is likely to be purchased by guests and the ingredients
required, inventory or stock can be purchased, received and stored as and when it is
needed. There is always a balance to be maintained to ensure there is neither too little
nor too much stock on hand at any time. Factors such as storage capacity, product
perishability and supplier delivery times must all be considered.
Once the quantities required are determined, decisions regarding purchasing need to be
made – what should be purchased, what is the best price to pay and how can a reliable
supply be assured?
Standardised recipes provide information on what should be purchased. Suppliers then
provide estimates of the quantities and price they can provide along with delivery
schedules. If a number of suppliers provide the same goods, managers of catering
operations may prepare bid sheets to compare the information and select a supplier
based on the best price.
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When suppliers are chosen and appropriate stock requirements determined, purchases
are made. The financial control system should detail the particular process for your
catering operation which usually involves the preparation of a purchase order that is sent
to the supplier.
Receiving
When goods are received into the catering operation, the quality and quantity of the items
should be confirmed. It is important that processes in the financial control system detail
the manner in which this occurs. For example, all meat products are weighed when they
are received and boxes checked to ensure all items are of similar quality. It is also
necessary to ensure that receiving and purchasing tasks are performed by different
employees to minimise the risk of theft or fraud.
Storage
Food and beverage products must be stored according to workplace policies and
procedures so that product quality is maintained – food products are highly perishable
and beverage products often come with
particular storage instructions.
The value of food and beverage inventory held
in an establishment at any time can be high. The
business has used funds from revenue to
purchase the stock and is expecting sales of the
stock to produce revenue for the future. It is
essential to the success of catering operations
that the financial control system protects
inventory items from the risk of theft or fraud.
Managing labour costs
In addition to food costs, labour costs are considered to be one of the highest expenses
incurred in a food service operation. Staff are needed in kitchen operations, to serve
menu items to customers or guests and to perform other customer related functions.
Planning the appropriate level of staff numbers and type of employees for the number of
guests expected is necessary for good control of this cost. This is called labour
productivity and is most often measured by the labour cost percentage:
Labour cost percentage = Cost of Labour ÷ Total sales
There are several ways to define the cost of labour and you will need to know how this is
defined in your workplace.
Catering operations require accurate and timely payroll figures to be reported from the
financial control system so that this calculation can be performed and cost control
objectives met.
Further requirements of the financial control system to support the effective management
of catering labour costs regards policies and procedures of employee selection, training,
scheduling and supervision as some examples.
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Managing other expenses
As is the case with food, beverage and labour expenses, other catering costs that are
within the control of catering operations must also be controlled. This is an important
distinction, especially when food service is part of an establishment offering other
services. Controllable costs are those costs that the manager can influence such as the
cost of producing new menus. Non-controllable costs are those that the catering manager
cannot influence such as maintenance costs from other departments.
The financial control system is required to integrate only controllable cost objectives from
catering operations.
Integrating catering objective and requirements
The manner in which catering objectives and requirements are integrated into the existing
financial control system depends on the size and nature of the business. Smaller, stand
alone food service operations where the owner is present on a regular basis will be
different to a larger establishment offering more than one service or product where the
owner does not have any day-to-day operational responsibilities – these are performed by
managers and supervisors.
Whatever the structure of your workplace might be,
the financial control system can be considered in
terms of three functions:

Recording and verifying transactions

Processing transactions

Reporting information as required by managers of
departments or functional areas.
Described below is the way in which catering objectives and requirements are integrated
into each of these three functions, with recording and processing considered together.
Recording and processing revenue and costs
The financial control system must feature appropriate controls to ensure that transactions
that affect revenue and costs from catering operations are recorded accurately, reliably
and in a timely manner. This is achieved in the following ways.
POS systems

POS terminals should be in place in food service operations
that are interfaced or integrated with other computer systems in
the establishment. For example, when sales are recorded for a
meal period, inventory is updated with the products used
alerting kitchen staff that orders may need to be made. Also,
staff responsible for banking the cash received can access
independent verification of the amount that should be received
from the terminal

As sales are recorded, sales histories are updated providing quick and easy access to
utilise this information

Information from POS terminals also provides menu forecasting information that
contributes to controlling costs.
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Separation of duties
Duties are separated in recording transactions to minimise the risk of fraud or theft and
offer independent verification of the accuracy and authenticity of transactions. The
financial control system integrates the requirements of catering operations as follows:

Cash handling tasks are separate from cash balancing at the end of a day or shift and
from depositing cash in the bank

Responsibility for recording revenue is separate from employees that collect revenue

A different employee will record inventory received from the employee that places
orders

Staff that issue inventory to the kitchen or other areas do not order or receive stock

Payments are processed to suppliers by employees who do not order, receive or
issue supplies

Employees outside of catering operations process amounts received from customers
who settle their bill or check later.
Standardised recipes
Computer software solutions offer different options for the integration of standardised
recipes into the financial system enabling revenue and costs to be verified. This includes:

Basic software such as spreadsheets is used to create standard recipes and
compared to information from the POS to verify transactions

Software that is more advanced integrates standard recipes with POS information and
inventory systems to record stock used and verify orders that need to be made.
Stocktakes
The financial control system must include procedures
for a stocktake of inventory held by catering
operations. This verifies that the actual amount of
inventory in the storeroom agrees to the amount
purchased and used. Stocktakes also indicate
minimum and maximum stock level which can alert
staff that items need to ordered. Stocktakes occur at
any time depending on organisational policies.
Reconciliations
As well as stocktakes, the financial control system will include processes that reconcile
other aspects of catering operations to verify the revenue and expenses that have been
recorded. Some examples are:

Total cash received for each day or shift is reconciled to total sales as recorded in the
POS terminal

Suppliers invoices are reconciled to purchase orders and goods received
documentation

Approved timesheets or time cards are reconciled to payroll information.
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Kitchen production controls
The success of any catering operation requires management of the food and beverage
production process. Financial system controls can integrate this responsibility by:

Installing computer terminals with relevant software in kitchen areas for staff to access
standard recipes, record requests for issues of stock, record food orders and other
tasks

Providing access to relevant revenue and cost so that comparisons can be made and
information verified.
Labour specific controls
Controlling the recording and processing of labour costs is a key requirement of the
financial control system. The following controls could be integrated into the financial
system:

Clear policies regarding the screening and selection of new employees

Training of new employees to be cost efficient and appropriate to the position

Separation of responsibilities from hiring new staff, approval of pay rates and
processing of payroll

Mechanical or electronic capture of hours worked if appropriate otherwise forms
should be designed that must be completed for hours to be recognised and processed

Pre-numbered documents such as identification number for each employee,
processing documents are used

Spot checks are conducted on payroll sheets to verify accuracy of calculations

A separate bank account is maintained for payroll to provide more accurate means of
verifying and reconciling payments to employees.
Audit
Audits can be both formal and informal. The financial control system should include
catering operations in any audit process so that transactions recorded in the financial
system are verified as accurate and complete. Audits also check that written policies and
procedures are followed by all areas of the business.
Reporting revenue and costs
Ensuring that catering revenue and cost information is recorded and processed is a
necessary requirement of the financial control system. It is also important that managers
of catering operations are provided with information that can be analysed and from which
decisions can be made.
The key tool for catering operations is the profit and loss or income statement. This is a
report that summarises the revenue and expenses and therefore profit for a given period
– daily, weekly, monthly or as required. The financial system can provide comparisons to
budgets, previous periods and even perform calculations such as food and labour cost
percentages depending on the system used.
A complete profit and loss statement is not always required for analysis. Certain elements
such as revenue are reported in a revenue report or labour costs are reported in a payroll
cost reports. These reports provide detailed information about the activities or events that
have occurred, offering catering managers more data to analyse.
This is explored further in 1.5 Manipulate catering financial data into established control
systems.
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1.4 Enter catering financial data into established
control systems
The next step
When computerised control systems have been implemented and the objectives and
requirements of catering operations integrated into financial control systems, the next step
is for financial data to be entered. This will incorporate or include catering revenue and
expenses with other revenue and expenses and asset and liability information providing a
complete financial picture of the establishment.
Note that this section focuses on the catering financial data that is entered into
established control systems. Section 2.2 discusses inputting financial data into the
catering computerised control system during the normal course of business.
What is catering financial data?
Catering financial data includes:

