It’s no secret that food, beverage, and labor cost issues arise fairly often. With the current economy and the constantly rising costs of supplies, there is an understandable need to control costs. To assist you on your journey to better cost control, we have provided a list of seven basic principles to keep in mind when developing a cost control system.
1. Keep it Simple. There’s no need to design a complicated cost control system; being minimalistic is key. Keep your procedures and forms to what is necessary to complete the job so that those who provide information and fill out the reports can do so easily. A complicated system can become confusing to staff, making the process too time consuming or difficult to complete.
2. Make the System Timely. Information that takes too long to get, is ineffective in controlling an operation. Being told at the end of the month that there was an unacceptable cost the month before probably means that there have been at least two months of bad costs – the previous month and the current month that is coming to an end.
3. The Information Must be Comparable. The purpose of accounting and cost control systems is to provide the information needed to manage the operation and to track changes over time in order to progress towards goals. To accomplish this, the information provided must be comparable – if you change systems or procedures, you will get different information and may not be able to compare different periods.
4. Stay Current. Operational profitability is dependent on controlling costs and must be supervised every single day in your business. To make sure that your costs are being controlled, someone has to actively monitor them daily and take action if there are inappropriate or unacceptable deviations.
5. Practice the 80/20 Rule. The 80/20 rule states that 80% of your attention should be on the 20% of items that make a difference. You will to see the best results in cost control when you monitor the higher cost and/or higher volume items. Additionally, to correct or prevent labor cost problems, you should concentrate on the hours and overtime of your highest paid staff rather than the lowest paid staff.
6. Know what the Costs Should Be. If you don’t know what the costs should be, then you won’t know how well you’re doing or when to take action. You may want to prepare a theoretical cost for use as a goal and to compare performance to. Be sure to know industry statistics for similar operations as well.
7. Costs are Cumulative and Interactive. Food, beverage, and labor costs are combined to become the “Prime Costs”. It is useless to save on one cost if it adds greatly to another. Seek products that add value while also lowering operating costs.
A properly designed and implemented cost control system gives you concise, timely, accurate, actionable information in a simple format. Once the system becomes part of the operational routine your profitability and sustainability will be enhanced. Rather than having to develop a cost control strategy, let the Best Western MarketPlace lend you a hand. Best Western MarketPlace provides a complete purchasing solution for all your food and beverage procurement needs including expanded premier level contract pricing on many categories and product brands.
We focus on helping you succeed in food and beverage operations by providing you with discount prices, rebates and distributor incentives. Download the Enrollment Guide to learn more.