Real Time Accounting in Food Service Operations
The attitude in some clubs seems to be that monitoring the financial performance of the club and all its departments is the sole responsibility of the general manager and the club controller. The fact is that all department heads with bottom line responsibility in profit or cost centers must be held accountable for the performance of their units. In addition to their expertise in a chosen profession—food and beverage, golf, tennis, membership marketing, agronomy, aquatics, spa and fitness, and activities—department heads are expected to master the skills of running a successful business.
Further, they are expected to analyze the performance of their operation on an ongoing basis, demonstrate initiative to stimulate revenues and control expenses, and take all necessary steps to meet or exceed their budgets. This can only be done by tracking their revenues and expenses in real time.
Some department heads aren’t inclined to do this, either because they don’t relish or truly understand the numbers side of a business or feel it takes too much time from other more enjoyable tasks. In any case, these excuses are inappropriate. Running a business requires a commitment to the financial aspects of the operation and not knowing where the business stands financially at any given moment prohibits the possibility of corrective intervention.
While computers do make the task of capturing daily data much easier, there is both the necessity and benefit of managers ‘touching' their numbers every day. Doing so ensures both a conscious and intuitive understanding of one’s business; helps spot anomalies, adverse trends, or erroneous entries; and makes a manager more attuned to the cyclical ebbs and flows of their business.
What does the concept of real time accounting encompass?
· Revenue Tracking is perhaps the easiest performance indicator to monitor. Point of sale and club management systems summarize daily sales by category. All that is necessary is for the department head to extract the sales data from the club management system and enter the daily data into a monthly spreadsheet while noting if the department is on track to meet its budgeted revenues. If not, steps must be taken to stimulate greater activity and sales. The Weekly Activity Report is a good example of this summary.
· At the same time, the department head must utilize Revenue Benchmarks to gain a clearer understanding of the interplay of volume of business and the average member spend that underlies gross sales. This is incredibly important in that it points directly to the reason for missing budgeted revenues—either not enough member traffic or less member spending during each visit. Since the solution to either of these conditions is different, it helps the department head formulate the appropriate corrective action.
· Pay Cost should be monitored daily and tracked for each pay period. The Departmental Payroll Analysis Summary, PCPM Form 230, (or some variation of this specifically designed for your operation) is an excellent tool to do this. Not only does it compare actual cost to budget, but it also computes year-to-date variance, summarizes payroll hours by type, and computes the average hourly wage for non-exempt employees. This data will clearly show if out-of-line payroll cost is the result of too many hours or a higher than budgeted average hourly wage.
· A Quick and Easy Cost of Goods Computation can be made at any time during an operating period by assuming that beginning and ending inventories will be roughly equivalent. Simply track the amount of resale purchases and divide that amount by sales to provide a quick check on cost of goods sold. It is also helpful to benchmark the monthly variations in cost of goods sold using the Cost of Goods Sold Analysis, PCPM Form 244.
· Up-to-Date Other Operating Cost Expenditures can be tracked by using two forms—the Expense Log, PCPM Form 233, for each expense account, and the Expense Log Summary, PCPM Form 234, of all operating expense accounts. These forms provide a convenient location to record all purchases as they occur during the operating period and compute the remaining budgeted but unspent amount for each expense account. Since most departments have a relatively modest number of expense accounts, this up-to-date recording of purchases will not overburden the manager while closely monitoring expenses. Keep in mind that the cost for food and beverage products is computed in the cost of goods sold calculation. This only leaves other operating expenses to be tracked using the two above-mentioned forms.
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In tracking a department’s numbers in real time, a manager must understand that this data will provide an approximation of actual performance, not the exact accounting of double-entry bookkeeping used by the controller to balance the general ledger and prepare financial statements. This approximation in no way detracts from the benefits of real time accounting and the ability it provides to make timely interventions.
All the completed documents and forms mentioned above should be kept in the Tools to Beat Budget/Real Time Accounting binder for easy reference at the Monthly Review of Financial Statements Meeting and for use in preparing the departmental budget for the next year.
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