All catering cost information

Revenues generated from catering activities and events

Profits or operating income that summarise performance

Documentation that supports the activities and events in the catering operation.
Financial data, or perhaps a clearer term is facts, are entered into established financial
control systems based on the activities or events that have occurred, to provide a
permanent record of assets, liabilities, revenue and expenses.
Entering financial data
The nature of catering financial data that is entered into financial
control systems depends on the type of system that has been
implemented. This is determined by the size and nature of the
organisation. For this purpose, catering operations are
considered part of an establishment offering other services such
as a large accommodation venue. This provides the greatest
scope for including the variety of data that you may encounter in
your workplace.
Historical data
Historical data refers to financial activities and events that have occurred in the past. The
financial system needs to reflect this information so catering objectives and requirements
are met. Depending on the organisation, records used to update the financial system may
be manual or kept on electronic formats that are now replaced. Examples of historical
data include:

Sales histories in monetary amounts

Menu item summaries that include both the number and value of items sold

Pricing histories

Sales for which payment has not yet been received

Previous popularity indices for each menu item
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
Standardised recipes that are no longer used but support other historical data

Cost of Goods Sold calculations – for food and beverage costs

Food and beverage cost percentages

Agreements with previous suppliers for price, quantity and delivery terms

Inventory summaries that include details of ordering patterns, usage statistics and
show the flow of inventory on hand

Labour productivity and cost information including labour cost percentages,
scheduling and rostering information

Details of other costs

Performance reports including profit and loss statements, revenue reports, payroll
reports and cost of goods sold analysis

Any standard documentation that will continue to be used.
Current data
To appropriately utilise the functions of the financial computer system, there will also be
current data that needs to be entered into the system. This is financial data that is used in
present day catering operations to create revenue and control costs.
To meet catering objectives, the following is examples of financial data that should be
entered into established control systems.

Current standardised recipes. This enables:

Accurate food costs to be calculated for each menu item

Quantities to purchase of each ingredient to be considered

Food produced to be matched to cash sales

Current popularity indices for menu items

Agreements with current suppliers for price, quantity and delivery terms

Reporting requirements including classification of costs, report formats for internal use
and to meet external obligations and reporting periods

All budgets prepared for the catering operation such as:

Catering department budget

Payroll budget

Events budget

Purchases budget

Staff needs and rostering documents

Repairs and maintenance schedules for kitchen operations

Amount and value of current inventory on hand

Employee records detailing pay rates, conditions and other information such as when
and if meal allowances are given

All standard forms and documents that were agreed in the systems design and
implementation phases of development.
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Other financial data
You should always be aware of any other financial data that is relevant to your workplace
and ensure that this information is entered into the established financial control system.
It is important to remember that processing and reporting capabilities of computer
systems are dependent upon the information that is entered. They cannot report or be
programmed to provide data that does not exist in the system.
1.5 Manipulate catering financial data into
established control systems
Financial data revisited
The operation of financial control systems has three basic
steps when considering financial data:

Inputs

Processing

Outputs.
Catering financial data is manipulated through the first two of these phases and becomes
integrated or combined with other activities and events that occur in the organisation.
Remember that financial data includes:

All costs incurred

Revenues generated from activities and events

Profits or operating income that summarises performance

Documentation that supports the activities and events in the business.
The third step or phase, outputs, is concerned with the reports or summaries of activities
and events that the financial system has been designed to provide. Consider the
organisation where catering operations are part of the overall services provided.
Management will now be able to receive reports that include the revenue and expenses
generated from catering operations along with the financial data from other departments
or functional areas.
Budgets
Budgets come in many different forms, all of which have a slightly different purpose. The
common purpose among them all is to control the future performance of the business.
Some common formats in catering operations are:

Master budget – This is the budget for the whole business and includes cashflow
requirements, profit and loss and balance sheet budgets. It includes all operations and
departments

Department budget – Each department or functional area will have its own budget.
Some budgets will show revenues and expenses such as catering and others only
expenses such as the maintenance department. Monthly and annual targets, average
spend and number of covers may be information that is included, both in percentages
and monetary amounts
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
Payroll budgets – In a larger establishment, this budget details payroll costs for each
department and provides an overview of staff performance and rates

Purchasing budgets – sometimes this is called an expense budget and is reported for
each significant expense. For a kitchen, this would include food and consumables
such as plastic wrap to cover food.
When catering financial data is entered into established financial control systems, these
budgets are updated to include the budgeted revenues and costs for catering operations,
providing complete financial records for the organisation.
Performance reports
The following diagram illustrates the flow of transactions through a typical hospitality
establishment that provides catering and other services to customers and guests.
Performance reports are generated from the financial control system that summarise the
activities or events within each stage of the cycle and for the operation as a whole.
Revenue cycles also determine the frequency for which performance reports are
prepared. These can be daily cycles such as different meal sittings for catering operations
or weekly cycles where types of guests differ – corporate guests on work days and leisure
guests during non work times. Both accommodation and food services would be affected
by such weekly cycles.
Cash reserves (and
credit facilities)
Used to purchase
Supplies
Profits
Supplies, labour and
other expenses to
produce goods and
services
Accounts receivable
or Cash
Generates
Produces
Sales of Goods
and Services
Examples of the types of performance reports that may be generated are given in the
table that follows. The final column details the financial data that is commonly included in
each report. A review of this information illustrates the manner in which catering financial
data is manipulated into the financial control system.
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Report
Profit and loss statement
Balance sheet
Statement of cash flows
Cash budget
Frequency
Data that is reported
Daily, Weekly
Total revenue and total costs for the
entire establishment
Monthly, Annually
Also prepared for each department
Monthly, Annually
Assets, liabilities and owner’s equity
Daily, Weekly
Cash inflows, cash outflows,
available funds
Monthly, Annually
Daily, Weekly
Monthly
Plans for future cash inflows and
outflows
Bank reconciliation statement
Monthly (or daily)
Cash balance in the bank account
and the ledger account
Payroll cost report
Daily
Labour cost by department
Daily
Food and beverage costs for catering
operations
Room cost report
Daily
Summarises all costs associated with
preparing rooms for guests
Other operating cost summaries
Daily, Monthly
Details any other operating costs
management wish to monitor from all
departments
Purchase order reports
Daily
Summarises the supplies ordered by
department
Goods received reports
Daily. Weekly
Records the stock received for the
period of time required
Wastage report
Daily, Weekly
Lists stock that could not be resold to
customers
Food cost report
Beverage cost report
Daily, Monthly
Annually
Lists item by item the stock or
inventory held on the premises
Daily
Details revenue by department
Daily, Weekly
Monthly
Includes statistical data to analyse
specific nature and timing of sales
Daily Takings report
Daily
Summarises cash movements at
each point of sale for each shift or
day
Daily Cash received reports
Daily
All cash received for the day
identifying daily takings and accounts
receivable amounts separately
Inventory or stock sheets
Daily revenue report
Sales analysis reports:
Occupancy reports
Food and Beverage menu
abstracts
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Work Projects
It is a requirement of this Unit you complete Work Projects as advised by your Trainer.
You must submit documentation, suitable evidence or other relevant proof of completion
of the project to your Trainer by the agreed date.
1.1 Prepare a report that describes the hardware and software options that are part of
the established control systems for catering operations in your workplace. Given the
information you have learnt in this unit, can you suggest any improvements. You
may find a review of workplace policies and procedures will assist with this project.
1.2. Detail how the financial control system in your workplace integrates catering
information. Use specific examples as appropriate.
1.3. Investigate the reports generated by the financial control system that are used by
catering operations in your workplace and prepare a summary that lists:
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
The name of the report or schedule

