Know Your Food Cost Percentage. Know Your Restaurant Profits.
Calculate Food Cost Percentage
Did you know that 82% of all businesses fail due to poor cash flow management? Among other reasons, a lack of efficient cash handling can push many small businesses backward.
For any business that accepts cash, efficient and secure cash handling at the point of sale (POS) and in the back office is essential. However, we understand that the task may seem overwhelming for retailers and small restaurants.
This blog will address the issues related to cash management and provide solutions to tackle them. Join us as we guide you through tips and strategies to overcome cash management challenges.
Cash management is a critical aspect of restaurant and retail businesses. It involves handling, storing, and transferring cash. The following is a list of tasks that encompass restaurant and retail store cash management:
Despite being aware of these processes, restaurant and retail owners sometimes fail to implement them. Several reasons, such as theft, improper accounting systems, and lack of technology to track cash flow, make it challenging for them to ensure accuracy.
Let's discuss each of these challenges in detail.
There is no doubt that businesses face many cash management challenges now and then. Here are the challenges that you must have come across while managing the cash flow of your business:
When dealing with a lot of cash, there’s always a chance of staff making mistakes or intentionally mishandling money during processing. While trying to save money and the cost of outsourcing the cash processes, you lose more money with the traditional cash management system.
No matter how many preventive measures you take, like quickly noting receipts, keeping cash safe, depositing money on time, and making sure different people handle recording and depositing, you can only partially erase the risk of funds missing.
Taking cash from your place to deposit is the most risky deal with money because of the potential for theft. This is a more significant concern for smaller shops since they usually need more security, making them more tempting for thieves. If your staff is moving the money, it puts them at risk of violence and could land your business in legal trouble. Also, remember that if your in-house team carries the cash, insurance might not cover it if it gets stolen.
Managing cash, whether you do it in-house or not, involves staffing. Those hours spent dealing with money and waiting in line at the bank are a significant hidden cost when you handle cash internally. And remember the time and energy it takes to hire, check backgrounds, train, and oversee the staff responsible for cash handling.
Even with a careful cash handling system, you can't escape the occasional human error when reconciling books. Handling big piles of cash takes up much of the workforce and opens the door to counting mistakes and discrepancies. Switching to cash recycler technology can wipe out these issues and save you from those time-consuming cash audits.
Another significant challenge in cash management is the lack of visibility into cash. It means not having a clear view of cash across a business. This makes it tough to keep tabs on where the money is going and what's happening in different parts of the business. Without a POS system, restaurant owners and retail businesses drown in manual paperwork or spreadsheets. Yet, they can't have complete visibility
To effectively manage cash in restaurants and retail businesses, it is essential to focus on the following things:
A POS system is an essential tool for retail and restaurant businesses, as it can ensure that the physical cash matches the cash recorded in the system with utmost accuracy. Similarly, a safe and secure cash handling system like Loomis smart safes can guarantee the safety of your physical cash.
With the OneHubPOS cash management feature, it is now easy to maintain the cash log of every terminal in your store and across stores. Our integration with Safe Point enables us to manage your cash from the register to the smart safe. When your register limits its cash capacity (set by you) - your employees are forced to transfer it into a smart safe with an automated trigger and take a receipt every time a transfer happens. At the end of the day, reconcile your books by matching cash transactions to account for sales made with cash versus other payment methods.
Federal law allows including only employees who customarily and regularly receive tips. This typically excludes back-of-house staff like cooks and dishwashers. However, some states might have different regulations.
Tips are typically collected throughout the day and pooled at the end of the shift. The pool is then distributed among eligible employees based on the chosen method.
In some states with allowed tip credits, employers can take a portion of the minimum wage based on tips received by employees. This essentially allows employers to pay tipped employees a lower base wage.
Non-compliance can lead to fines and penalties from the Department of Labor, wage-and-hour lawsuits from employees, and employee morale issues.
Tip sharing is voluntary. An employee might choose to share some of their own tips with colleagues. Tip pooling is a mandatory system where all tips are collected and then distributed among eligible employees based on a predetermined method.
No, managers and supervisors cannot participate in the tip pool.
There are no standard percentages by law. However, 15-20% is a common tipping range for good service in the USA. Tip pooling eliminates the need for individual tip calculations.
Tip pooling can be beneficial for restaurants of all sizes. It can foster teamwork, ensure everyone benefits from good service, and simplify tip distribution.
Yes, tip pooling is legal under federal law (FLSA) with some key restrictions. However, some states might have additional regulations. Always check your state's Department of Labor website to ensure compliance.
Pricing is a balancing act! You need to cover your costs (including the food cost per portion) while offering a price point that feels valuable to your customers. Consider factors like competition, target audience, and the overall dining experience you create.
Food cost calculators are great for initial estimates, but consider restaurant management software for ongoing success. This software tracks inventory, automates cost calculations, and generates reports to identify cost-saving opportunities.
Absolutely! Many online food cost calculators can handle various cuisines. Look for tools that consider ingredient types, portion sizes, and even regional pricing variations.
Consider your food cost percentage your restaurant's financial fitness tracker. It's the total cost of recipe ingredients divided by your total menu sales. Ideally, calculate this regularly, like weekly or bi-weekly, to monitor profitability and adjust pricing or portions as needed.
The standard costing model is like a recipe for consistent pricing. It uses historical data and market trends to predict ingredient costs, allowing you to budget, purchase, and maintain profit margins even when prices fluctuate.
Food cost per portion is the actual cost of creating a single serving of a dish. It considers all ingredients, including spices, garnishes, and even waste! This number helps you understand your profitability and set menu prices effectively.
Sahana is a seasoned GTM leader with a passion for building startups. She excels in crafting GTM strategies for tech products, driving revenue growth.
