Businesses in the hospitality sector often question the value of regular stocktaking and whether it benefits the business. In this blog post our Stock Auditor and National BDM, Dawn Lake, looks at why it’s only worth doing if it’s being done properly.
The benefits of stocktaking and the way to do it are often widely discussed given that the practices and processes vary across the hospitality sector. Some businesses stocktake for food and beverage, and some only do this for liquor/beverage. The regularity of stocktaking also can vary (weekly, monthly, quarterly or yearly). Whilst there is no right and wrong answer it is critical to ensure it is done in a way that brings real value to understanding your business, cash flow and profitability.
In the current economic climate, it is clear that many businesses in the hospitality sector are struggling. A recent report (Hospitality Market Monitor from AlixPartners and CGA by Nielsen IQ) has shown over 13,000 hospitality businesses closed since 2020 meaning that 10% of the UK’s hospitality businesses have permanently closed since the start of the pandemic. Many closures were the result of spiraling costs, which hit profit margins and made real-terms growth difficult. Fragile consumer confidence, rail strikes and labour shortages have also made it a challenging start to 2023 for many operators. In reality, money is tight and many businesses are looking at ways to reduce costs and stocktaking, as an outsourced activity, is one way of doing this. But is it the right cost to eliminate?
We would say no. We believe that the value of a full and timely stocktake far outweighs its cost. A good stocktaker can and should save you the cost of the stock, by helping you to achieve the maximum you can from your stock.
How regular should my stocktaking be?
The good news is that not all hospitality businesses require monthly stocktaking. However, our recommendation is to have a ‘baseline’ of 3 consecutive monthly stocktakes, which might then be reduced in frequency to once a quarter. By having historic and frequent reports in place you will have a clear and concise overview of how the business is performing. By reviewing the detail of the stocktake report in detail with your stocktaker you can take the appropriate and timely action required to keep on top of your stock/inventory. You will always reap the benefit of the advice and guidance given by your independent stocktaker.
Some businesses will have an Epos system, allowing ‘real-time’ inventory taking linking the till to the storeroom. If you are relying on that system to manage your stock solely, be mindful that it is not physically counting stock and will not tell you that what is in the cellar or freezer is actually there. For example, the Epos system will tell you how many fish suppers you have sold but not how much wastage. Similarly, it will not know how many roast dinners you might get from one single joint of beef! It is not auditing against actual stock and by relying on this system or by doing your stocktaking in-house you may open your business up to risk and manipulation on levels of actual stock on the premises.
However, the use of the EPOS systems combined with the support of a stocktaker can help you work out which lines are the most profitable and which ones are not as well as look at pricing points and strategies.
Unfortunately, theft and damage do occur and an effective stocktake will uncover these as discrepancies allowing you to be proactive and responsive to this reality in a timely manner. Prompt identification will allow early intervention, preventative action and loss minimisation.
By eliminating your stocktaking you are, without doubt, increasing risk and exposure.
What are the benefits of an independent stocktake?
- To provide you with an accurate report on the value of the differences between your opening and closing stock so that you know what your usage (and wastage) has been.
- To provide independent transparent reporting for your business. In some cases, we have seen staff manipulate stocks and figures to their own advantage.
- To provide you with accurate figures so that your food and beverage Gross Profit and Food cost % you report are accurate – by just taking purchases against sales you could be reporting inaccurate and inconsistent figures.
- To monitor stock shrinkage, identify vulnerabilities, spot theft hot spots and closely monitor high-value items i.e. monitors what you should have versus what you actually have.
- To encourage more efficient and effective stock management and stock rotation.
- To support and help you grow your business and yields.
How Everett King can help?
At Everett King, we understand the hospitality sector and the challenges it is facing. Our focus is always on maximising yields and securing decent Gross Profit margins.
Why not contact us and book in for a comprehensive stocktaking service and let us work with you to improve your yields and profits? For new clients we have a fantastic special offer running – have your first stocktake on us on the basis of a 12-month minimum contract.