The frequency it is generated

Specific catering data it provides.
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Summary
Use financial record keeping technology
To be successful, all catering operations must control revenue, expenses and profit.
Stand alone operations consider all monies spent to produce the menu and serve the customer
and catering departments in multi product venues need to consider the covering the costs of all
areas that do not produce revenue.
Internal control measures are procedures and processes that help monitor revenue and costs.
Computer hardware and software options can be implemented or developed to enhance internal
controls. Both the internet and Wi-Fi technology have influenced the options available to catering
operations.
When considering the choices available, the costs and the benefits of the system must be
balanced as well as the compatibility with other aspects of the business.
It is important to remember that computers can only be programmed to imitate catering control
processes that are already implemented and understood.
The financial control system records, processes and reports all activities and events that affect
revenue, expenses, assets and liabilities of catering operations and the business.
Both the revenue and cost objectives and requirements for catering operations are integrated into
the financial system through the input of key financial control information and documents.
Both historical and current financial data is entered into the financial control system so that
revenue and expenses can be monitored and controlled.
Budgets and performance reports provide the financial information required to effectively monitor
and control the financial performance of the catering operation.
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Element 2:
Create financial control system
2.1 Develop, or confirm an existing, effective
financial control system to record and track
the performance of the catering department
Introduction
This section provides an overview of the key management tools
that may be used to record and track financial performance for
catering departments or businesses. You may use this
information to confirm that these tools exist in the financial
control system of your workplace or to support the development
and implementation of some or all of the techniques.
Uniform System of Accounts
An important part of managing catering operations is to be able to identify and analyse the
financial data so that the performance of the department or business can be assessed.
Among things, managers will want to know:

How much money was received?

How much did we spend?

How much profit was made?
This information is not only required to effectively operate the catering department or
establishment but also to satisfy other parties that are interested in the financial
performance of the business. Government authorities or agencies require financial
records such as employee taxes on a regular basis. Owners, investors and financial
institutions will always require accurate and timely updates on the financial health of the
business.
To ensure that financial information is presented in a way that is both useful and
consistent, uniform systems of accounts have been established for many areas of the
hospitality industry. These guidelines are not mandatory but provide basic formats and
principles that catering operations may follow. Stand-alone food service operations may
use the Uniform System of Accounts for Restaurants (USAR) and catering departments
within accommodation venues may use the Uniform System of Accounts for the Lodging
Industry. You will need to know the e uniform system of accounts used in your workplace
and become familiar with the relevant formats and principles.
Note that a Uniform System of Accounts should form part of the financial control system in
your workplace. If not, then software should be obtained and implemented as was
discussed at 1.2 Identify and obtain, where appropriate, effective and user-friendly
software to underpin the initiation and/or use of identified computer systems.
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Cost classifications
To effectively monitor the costs or expenses of a catering operation, Uniform Systems of
Accounts provide categories for which costs can be classified, depending on the nature of
the expense. Two views are particularly useful for catering operations and should be
reflected in the financial control system. These are Fixed, variable or mixed costs and
Controllable or non-controllable costs.
Fixed, Variable and Semi-variable costs
One of the factors affecting catering costs is the volume of sales. If the number of
customers increases, the amount of food purchased will increase. Therefore, food costs
also rise. In contrast, the monetary amount of rent that is paid is not affected by the
number of guests or customers that are served. The behaviour of costs in relation to sales
is defined into three categories:

A fixed cost is one that does not change when sales increases or decreases such as
rent

A variable cost generally increases as sales volume increases and decreases as
sales volume decreases such as food costs

A semi-variable cost is one that has both a fixed and a variable component such as
electricity. There may be a basic service charge and a charge based on usage.
When catering managers understand the relationship between costs and sales, they can
predict sales, costs and profits for different levels of activity. This is often called breakeven analysis and is discussed later.
Controllable and non-controllable costs
Controllable costs are those costs that catering managers can manage and control. Food,
beverage, labour and advertising costs are common examples. Non-controllable costs are
those that the manager cannot control in the short term such as rent, taxes and
insurance.
When evaluating the performance of catering operations, managers will focus their
analysis and decision-making on controllable costs.
Percentages
Percentage calculations are the most common standard used for evaluating performance
in catering operations. It means little to ask if food costs yesterday are high or low unless
they are compared to another period of time or other financial data. Monetary values
change over time adding a further complication to this comparison. To overcome this,
percentage calculations are used that relate expenses to revenue generated within the
same period.
To determine what percent one number is of another, divide the part by the whole. In the
example above, 100 is the whole (or all customers) and 15 is the part (some customers).
The formula looks like this:
Part
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Whole
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Element 2: Create financial control system
As a general rule in catering operations, the whole number is revenue and the part is the
relevant cost you wish to analyse. To interpret this, consider food costs. If food costs
divided by revenue equal 35%, this means that:
For each dollar of revenue, 35% is spent on food costs.
This can be compared to forecasts, prior periods and other data to monitor the
performance of the operations.
Profit and Loss or Income statement
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Element 2: Create financial control system
The profit and loss or income statement is the key
management tool for monitoring the performance of
catering operations. It details revenue, expenses and profit
for a given period of time at a level of detail based on the
appropriate uniform system of accounts. It is important to
note that the word ‘profit’ can be interpreted differently. For
example, profit may mean:

The monetary amount remaining after all operating and other expenses such as taxes
are deducted from all revenue when catering operations are stand alone businesses

Monetary amount remaining after catering and other expenses assigned to the
department are deducted from catering revenue when catering operations are part of
a multi service establishment.
The interpretation of profit should always be established and communicated accurately so
that the performance of catering operations is analysed correctly.
Understanding the components
The profit and loss statement on can be understood by dividing it into three sections:
gross profit, operating expenses and non-operating expenses.
The gross profit section consists of food and beverage sales and costs that can and
should be controlled by the catering manager on a daily basis.
The operating expenses section is also under the control of the manager but more so on
a weekly or monthly basis (with the exception of wages which can be controlled daily).
Consider the Repairs and Maintenance category. Although repairs to equipment are
needed when equipment breaks down, maintenance is typically scheduled on a monthly
basis.
Non-operating expenses section is the least controllable by the catering manager. For
example, interest and taxes are due regardless of the ability of the manager to control
operations.
Each revenue and expense category on the profit and loss statement can be represented
both in terms of its whole dollar amount, and its percentage of total sales. All percentages
are calculated using total sales as the whole dollar and the category of revenue and
expense as the part except the following:

Food costs (part) are divided by food sales (whole)

Beverage costs (part) are divided by beverage sales (whole)

Food Gross Profit (part) is divided by food sales (whole)

Beverage Gross Profit (part) is divided by beverage sales (whole).
Whilst the profit and loss statement summarises the financial data of the catering
operations, supporting schedules or reports provide the details. Each line item on the
profit and loss statement should be accompanied by a schedule or report that outlines all
of the information that is needed to monitor the performance of the catering operation. For
example, a revenue report will show a breakdown of sales from each meal period over the
course of a day, week or other time.
It is in the supporting schedules that information is found that helps to determine issues
and potential opportunities for each item on the profit and loss statement. Common areas
of analysis are discussed below.
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Analysis of Sales
Sales or revenue from catering operations increases or decreases for two reasons:

