3.Crucial Financial Mistakes before expecting a Broker to sell your Restaurant or Hospitality Business.[Part3] By OPTIMAN.

Stock holding Level Exceed Sales.

You need to have a stock holding level that is sustainable for your business. You may order too little food or not the right kind and not be able to make certain dishes. But when you have too much inventory, this could lead to poor stock rotation that could lead to excess food waste.

You may also increase portion sizes to get rid of food items ready to spoil, losing money in the process. Alternatively, you could have to drop your selling prices to sell rapidly deteriorating food items. This could cause unhappy clients that won’t return and a poor food cost.

Poor cash flow.

If you’re buying too much food, you’re causing your cash flow to suffer. Your money is on your shelves and not in the bank. The general rule of thumb is to keep seven days of stock. Items like meat that you want to mature could be up to 28 days worth to ensure top quality. You can keep even less stock in certain niches, but you don’t want to keep more than a week’s worth of standard stock items.

Stock Turn Ratio.

A simple way to determine this is to calculate how much food is selling every month and divide the number by thirty. The number determined will be your single-day value of food sold. Let’s assume this number is R10,000. You would multiply this number by seven (for the days of the week) and now calculate how much you should have in stock. If you have significantly more, reduce this amount. You’ll save money and reduce food waste at the same time.

Poor stock control and wasteful stock losses.

Stock accountability is an integral part of a business’s operations. It’s difficult to know if your stock is being stolen or wasted if you don’t have firm control of the stock. Restaurants should conduct the following at the end of each week:

• Stock Count.
• Unit Costing.
• Usage Variation Report.
• Explanation report of all the over and or under variable stock items.

Many establishments will do this on a monthly basis or before stocking up for events or a busy season. The restaurants and hospitality operations that really perform well are the ones who control these reports on a daily basis.

• Reduce excess spending.
• Reduce stock holding.
• Improve their stock turn ratio.
• Detect food theft.
• Detect food waste.

Daily and weekly reports allow owners to make quick accurate adjustments throughout the week or month to keep the business profitable.

Error’s in the Account System.

Accounting systems are only as good as the people entering all of the data. Mistakes and errors do occur:

• Review financial entries.
• Double-check all accounts.
• Double-check counts.
• Check variables.
• Check unit cost calculations.
• Check VAT calculations.

Work with an accountant to implement a system that will ensure that your restaurant’s accounting is accurate and reliable. Now you know that you can expect a fair value for your business when selling, based on the profits that you generate.