The hospitality industry leader at bgr CPAs explains the four practices that all restaurant managers should consider implementing to help combat financial challenges that are common within the hospitality industry.
The failure rate of new restaurants is well documented. Lack of monitoring and understanding of performance can be a big contributor to this daunting statistic. In part two of this series, the hospitality industry leader at bgr CPAs discussed the benefits provided by conducting detailed menu costing. By implementing a four-week period system, and conducting menu costing during each period, restaurant managers will find that they gain the ability to more accurately forecast profits and losses and address any performance issues more efficiently and timely with the use of better information. In this edition of our series, the bgr CPAs detail the importance of holding weekly profit and loss meetings.
Profit and loss meetings (P&L’s) are most commonly conducted on a monthly or quarterly basis. It is in these meetings that managers and essential staff assess the performance of the restaurant based on sales and costs, and compare the operations of the restaurant against what was budgeted. Performing these meetings more frequently can benefit the restaurant in a few different ways.
Establishing regular P&L meetings guarantees that managers and essential staff are reviewing, analyzing and discussing operational performance and financial results on a regular basis. In some cases, monthly meetings may be too late to address critical changes affecting operational performance. Remember this is a fast paced industry. Weekly meetings allow managers and owners to become more proactive and less reactive. An overstaffing issue with back of house labor will certainly have less of an overall effect if identified after a weeks’ time than a month.
Weekly P&L meetings are particularly beneficial for assessing prime costs: food, beverage and other payroll expenses. Reviewing these items on a more frequent basis enables continual assessment of employee productivity throughout the course of the month, allowing managers to identify problems before scheduling labor for the next period. When waiting until the end of the current, beginning or next month to perform this analysis, managers lose the ability to react quickly to performance issues, and risk having these issues become costlier.
One of the most beneficial aspects of weekly P&L meetings is that they provide managers with the opportunity to perform short-term comparative analysis. This means that managers can assess the various financial and performance factors from a current week against those of the previous week and obtain an immediate understanding of how their restaurant is trending. As a result, managers have more opportunities to adjust if necessary in hopes of meeting long-term goals.
While establishing four-week periods, conducting routine menu costing and holding weekly P&L meetings are beneficial to improving overall performance of the restaurant, internal control reviews are essential to protecting the business during daily operations and over time. Learn more about internal control review in part four of our series.
bgr CPAs professionals have helped clients within the hospitality industry throughout the Mid-Atlantic region. We have assisted restaurants with their tax, accounting, and business needs. To learn more, please contact Stephen Wolf, CPA at firstname.lastname@example.org or (410) 418-4400.