The number of customers served - this is called sales volume

The price of men items.
Sales must be analysed carefully so that the effect of
price changes is isolated from volume changes. For
example, if the catering operation increased prices, you
would naturally expect total sales to increase because
customers are paying more. But the real sales increase
comes from the number of customers served. You need
to isolate so that the true direction of revenue can be
analysed.
Overall sales increases or decreases can be computed using the following steps:
Step 1: Determine sales for the given period
Step 2: Calculate: this period’s sales minus last period’s sales
Step 3: Divide the difference in step 2 by last period's sales to determine percentage
variance.
To determine if part or all of the variance or difference is due to a change in sales volume,
make the following adjustment:
Step 1: Increase prior period sales by amount of the price increase
Step 2: Subtract the result in Step 1 from this period's sales
Step 3: Divide the difference in Step 2 by the value of Step 1 to determine the percentage
variance.
Analysis of Food and Beverage expenses
Food and beverage expenses are analysed by calculating a separate food and beverage
cost percentage:
Cost of Food Sold
Total Food Sales
Cost of Beverages Sold
Total Beverage Sales
=
Food cost %
=
Beverage cost %
It is important to remember that the numerator (or top) of the equation is cost of food or
beverage sold while the denominator (bottom) is total food or beverage sales, rather than
total food and beverage sales.
These cost percentages can be computed for each food or beverage subcategory
depending on the information required. An effective financial control system generates
both of these percentages at least daily or as required by managers of catering
operations.
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In addition to costs, food and beverage inventory turnover is also
calculated. This refers to the number of times inventory has been
purchased and replaced in a given period. A high food inventory
turnover usually indicates increased sales although it can indicate
waste, spoilage or theft. If high value beverages are held in stock, such
as expensive wine, the beverage turnover rate will often stay low.
The formula used to compute inventory turnover is as follows:
Cost of Food Consumed
Average Inventory Value
Cost of Beverages Consumed
Average Inventory Value
=
Food Inventory Turnover
=
Beverage Inventory
Turnover
The average inventory value is computed by adding beginning inventory for this year to
the ending inventory from this year and dividing by 2.
Note that it is cost of food or beverage consumed rather than cost of food or beverages
sold that is used as the numerator in this ratio. This is because all inventories should be
tracked so that you can better determine what is sold, wasted, spoiled or stolen.
Analysis of labour expenses
As has been mentioned, the expense of hiring staff is one of the main costs in catering
operations. An effective financial control system will generate a payroll cost percentage
that can be used to monitor this expense.
The payroll cost percentage is calculated as follows:
Total Salaries and Wages expenses
Total Sales
=
Payroll cost %
Generally, when labour expenses are controlled appropriately, increases in sales will
result in a corresponding increase in labour costs to serve the customers or guests. The
payroll or labour cost percent enables managers of catering operations to assess this.
Analysis of Profit
The profit margin in catering operations is the calculation used to indicate how effectively
managers have controlled costs and provided a profit.
Net Profit or Net Operating income
Total Sales
=
Profit margin
While it is not possible to state what a "good" profit margin should be for all catering
operations, industry averages, depending on the specific establishment, range from 1% to
over 20%.
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Budgets
Budgets are simply an estimate of future revenue, expenses and profit that is prepared for
a particular period of time such as a day, a week or a month. A reminder of the types of
budgets that are entered into the financial control
system for catering operations are:

The Master budget

Department budgets

Payroll budget

Purchasing budget

Events budget.
The format for these budgets is similar to the profit
and loss statement illustrated above, depending on
the details required.
Variance analysis
An effective financial control system will provide actual and budgeted catering revenue
and costs to enable manager to monitor performance. The difference between the actual
and budgeted results is called a variance. Variances can be expressed as monetary
values or as percentages. A significant variance is a concept used to determine whether a
problem with costs or revenues exists. This allows attention to be focused on any areas of
concern in the catering operation.
Four steps are commonly associated with variance analysis. They are:

Compare actual results to the budget

Identify significant variances

Determine the cause of significant variances

Take corrective action as required.
Performance to budget
The concept of performance to budget describes the percent of the budget that was
actually used in the catering operation for a given period. Revenue and expenses are
presented for both actual and budget monetary amounts. Percentages are used to
compare actual expense with the budget amount using the formula:
Actual ÷ Budget = % of budget
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The calculations in the following table illustrate the performance to budget concept. You
can see that this catering operation served fewer meals than planned and spent less on
food than was planned. However, more was spent on labour and other expenses. If this is
considered significant, managers will focus their attention on investigating the problem
and taking corrective action.
Item
Budget
Actual
% of budget
Meals served (quantity)
3,780
3,700
97.9%
Food expense
2,600
2,400
92.3%
Labour expense
2,800
2,900
103.6%
Other expense
700
965
137.9%
Profit
893
728
81.5%
Break-even analysis
There are three possible results provided by a profit and loss statement:

Profit

Loss

Break-even.
The break-even point of a catering operation or business is the point where the amount of
revenue exactly equals the amount of expenses – there is neither a profit nor loss. When
catering costs are classified in the financial control system as fixed and variable,
managers are able to analyse the behaviour of costs in relation to revenue and calculate:

The break-even point in monetary amounts and number of items

The value of costs and the amount of profit that will result from a particular sales
target

The sales required, as both a monetary amount and the number of customers to
achieve a particular profit target.
This information can be used to create the budget for the catering operation and give
management another tool for monitoring performance.
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2.2 Input financial data into the catering
department computerised control system
The Accounting cycle
Catering departments engage in a continuous flow of financial transactions. These
financial transactions are summarised and reports generated from the computerised
system for given periods of equal length known as accounting periods. During each
accounting period, steps and procedures are followed to ensure that all financial data is
recorded correctly and in a timely manner. These steps and procedures are called the
accounting cycle and are summarised as follows.
1. Analyse source documents
2. Record transactions in journals and ledgers
3. Prepare an unadjusted trial balance
4. Process adjusting entries
5. Prepare a final trial balance
6. Prepare financial reports.
Computerised financial control systems process transactions according to the accounting
cycle. Each system will have its own procedures depending on the nature and size of
catering operations but all will reflect the following basic features and principles. You must
be familiar with the manner in which catering financial data is entered into the
computerised system in your workplace.
Source documents
Source documents provide written evidence that a transaction has occurred between the
catering operation and another party such as a supplier. All financial data should be
supported by source documents. Examples of common source documents for catering
departments are:

Purchase order – goods or services are ordered from a supplier

Invoice – request for payment from a supplier for goods or services provided

Cash register tapes – record cash received from cash sales

Timesheets recording hours worked

Goods received documents

Forms to issue inventory from stores.
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Ledger accounts
The computerised financial system classifies financial data
into five categories:
1. Assets
These are Items of value that are owned by the
business and used to create sales. Examples are cash,
stock, silver, glass, linen, equipment, land, buildings,
and furniture.
2. Liabilities
Any obligation or debts the business has as a result of operations are called liabilities.
Amounts owed to suppliers and bank loans are examples.
3. Owners equity
Represents the claim the owner has on the assets of the business after liabilities are
deducted.
4. Revenue
Sales generated from providing goods and services in a business. Room sales, food
and beverage sales and ticket sales are all examples for hospitality and tourism
establishments.
5. Expenses
Goods or services used in operating a business. Wages, housekeeping, inventory or
stock, cleaning costs, electricity and telephone are just some examples of expenses.
Expenses are further classified as fixed, variable, controllable and other categories as
required by catering operations.
Typically, an account called a ledger account exists in each business for each type of
asset, liability, equity, revenue and expense that is affected by financial transactions.
Each ledger account is assigned a unique code and any point in time the current balance
or total can be calculated. The collection of individual ledger accounts for a particular
business is called the general ledger.
Journals
Ledger accounts are not designed to provide specific details of every transaction so
transactions are recorded in a book called a journal. This provides one complete record of
all transactions, as they occur. It is important to note that many computerised systems
appear as if the details of a transaction are entered directly to the appropriate ledger
account instead of a journal. This is just a matter of design rather than accounting
principle. There are commonly a number of journals used to record financial data. Similar
transactions are grouped together – all cash received, all cash paid, all credit sales and all
purchases of stock or inventory.
Subsidiary ledgers
When a large amount of detailed financial data about a certain ledger account must be
kept, neither the ledger account nor any journals are designed to hold the information.
Instead, a separate ledger called a subsidiary ledger is used. Common for catering
operations is the inventory subsidiary ledger that records all the details of all inventory
items. The total value of inventory is shown in the general ledger account.
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Recording transactions in journals and ledgers
In order to record transaction in the computerised system, the source document is
analysed to determine the ledger accounts that are affected. Each and every financial
transaction affects two or more ledger accounts (or even the same ledger account twice).
This is referred to as the principle of double entry accounting. For example, when food
supplies are purchased for cash, the ledger account cash decreases and the ledger
account food supplies increases. However, it is
usually sufficient to simplify identify the purpose for
the transaction from the source document as the
computer system takes care of the double entry for
you.
It is important to ensure that transactions are
recorded in a timely manner. Managers of catering
operations often analyse costs on a daily basis and
expect that the summaries or schedules from the
general ledger provide up-to-date information.
Without this assurance, managers may delay crucial
decisions or find it difficult to control the revenue and
expenses in the catering department.
Checking transactions
Part of entering financial data into the catering computer system is checking that the
transactions are:

