This article was written by Morgan Harris and featured in Retail & Restaurant Facility Business.
Most small businesses start out using spreadsheets because they are basically free, easy to use and highly customizable. Restaurant operators can use a spreadsheet for almost every function in the restaurant from ordering, inventory, prep lists, invoicing, food costing, scheduling, accounting — you name it.
These spreadsheets require hours of data entry along with manually creating formulas just to generate reports. Many of these spreadsheets are so complex that only the owner or general manager can maneuver through them — making it nearly impossible to teach others how to use them. If one number in a formula is accidentally changed, an entire report could be affected. Simply put, managing your restaurant’s operations shouldn’t be this time consuming.
The good news is restaurant specific solutions have been built to automatically pull point-of sale (POS) and operations data to deliver business intelligence reports. These solutions are increasing in popularity and are surprisingly affordable. Operators using advanced reporting solutions can review specific, detailed metrics commonly tracked by restaurant businesses to make real-time, data-driven decisions that improve business performance and grow the bottom line.
Below are five reports that provide essential data required to improve your restaurant operations and boost profitability.
Labor Actual vs. Scheduled Report
Use this report to view the theoretical scheduled labor cost compared to the actual labor at a specific location over a certain period. The Labor Actual v. Scheduled report helps you understand your variance in labor, which is one of your operation’s largest costs. When you can see how successful a labor forecast was, you are able to optimize your labor and improve profit margins.
This report includes actionable drill-down details attached to data points that allow you to look for outliers. A common example is early clock-ins. Let’s say you have 20 back-of-house employees working per day at $12/hour each. If each employee were to clock in 10 minutes early, that’s $40 in additional wages per day — or $14,600 per year! So set your POS to ensure employees can only clock in a few minutes before their shift begins unless they have manager approval.
Received by Purchased Item Report
This report tracks items received by a certain location over a period of time, as well as individual prices. The data can be tied to a specific purchased item or sorted by item categories. This report can identify pricing errors outside your contracted prices, holding vendors accountable to billing quoted prices and alerting you when substitutions are made.
The Received by Purchased Item report also allows you to tabulate the total cost and percent each item contributes to the total cost of goods sold (COGS), identifying top-moving items to keep an eye on. Running this report every 2 or 3 days helps you keep close tabs on vendor pricing, an essential oversight that helps you keep a healthy bottom line.
For instance, many vendors have a tiered pricing structure that gives an automatic discount once you order certain quantities of product. If your Received by Purchased Item Report shows your vendor charges $3.51/lb. for bacon when you buy the 5 lb. case but $3.03/lb. when you buy the 30 lb. case, purchase the larger case if you know you will use 30 lbs. or more before your next order. It may not sound like much money, but these small savings add up to big bucks when applied across your entire menu.
Actual vs. Theoretical Analysis
Your Actual vs. Theoretical (AvT) Analysis provides a deeper dive into the quantity and cost of your inventory and menu items. Your AvT report includes metrics such as actual usage, theoretical usage, waste, variance, unexplained variance, efficiency percentage, as well as all these details as a percentage of restaurant sales.
Understanding the biggest item variances and closing the gap between your theoretical and actual food costs can help you maximize the efficiency of your inventory management. By identifying leaks, you can control the costs of individual ingredients and add money back into your bottom line.
While most operators keep an eye on higher priced items like meat or alcohol, don’t forget smaller costs can add up quickly. For example, if you notice you are ordering a disproportionate amount of romaine lettuce compared to the number of salads you sell, you need to pinpoint the discrepancy. Is the staff storing it incorrectly or over-prepping and then throwing it out without reporting it as waste? If you lose 270 heads of lettuce in a 6-month period, that equates to $500, which means you are losing $1,000 per year.
Menu Item Analysis
Your menu item analysis shows the current selling price, cost and margin for each menu item, as well as quantities sold. This report is one of the few that “tells you what to do,” analyzing metrics to create menu engineering recommendations.
The Menu Item Analysis report analyzes the popularity and profitability of each menu item, ranked against each other, and places these items into categories. Each category, such as “star” (high margin, high popularity) or “opportunity” (high margin, low popularity), provides suggestions with what to do for specific menu items. By understanding how adding a promotion, adjusting prices, or reworking the product mix of the menu can impact your margins, you can make smart decisions that grow your profits.
Be careful not to assume the item sold most often is the most profitable. Just because you can’t keep that item on the shelf does not mean its contribution to your bottom line is the best it can be. Maybe your second or third best sellers are really making you more money even though you don’t sell as many. Perhaps adding $0.97 to the price of the Half Quinoa Avocado Appetizer will not decrease the number of orders and can make the item a “star” by adding an additional $1,500 annually to your bottom line.
The daily restaurant Flash Report is a consolidated report that provides a snapshot of a single day’s performance at one or multiple locations. This is high-level summary of several key metrics, including sales, labor costs and discounts and comps. All daily sales summary information flows through this report, which also incorporates historical information and labor report numbers.
This report is designed for instore or above-store restaurant operators who need a snapshot of the day’s sales, labor, and other metrics. By tracking a daily summary, restaurant managers can make almost real-time adjustments, resolving operational issues before they become long term problems that affect profit margins.
For example, say you have a restaurant that is full every night with a certain number of staff members, reflecting a labor cost of 25% of revenue. Should the restaurant have a slow night with half the usual amount of traffic and revenue, labor costs will jump unless a significant adjustment is made to the schedule. This overview report provides the daily transparency operators need to act in a dynamic restaurant climate.
Restaurant reports empower you to leverage the trackable data you accumulate every day. Proactive restaurant operators leverage these reports to boost their profitability by making real-time, data-driven decisions about the numbers, trends and big picture of their restaurant operations. A comprehensive restaurant management system can help by providing the data you need to quickly visualize the financial health.
Morgan Harris is Co-Founder of Restaurant365, an all-in-one, cloud-based, restaurant-specific accounting, back office and reporting solution. Harris has worked in accounting since 1998 and earned his CPA license while working with PriceWaterhouseCoopers. In 2001, Harris started Dynamic Methods, a Great Plains value added reseller (“VAR”) business, with John Moody where they sold software and services to more than 300 different companies across many different industries. In 2011 as software was moving to the cloud, Harris, Moody, and Tony Smith decided to focus on the restaurant industry and Restaurant365 was born. In his role at Restaurant365, Harris supports large accounts, strategic partnerships, and works on executive level sales.