How to Manage Your Restaurant’s Inventory

If you own a successful restaurant, there’s a good chance you’re almost always in a state of urgency. You probably wake up each morning with the goal of having a busy yet problem-free service that day.

However, restaurant owners can’t simply take it one day at a time. It’s important to save some time to make sure the business is operating efficiently. Ensuring your inventory count is correct is one of those responsibilities that keeps your business on track.

Counting your inventory correctly is critical because it translates to one of the most important financial indicators for your restaurant - Cost of Goods Sold (COGS). Calculating COGS for your restaurant is simple. Take your beginning inventory, add purchases made during the period, subtract your ending inventory, then divide by sales for the period.

In restaurants, COGS often account for one third of the total expenses, so it’s important to have a good handle on these costs. The first step in doing so is to create a target for your COGS as a percentage of income. COGS should be 30 - 35% of your sales, depending on the type of restaurant. If your COGS are significantly higher than your targeted percentage, you might want to look at your menu pricing. It’s likely that you need to raise your prices to achieve the desired target.

Once you are consistently able to meet your target, you can identify sharp changes to COGS. Increases in COGS could be due to many variables, including employee theft, incorrectly preparing products, or waste. The good news is once you identify a problem, you can set up controls to minimize these losses.

In order to accurately calculate your COGs, you must first accurately count your inventory. If you’re inventory count is incorrect, your COGs will be too. Here are few tips for efficiently keeping track of your inventory:

  • Devote a specific day each week to counting inventory - It should probably be your least busy day of the week. Get in the habit of making it inventory count day and don’t skip it.
  • Organize your inventory before the count - Before you start, make sure everything is where it should be and throw away items that have gone bad and are no longer useful.
  • Have multiple people do an inventory count - People make mistakes. Have multiple people do the inventory count and compare their numbers at the end to make sure they match. It can also be beneficial to have the same people do the count, like your restaurant manager or chef, so they develop an efficient process.
  • Don’t take inventory during service or when shipments are arriving - Counting your inventory while new items are arriving or being used is going to make things messy. Do your inventory count during a downtime.
  • Use technology to make things easy - Once again, people make mistakes. Fortunately, there is cloud-based software available to restaurants that tracks purchases and sales. You can use the data to make sure your inventory eventually makes it to your customers’ tables.

Get into the habit of regularly doing an inventory count and stay on top of your COGS. Doing so is a big step towards running a financially successful restaurant.

BookKeeping Express (BKE) is the leader in accounting and bookkeeping services for restaurants. Our team of financial specialists can manage your bookkeeping, handle your payroll, help you track revenue and expenses, and more. Visit our restaurants page to learn more.