Recorded accurately in journals and ledgers

Transferred from journals and subsidiary ledgers into ledger accounts correctly
Computerised accounting systems generate a report called a trial balance that
summarises all the monetary amounts that have been entered into every ledger account
for a given period. This should be reviewed to ensure all ledger account balances are
updated as expected and no transactions are missing.
Most catering operations will also reconcile or check that the balances in subsidiary
ledgers are the same as the corresponding ledger account. This is usually completed
once a month depending on workplace policies and procedures.
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Work Projects
It is a requirement of this Unit you complete Work Projects as advised by your Trainer.
You must submit documentation, suitable evidence or other relevant proof of completion
of the project to your Trainer by the agreed date.
2.1 Obtain a recent profit and loss statement from your workplace for catering operations
and analyse the performance for the period. Compare the results to prior periods
and budgets where possible and report your findings.
2.2. Choose five common transactions that occur in the catering operation at your
workplace and provide the following:
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
Describe the procedures required by the computerised accounting system to
enter the transactions. You should be able to give these procedures to a new
employee to use when inputting the data

List the names of the general ledger accounts and the category in which they are
classified.
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Summary
Create financial control system
A Uniform System of Accounts provides a useful and consistent format for the presentation of
financial data so that managers can monitor the performance of catering operations.
Classifying costs as fixed and variable describes the behaviour of costs in relation to sales.
Classifying costs as controllable and non-controllable assists managers to focus on evaluating
those costs that their decisions can change.
Percentages are the most common standard for evaluating performance in catering operations
with the whole or denominator being total revenue. Sales, food costs, labour costs and profit are
all analysed using percentages.
The profit and loss statement is the key management tools for monitoring and evaluating
performance in catering operations.
Each revenue and expense category on the profit and loss statement can be represented both in
terms of its whole dollar amount, and its percentage of total sales. Also, a schedule or report
showing details of the revenue or expense should accompany the profit and loss report.
Variance analysis highlights the difference between actual results and budgets, prior performance
or other standards used by the catering operation.
The concept of performance to budget describes the percent of the budget that was actually used
in the catering operation for a given period.
Break even analysis is used to answer questions such as:

For a given sales volume or monetary value, what are total expenses and what is profit?

To achieve a certain monetary amount for profit, what do sales need to be?
The accounting cycle describes the manner in which financial data is entered into the catering
computerised control system.
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Element 3: Create production control system
Element 3:
Create production control system
3.1 Develop, or confirm an existing, effective
production control system to record and track
the performance of the catering department
What is the production control system?
For a catering operation, whether as a standalone business or as part of a venue offering
other services, managers are responsible for controlling the food and beverage
production process. The complete production control process involves the following steps:

Maintain sales histories

Forecast future sales levels

Purchase and store required food and beverage supplies

Plan daily production schedules

Issue products to kitchen production areas

Manage the food and beverage process.
The performance of the catering department can be measured in terms of both financial
results and efficiency or productivity. At each stage of this process, there are revenue and
expense implications that can affect the financial performance of the catering department
and procedural matters that impact productivity or efficiencies.
It is important that the production control system is designed to ensure that financial
performance and productivity is maximised. Some of the key features that should be
developed or exist in the system in your workplace follow.
Menu design and recipes
Menus must not only appeal to customers but should provide a profit for catering
operations. Planning the menu includes evaluating menu costs from standard recipes,
waste control and yield information to get a clear picture of the profitability of individual
menu items as well the menu overall.
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Ordering, receipt and storage
An effective production control system will always feature good
controls over the purchasing and storing of food and beverages.
Examples of these controls are:

Clear purchasing descriptions and quotes from suppliers to
determine actual costs

Timely delivery of goods to minimise waste and spoilage

Checking goods received for consistency, quality and correct quantities

Forwarding documentation such as invoices for payment in a timely manner

Ordering should be based on information the computerised system that will detail
amounts to ensure the best value and to maximise shelf life of the product

Supplies should be stored with appropriate consideration to temperature, ventilation
and packaging.
Daily production schedules
Based on the menu for the catering operation, historical sales information is utilised, along
with popularity indices to forecast the sales for the day, shift or meal period, depending on
the nature of the catering business.
Using this information, daily production schedules are planned that will identify the
products and staff needed to serve the guests or customers. The process for determining
how much of a given menu item to prepare on a given day would look like this:
Prior day carry over + Today’s production
=
Today’s sales forecast (+ margin of error)
To minimise the chance of running out of menu items, there is often a small amount
added to this calculation. This is called the margin of error.
When your kitchen production staff knows what needs to be produced for a given meal
period, the next step which is to request the inventory needed to produce the menu items
indicated by your production schedule. These inventory items are then issued, that is,
taken from storage and placed into the food and beverage production areas.
Product issuing
When supplies are issued from inventory, effective controls should be on place to
maintain the security of the product. Some principles to observe include:

Food, beverages, and supplies should be requisitioned only as needed based on
approved production schedules

Required items should be issued only with appropriate approval

If a written record of issues is to be kept, each person removing food, beverages, or
supplies from the storage area must sign, acknowledging receipt of the products

Products that do not ultimately get used should be returned to the storage area and
their return recorded.
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Depending on the size and nature of the catering operation, a store person may be
employed who may organise the issue of supplies a day or meal period ahead of time.
Sometimes, products will be weighed and measured before they are issued to the kitchen.
Note that it is important for storeroom request documentation to be sent to purchasing
personnel so that they are aware of product levels. In a computerised system, this is
usually an electronic notification such as an alert.
Beverage issues
If beverages are issued in your workplace, there are additional concerns that should be
addressed as follows:

Empty bottles should be disposed of with consideration to local liquor laws

Liquor is issued on an empty for full system where bar staff complete a request and
storeroom personnel issue the new bottle

Storerooms should be locked and accessed only by approved employees

All liquor issued from the liquor storage area should be marked or stamped in such a
manner that is not easily duplicated.
Inventory control
Regardless of the control system in place to request food
and beverage products, inventory or stock levels will be
affected. Additional products need to be ordered on a timely
basis for avoid shortages and balance waste or spoilage.
Two systems are used for inventory control:

A perpetual inventory system is one in which the entire inventory is counted and
recorded, then additions to and deletions from total inventory are recorded as they
occur

A physical inventory is one in which an actual, physical count and valuation of all
inventory on hand is taken at the close of a given period.
For catering operations, the second system, physical inventory is more commonly used
as it is considered the most accurate.
At the end of a given period, the computerised control system generates a list of all
inventory items relevant to the catering operation. Usually two employees are assigned to
count the items in the storeroom and enter the amount counted on the list. Some
organisations use hand held scanners to scan bar codes to assist this task.
When the count is complete, the amounts are entered into the computerised system and
compared to the amounts in the system. Discrepancies must be investigated and
resolved.
Note that the amounts already in the system are updated from sales and purchases that
have occurred during the period.
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Managing food production
Monitoring and controlling the production of food involves controls in the following areas:

Waste

Overcooking

Portion control

Improper carryover utilisation

Inappropriate make or buy decisions.
Waste
Food losses through simple product waste can play a large role in excessive costs for
catering operations. Common examples are waste such as the contents of a jar is not
completely empty or a product is not cut or trimmed appropriately. Generally, this is the
result of poor training or lack of attention from managers or supervisors.
Overcooking
To control losses due to overcooking, kitchen staff must strictly follow the standardised
recipe cooking times. Many catering operations supply small, easily cleanable timers for
kitchen staff to use as a simple control measure.
Portion control
It is important to control the size of menu portions provided to customers because:

Over portioning increases catering costs and may cause the operation to mismatch its
production schedule with anticipated demand

Customers or guests require consistency so a large portion one day and a smaller
portion the next may cause them to question that they have received fair value for
money.
To establish an appropriate portion size for each catering operation, the nature of the
business, the pricing structure, the profile of customers and quality of products are all
considered.
To control portion sizes effectively, catering operation use the following tools:

Scales

Scoops

Ladles or spoons

Consistent dish sizes

Standard size of products such as one egg or one banana.
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Product Carryover
The ability to manage products that have not been used and can be carried over to the
next day or meal period directly affects the financial performance of the catering
operation. If these products cannot be used, they are an expense they will be discarded
without generating any revenue and only adding to costs. The following table illustrates a
menu and suggested use for leftovers.
Make or buy decisions
Many catering operations choose to buy some food products that are pre-prepared. This
is often because the cost of preparing the product in terms of labour and equipment can
be greater than the cost of purchasing the pre-prepared item. In general, effective controls
will address the following questions:

Is the quality acceptable?

Will the product save labour?

Would it matter if the guest knew?

Does the product come in an acceptable package size?

Is storage space adequate?
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Managing beverage production
Production control systems must also adopt measure that are effective in controlling the
amount of beverages served to guests when applicable to the catering operation. Unlike
food production, there are a number of automated choices to help with controls. You
should be familiar with the following:

A jigger is a device (like a small cup) used to measure alcoholic beverages, typically in
ounces, and portion of ounce quantities

A metered bottle or other metered dispensing unit. In this case, a predetermined
portion of product is dispensed whenever the bartender is called upon to serve that
product

In some catering operations, beverage “guns” are connected directly to liquor
products. Pushing a mechanical or electronic button may activate the gun

The most expensive, but also the most complete solution, a total bar system combines
sales information with product dispensing information to create a complete revenue
and product management system.
Theft management
Loss of food and beverage products can happen in catering
operations if control systems do not attempt to minimise theft. The
following is a list of product security tips that should be present in all
production control systems.

Keep all storage areas locked and secure

Issue food only with proper authorisation and management
approval

Monitor the use of all carryovers

Do not allow food to be prepared unless a guest check or written request precedes the
preparation

Maintain an active inventory system and conduct stocktakes of all products

Ensure that all food received is signed for by the appropriate receiving clerk

Do not pay suppliers for food products without an appropriate and signed invoice

Do not allow employees to remove food from the premises without management's
specific approval.
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3.2 Input production data into the catering
department computerised control system
What is production data?
In an earlier section the financial data held in the computerised
catering control system was discussed. To effectively monitor the
production of food and beverages, the computerised system also
holds all the production data the catering operation may require.
Production data includes all the information necessary to:

Develop food production controls, including standard recipes,
quantity and quality criteria and production schedules

Develop work flows to optimise production efficiency

Minimise labour costs while maintaining production levels, required food standards
and quality

Track sales to determine or amend production quantities and changes to menu items

Monitor stock, including losses in storage, damaged products that become unfit for
sale and product wastage.
The types of production data that should be entered into the computerised control system
are listed under each of these categories. You should know the specific information
required in your workplace and the processed and procedures that guide the input of the
production data.
Food production
To effectively control the food production process, at least the following information is
entered into the computerised system:

Standardised recipes for each menu item control both the quantity and quality of the
product the kitchen produces. It is the foundation of all effective production systems
because the recipes influence menu pricing, purchasing, ordering, labour needs,
portion control and other food production issues

All items of inventory with specific details such as:

Unit measurements

Monetary value per unit

Total monetary value

Weights in local measurements including purchase weight, weight when peeled or
trimmed and weight after cooking

Ordering quantities

Re-ordering levels

Delivery times

Storage details
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
Purchasing and issuing of supplies. As supplies are requested, stock movements are
entered into the computerised system. This indicates to purchasing when new orders
need to placed and updates the amount of inventory held to be checked during
stocktakes

Yield information. This records how much usable product can be derived from an
ingredient. For example the yield of an average egg as laid by a hen is as follows:

30 percent egg yolk

60 percent egg white

10 percent shell.
If a recipe required liquid measurement of egg whites, the knowledge of the above
yield test will help to determine exactly how many eggs are needed

Standard portion sizes by weight or other measurement so that staff are aware of the
portions to prepare and serve

Waste management information such as the product carryover table displayed above
at section 3.1.
Production schedules
In a computerised catering operation, daily production schedules are input into the system
so that they are accessible for all users. Depending on the size and nature of the
business, users can include:

Kitchen staff

Storeroom personnel

Supervisors and managers of catering operations

Employees responsible for purchasing.
Labour costs
Previously, classifications of costs or expenses including
labour have been discussed as controllable and noncontrollable. However, when focusing on the production
of food, some catering departments or business prefer to
classify labour costs as direct or indirect costs.
Direct labour costs include all staff who have specifically
prepared or served food to customers or guests.
Indirect labour costs include all employees who support the overall catering operation.
When calculating the cost of a menu item, both these categories of costs are included as
follows:

Direct cost - the actual time taken to prepare the menu is multiplied by the appropriate
hourly rate for the employee

Indirect cost – a portion or percentage of total indirect costs is assigned to each menu
item according to organisational policies and procedures.
It is therefore necessary to enter the estimates of time taken to prepare menu items and
to ensure that hourly rates and total costs are current and accessible for production staff.
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Monitor stock
To effectively monitor stock, all inventory details mentioned above need to be entered into
the computerised production control system. In addition to this, regular input of the
following is required:

Food and beverage supplies that have been ordered

Goods received

Requests for supplies based on daily production
schedules

Supplies issued from the storeroom based on daily
production schedules

Price or standard quantity changes

Sales data to record the products that have been sold to customers or guests.
At the end of a given period, depending on workplace policies, stocktakes are conducted
and the actual amount of each inventory item is entered into the catering system.
Other data
Depending on the technology used in catering operations, other data that informs
production may be updated automatically or required to be input separately. For example,
in a fully integrated computerised system, the relevant sales information collected by the
POS system would be available, usually through use of password access, to the catering
manager or supervisor to use for production decisions as needed. If the different functions
within the computerised system operate separately, then the required sales data would
need to be entered into the production function.
This type of computerised system is becoming less common as catering operations
appreciate the benefits in both costs and efficiencies of a fully integrated computerised
system.
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Work Projects
It is a requirement of this Unit you complete Work Projects as advised by your Trainer.
You must submit documentation, suitable evidence or other relevant proof of completion
of the project to your Trainer by the agreed date.
3.1 Describe the production control system in your workplace and how the performance
of the catering department is monitored. You should at least address the key areas
of production.
3.2. Choose three different types of production data from the catering operation at your
workplace and provide the following:

58
Describe the procedures required by the computerised accounting system to
enter the data. You should be able to give these procedures to a new employee
to use when inputting the data.
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Summary
Create production control system
The production control system includes all aspects of kitchen production and the surrounding
processes such as menu design, production schedules and inventory management.
The production control process should maximise both financial performance and productivity by
monitoring:

Menu design and recipes

Ordering, receipt, storage and issuing of supplies

Production schedules

Inventory control

Food production

Theft management.
Standardised recipes and details of supplies such as weight, price and quantity need to be
entered into the production control system.
Production schedules should be accessible in the computerised system for all staff who need
them.
Labour costs are classified as direct and indirect costs in the production control system so that
food costs can be calculated accurately.
Regular input of inventory movements must be entered into the production control system to
effectively monitor stock levels and costs.
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Element 4:
Respond to the results produced by
the established control systems
4.1 Take action to address expenditure figures
that are deemed unacceptable
Variances
At the end of given period such as a day, week or
month, computerised systems generate reports that
summarise both the actual and planned results for a
catering operation. The types of reports and the
frequency in which they are generated depend on the
needs of managers and the nature and size of the
catering business or department.
The difference between actual and planned results is
called variance and can be expressed as monetary values or percentages. Variances are
considered favourable if the actual result is an improvement on the budget (higher
revenue or lower expenses) and unfavourable when actual results do not meet budget
expectations (lower revenue and higher expenses).
There are two ways that are commonly used to identify variances:

Horizontal analysis compares a change in results over time by choosing a base period
and comparing results to that base period

Vertical analysis is most often used in catering operations and reveals which costs
absorb the most revenue for the given period. This can be compared to prior periods,
pre-determined standards and industry benchmarks.
Identify unacceptable variances
Once all variances are calculated, managers are responsible for determining if the
variance is significant based on their knowledge and workplace policies and procedures.
Generally in catering operations, of major concern are:

Revenue, overall and by menu item

Food costs

Inventory turnover

Labour or payroll costs.
By calculating the relevant percentage for each of these areas, such as the food cost
percentage, managers can determine if the result is unacceptable and take action as
necessary.
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Determine the cause of the variance
To determine the cause of a variance, managers must first identify the two reasons why
the variance occurred. Consider an unfavourable payroll cost variance for a small catering
operation. The total payroll cost is calculated by:
Total hours worked x Average hourly rate
The financial system has reported the following on the daily total payroll cost report:
Item
Actual
Budget
Variance
Total Payroll
936
750
186 (U)
Hours worked
120
100
20 (U)
Average rate of pay
7.80
7.50
0.30 (U)
It is clear from the table that the unfavourable variance has occurred because both the
hours worked and the average rates of pay are higher than the budget. Managers can
now focus their investigation on these two factors. It may be that the catering business
was busier than planned so more staff were employed or existing staff worked more
hours. This may have meant paying a higher rate to the casual staff or paying excess
overtime to existing employees.
A useful technique to remember when analysing the cause for variances is to remember
that sales revenue variances are broken down into price (sales prices) and volume
(quantity sold) differences and expense variances into cost (hourly rate) and quantity
(hours worked) components. It is also important to remember that there may be many
possible causes for variances, some of which will be beyond the responsibility of the
manager.
Take action to correct significant expense variances
Food expenses
The food cost percentage represents the portion of food sales that was spend on food
expenses. It is calculated as follows:
Cost of Food Sold
Total Food Sales
=
Food cost %
If this is higher than planned or than the standard expected from the catering operation, it
must be investigated and appropriate action taken.
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Common approaches to reducing food costs are:

Decrease portion size relative to price

Vary recipe composition

Adjust product quality by using substitutes or pre-prepared foods

Achieve a more favourable sales mix

Ensure that all product purchased is sold

Increase price relative to portion size

Changing suppliers or re-negotiating prices

Reducing labour

Improving staff training

Revising ordering processes.
Inventory turnover
When inventory turnover varies significantly from organisational standards or from budget,
it must be investigated. Generally, inventory turnover should increase as sales increases
as the more sales, the more supplies are required – this is a good sign for the
performance of the catering operation. However, it could also be due to wastage, spoilage
or theft. To identify the cause of the variance so that appropriate action can be taken,
managers should supervise food preparation to check that:

Temperature controls and correct work practices are minimising spoilage

Waste is minimised by preparing products according to standard procedures. Average
waste percentages can provide a good indication of the amount of waste that can be
expected from food products

Only requested goods are issued to the kitchen

Security procedures are being followed with regard to
the movement of food supplies.
Some suggestions to address any issues that arise from
this review of the preparation process are:

Revise workplace policies and procedures to reflect
the practices that employees should follow

Implement additional security procedures such as checking bags when employees
finish their shift if theft is suspected

Offering kitchen staff monetary or other rewards when waste percentages are
achieved

Offering additional training on food handing techniques.
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Labour or payroll costs
The monetary amount paid to employees in catering operation varies depending on the
location of the business and the nature of the services offered. Wages or salaries may be
different in an International hotel than in a street café and in a catering operation in
Malaysia and Singapore.
Regardless of this, labour or payroll costs are a significant expense for catering
operations and are usually monitored daily or weekly depending on the organisation.
The payroll cost percentage is calculated as follows:
Total Salaries and Wages expenses
Total Sales
=
Payroll cost %
There are two reasons why this percentage can vary significantly from expectations:

The monetary amount paid to employees

The number of hours worked for the given period.
Monetary amount paid to employees
The monetary amount paid to employees can be different to expectations or forecasts due
to:

Unplanned overtime

A decrease in sales therefore less staff were required per shift

A decision to buy rather than make a food product that was not expected

Shortage of less qualified staff available to work so more qualified staff who are paid a
higher wage covered shifts.
Number of hours worked
The number of hours worked for all employees can differ from forecasts due to:

Unplanned overtime

Fluctuations in sales that were not anticipated

Inefficient work practices

Standard recipe times were not followed

Staff were not suitably qualified or overqualified to undertake tasks so they took longer
in the former case and less time in the latter.
Managers of catering operations must carefully review both these reasons and take action
where necessary.
It is also important to be aware that over time, labour-related costs have increased across
all countries and regions. Appropriate time and planning must ensure that payroll cost
standards address any new conditions. For example, one of the fastest increasing labourrelated costs for catering operations is the cost of medical insurance benefit programs.
The Indonesian authorities are currently implementing such a program which may
increase payroll costs by up to 5%.
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Other expenses
Whilst food, beverage and labour expenses will always be important expenses to control
other expenses incurred by catering operations can represent a significant portion of the
operations total expenses and should be monitored. These other expenses are often
grouped together in these categories:

Music and entertainment

Repairs and maintenance

Utility services

Administrative and general expenses.
Action that can be taken on significant variances can include:

Verifying that only catering department costs are being
allocated to the catering department budgets

A properly designed and implemented preventative
maintenance program can go a long way toward reducing
equipment failure and thus decreasing equipment and facilityrelated costs

Proper care of mechanical equipment prolongs its life and reduces operational costs

One way to help ensure that costs are as low as possible is to use a competitive bid
process before awarding contracts for services you require

In the area of maintenance contracts, for areas such as the kitchen or for mechanical
equipment, it is recommended that these contracts be bid at least once per year

Air-conditioning, plumbing, heating and refrigerated units should be inspected at least
yearly, and kitchen equipment should be inspected at least monthly for purposes of
preventative maintenance.
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4.2 Take action to address revenue figures that
are deemed unacceptable
Variances continued
Following from the previous section, managers of catering
operations also need to address significant revenue variances.
Remember that sales revenue variances are broken down into
price (sales prices) and volume (quantity sold) differences so
managers of catering operations can consider actions with
regard to these two factors.
Take action to correct significant revenue variances
A considerable amount of time and effort can be spent in catering operations in deciding
the menu mix, the appropriate price for each menu item, forecasting or predicting the
popularity of menu items and ultimately calculating a planned revenue figure for a given
period.
The financial control system provides revenue reports that detail revenues earned for a
given period and food and beverage menu schedules that include statistical data to
analyse the specific nature and timing of sales. When these reports or schedules are
compared to forecasts or budgets and even prior periods, variances can be identified.
Changes to forecast assumptions
Any change to the set of assumptions made when budgeted revenue was calculated can
result in variance when actual and planned results are compared. It is the responsibility of
management to evaluate the significance of the changes and take action where
necessary. This may include:

Changing menu items if a particular menu item was not as popular as was thought. A
technique called goal value analysis is commonly used in catering operations to assist
such decisions

Adjusting portion sizes – goal value analysis is also useful here

Increasing selling prices.
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Revenue is recorded accurately
Customers or guests pay for the products provided by the
catering operations most commonly in some form of
cash. Cash is defined as a method of payment and
includes notes and coins, cheques, credit card payments,
vouchers, electronic transfers and any other legal form of
payment. Unacceptable revenue figures may mean that
payments are not received or entered in the financial
control system and therefore revenue is not recorded.
This requires an immediate review of revenue control
procedures such as:

Verifying that permanent records of all product issues from the kitchen are made

All product issues are reconciled or matched to guest or customer charges such as a
bill or account

Customer or guest bills are matched to sales receipts. There are usually four basic
payment arrangements in a typical catering operation

Guest pays cashier

Guest pays server who pays cashier

Guest pays server who has already paid cashier

Guest is billed directly.
Both the cashier and a supervisor or manager must always verify sales receipts

When cash is collected from POS terminals at the end of a day or shift and verified as
above, it is the responsibility of managers or senior personnel in the catering operation
to ensure that all bank deposits match actual sales.
Another issue that can arise with the recording of revenue is that sales from catering
operations are incorrectly allocated to a different department. For example, room service
sales are allocated to room revenue in the financial control system rather than to the
catering department. In a computerised control system, this is rectified by changing the
ledger account to which revenue is allocated or simply re-directing the ledger account to
the catering department.
Discounts and Promotional activities
Sometimes catering businesses offer special arrangements to attempt to attract new
customers, retain existing customers or trial new or improved menu items. This can be
done through the following techniques:

Discounting

Special deals

Complimentary items

Promotional offers

Set menu prices and times.
When these techniques are used in the current period but the desired results for revenue
were not achieved, they may be eliminated or altered.
If revenue is not at a desired level, managers of catering operations may decide to
introduce some of these strategies to improve revenue for the next period.
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4.3 Negotiate with management to obtain revised
budget figures
The role of the budget
The budget is an important document in catering businesses or departments as it
provides a set of standards or benchmarks used to monitor and evaluate the performance
of catering operations. The role of the catering budget can be summarised as follows:

Forecasting – the budget sets realistic targets for the future providing goals and
direction for catering operations

Motivation – catering staff can be encouraged to work towards achieving the goals set
by the budget, especially when these goals are explained and understood

Co-ordination – this is particularly relevant when the catering department is part of a
larger establishment. All departments need to work towards the same goals and the
budget defines these goals

Evaluate performance – comparing actual revenues and costs to budgeted revenues
and costs enables an analysis of the catering operation and provides a basis for
addressing any issues.
Preparation of the budget
The preparation of a budget often requires extensive negotiation between all departments
and personnel in an organisation. When catering operations are the only function of the
business, they given priority in the budgeting process. However, when catering operations
are part of a business, the process becomes a series of negotiations between
departments or areas with competing demands for the limited funds of the business.
This means that the budget for the catering department for a given period may reflect a
series of compromises in relation to the revenue, expenses and profit targets. When
managers evaluate the actual performance against the budget, these compromises need
to be considered.
Revising the budget
The budget should never be treated as a static document. It should
be modified as data about sales, costs and profit that affect the
direction of the catering operation becomes available. Stand-alone
catering operations modify their budget as and when analysis is
conducted and action is needed. However, for those catering
operations that are one department of many, modifications to
budgeted revenue, expenses and profit are not as straightforward.
The first step to revising the budget is analysing variances for
revenue and expenses and investigating the causes for the
variance. Action to address such variances for revenue and
expenses was discussed earlier.
However, if all possible reasons for significant variances have been investigated, it may
be reasonable to assume or it may be clear that the assumptions and circumstances have
changed since the budget was prepared. This has significantly impacted revenue and
expenses for the catering operation.
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Given that one of the roles of the budget is to evaluate the performance of the catering
department, managers may request that the budget is adjusted to reflect the changing
circumstances.
This may require reports and presentations to be made to senior personnel. Managers
can find that a sound understanding of negotiation techniques is useful for requesting
revisions to revenue and expenditure targets.
Negotiation techniques

Decide what is negotiable - before you start to negotiate, decide what you are (and
aren't) prepared to compromise. Key factors might include revenue targets or
particular expense categories

Plan your strategy - set clear goals and decide the
overall approach that you will adopt

Choose the right time and place for negotiation

Outline your requirements, Open negotiations by
outlining your requirements or terms and conditions
and try to get others to reveal their starting point for
discussions

Ask questions and listen closely to answers, asking questions will help you
understand what your opposite number wants to achieve. You may be able to get
them to reveal how flexible they are on certain issues

Do not reveal your negotiating position and avoid making unnecessary concessions

Be aware of negotiating tactics - Do not be forced into making rushed decisions. Each
time a point is agreed, clarify that you've understood it correctly and write it down.
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Work Projects
It is a requirement of this Unit you complete Work Projects as advised by your Trainer.
You must submit documentation, suitable evidence or other relevant proof of completion
of the project to your Trainer by the agreed date.
4.1 Below is a simple financial report detailing the actual and budgeted results for a
small catering operation.
Line item
Budget
Actual
Revenue
25,000
24,650
Food Costs
6,800
8,120
Wages
7,000
8,900
950
1,230
4,500
4,350
Advertising
Other expenses
1. Calculate horizontal and vertical variances. Take percentages to two decimals
2. Which item has the greatest unfavourable monetary variance?
3. Which item has the greatest unfavourable percentage variance?
4. What areas would you investigate for improvement? Do you need more
information?
5. Suggest actions you may take on significant variances.
4.2 Prepare a set of notes that you will use in a meeting to negotiate a change to the
budgeted food cost in the table above. You should include reasons for the change
and the techniques you may need to use in the negotiation process.
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Summary
Respond to the results produced by the established control systems
Variances identify the differences between actual and planned results.
Favourable variances are those where profit has increased and unfavourable where profit has
decreased.
Horizontal and vertical analysis are two methods used in catering operations to calculate
variances.
Variances that are of major concern in catering operations are:

Revenue

Food costs

Inventory turnover

Labour or payroll costs.
To correct significant variances, the reason for the variance must be thoroughly investigated. If the
variance results from procedural or security matters, workplace practices may need to be
modified.
Employee training, appropriate planning, accurate data and attention to changing assumptions are
all techniques that can address variances.
Sometimes the budget or plan needs to be changed to reflect a change in circumstances.
Organisations with limited resources will require detailed information on how and why this change
should occur. Good negotiation skills will enhance your ability to present this information to
management.
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Element 4: Respond to the results produced by the established control systems
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Trainee Manual
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Presentation of written work
Presentation of written work
1. Introduction
It is important for students to present carefully prepared written work. Written presentation
in industry must be professional in appearance and accurate in content. If students
develop good writing skills whilst studying, they are able to easily transfer those skills to
the workplace.
2. Style
Students should write in a style that is simple and concise. Short sentences
and paragraphs are easier to read and understand. It helps to write a plan
and at least one draft of the written work so that the final product will be
well organised. The points presented will then follow a logical sequence
and be relevant. Students should frequently refer to the question asked, to
keep ‘on track’. Teachers recognise and are critical of work that does not
answer the question, or is ‘padded’ with irrelevant material. In summary,
remember to:

Plan ahead

Be clear and concise

Answer the question

Proofread the final draft.
3. Presenting Written Work
Types of written work
Students may be asked to write:

Short and long reports

Essays

Records of interviews

Questionnaires

Business letters

Resumes.
Format
All written work should be presented on A4 paper, single-sided with a left-hand margin. If
work is word-processed, one-and-a-half or double spacing should be used. Handwritten
work must be legible and should also be well spaced to allow for ease of reading. New
paragraphs should not be indented but should be separated by a space. Pages must be
numbered. If headings are also to be numbered, students should use a logical and
sequential system of numbering.
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Presentation of written work
Cover Sheet
All written work should be submitted with a cover sheet stapled to the front that contains:

The student’s name and student number

The name of the class/unit

The due date of the work

The title of the work

The teacher’s name

A signed declaration that the work does not involve plagiarism.
Keeping a Copy
Students must keep a copy of the written work in case it is lost. This rarely happens but it
can be disastrous if a copy has not been kept.
Inclusive language
This means language that includes every section of the population. For instance, if a
student were to write ‘A nurse is responsible for the patients in her care at all times’ it
would be implying that all nurses are female and would be excluding male nurses.
Examples of appropriate language are shown on the right:
Mankind
Humankind
Barman/maid
Bar attendant
Host/hostess
Host
Waiter/waitress
Waiter or waiting staff
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Trainee Manual
Monitor catering revenue and costs
Recommended reading
Recommended reading
Food and Beverage cost control fourth edition; Lea Dopson, David Hayes, Jack E Miller;
John Wiley & Sons 2008
Accounting essentials for Hospitality managers; Chris Guilding
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Monitor catering revenue and costs
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Recommended reading
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Monitor catering revenue and costs
Trainee evaluation sheet
Trainee evaluation sheet
Monitor catering revenue and costs
The following statements are about the competency you have just completed.
Please tick the appropriate box
Agree
Don’t
Know
Do Not
Agree
Does Not
Apply
There was too much in this competency
to cover without rushing.
Most of the competency seemed relevant
to me.
The competency was at the right level for
me.
I got enough help from my trainer.
The amount of activities was sufficient.
The competency allowed me to use my
own initiative.
My training was well-organised.
My trainer had time to answer my
questions.
I understood how I was going to be
assessed.
I was given enough time to practice.
My trainer feedback was useful.
Enough equipment was available and it
worked well.
The activities were too hard for me.
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Monitor catering revenue and costs
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Trainee evaluation sheet
The best things about this unit were:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
The worst things about this unit were:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
The things you should change in this unit are:
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
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© ASEAN 2013
Trainee Manual
Monitor catering revenue and costs