Internal Controls for Fun & Profit

I confess, the title of today’s post was the best I could come up with to try and make internal controls sound interesting.  Truth is, the mere mention of internal controls makes most accountants’ eyes glaze over.  While they may not be “fun”, they certainly are profitable.  I’ll be writing extensively on the topic in the future, because the lack of effective internal controls will eventually destroy otherwise sound businesses.  It’s a tough task, but I will try to keep the discussions practical and avoid theoretical, technical details.
Internal controls are the backbone of your operations.  They help ensure that things get done the way they are supposed to and help ensure the accuracy of your financial reports.  They include both preventive and detective controls.  Whether you know it or not, you already have some internal controls in your restaurant.  The question is how good are they?
Continue reading “Internal Controls for Fun & Profit”

Do You Have a Sales Tax Expense?

On this blog, I mainly talk about controlling costs in restaurants.  When we look at sales taxes that restaurants pay, we rarely consider them to be “costs”.  Sales taxes are considered “trust” taxes.  Restaurants, retailers and other businesses that charge sales taxes are really collecting them on behalf of the government.  This means that sales taxes are not revenues and the remittance of sales taxes is not an expense.
So, it should be obvious that restaurants don’t have sales tax expenses.  However, many restaurants do have sales tax expenses!  I’m going to tell you how.
Continue reading “Do You Have a Sales Tax Expense?”

Restaurant Cost Percentages

I’ve been scouring the net for useful information on a variety of topics related to restaurant cost control.  I have to tell you that it is a pretty discouraging task.  The vast majority of the web sites and blogs offer very little useful information for a restaurateur who wants to manage his or her operations better.  Many blog articles are far too simplistic to be of any use.  It is a waste of time reading (or even scanning them)!  Others  offer a huge number of articles, videos and templates, but usually require you to sign up as a “member” (i.e. customer).  A quick review of their offerings suggest that you are not likely to get your money’s worth.  A few sites offer advice that is, well, wrong.  I hope to correct this deficiency, with an ongoing series of blog entries on this site.  In the mean time, you might consider Joe Dunbar’s blog, Food Cost Control.  Joe’s blog is one of the best I’ve come across so far.  Maybe I have a soft spot for his site, because he’s so analytical!
Today’s topic is restaurant costs.
Continue reading “Restaurant Cost Percentages”

How the HST Will Affect Your Prices & Margins

Recently, the Canadian Restaurant and Foodservices Association (CRFA) published three calculators to help restaurateurs determine the effect of the new HST, effective July 1, 2010, on their prices.  The calculators cover wine, spirits and beer.  I’ve included the links, below.  Perhaps a short note is necessary to help you use them properly.  They are set up for “typical” value, medium and premium priced examples.  Unfortunately, you aren’t able to change the net cost figures, but they will give you an idea as to the effects on your prices and the price that your customers will be paying come July.
Continue reading “How the HST Will Affect Your Prices & Margins”

Wine Cost Control

Wine inventory is different from food inventory in one very important aspect.  Wine turns over a lot slower than food.  In other words, it stays on the shelf longer.  While food must be sold quickly, or it perishes, wine often improves with age.
The size and composition of a wine list depends on the type and style of restaurant.  Higher priced, fine dining restaurants tend to have larger wine lists and include higher priced wines, while casual dining restaurants feature a smaller selection of reasonably priced labels that appeal to a larger audience.
We usually categorize wines by varietals, countries and price, and often show the wines by-the-glass separately.  This is helpful for the customer trying to make a selection, but it is much less useful to the owner/manager.  There are at least four different categories of wine, and each has its own unique profit profile and implications for analyzing costs.
Continue reading “Wine Cost Control”

Coupon Accounting

When the economy went into a tailspin, a lot of restaurants experienced an alarming drop in sales.  Not only were guests spending less, fewer were dining out and those that were, dined out less often.  Pretty much every restaurant that I knew saw their sales drop by a minimum of 20% – some as much as 40%.  Understandably, this put severe pressure on the bottom-lines of a lot of restaurants.
Restaurateurs were willing to do just about anything to bring a customer in the door.  Many began offering coupons, some for the first time.  Done properly, coupons and other discounts can be a valuable marketing tool, but too often they seriously harm the restaurant’s brand.  Today’s article is not about whether they are useful.  Instead, I want to talk about how we account for discounts and what it means to our analysis of costs.
Continue reading “Coupon Accounting”

Welcome to the Canadian Restaurateur Blog!

I’ve been involved in the restaurant business for over 20 years, both as a chartered accountant advising restaurateurs and as an owner operator.  I started this blog to help restaurateurs improve their operations with practical information.  While I have advised a variety of different restaurant operations from fast food to fine dining, my focus is mostly in the area of licenced, full-service restaurants. 
Despite being “small” businesses, restaurant operations are surprisingly complex.  They offer a wide variety of products, using hundreds of ingredients, purchased from numerous suppliers.  The product mix needs to have some uniqueness to distinguish one restaurant from the multitude of competitor operations.  There are huge number of small sales from a team of changing salespeople.  Many of the products are “manufactured” and the prices of many ingredients change frequently.  Manufacturing needs to be closely matched to sales, because many of the ingredients are perishable, yet sales volumes are notoriously difficult to forecast.  Restaurants must comply with a variety of laws and regulations covering virtually every aspect of their business.  All this, and we haven’t even touched on how restaurants attract and retain customers.  Finally, there are several catastrophic risks that need to be managed every single day. 
The complexity of restaurant operations means that there is no shortage of topics to discuss!  As an accountant, my specialty is cost control, and you will find a wealth of practical advice to help you better manage costs in your restaurant.  The recent economic downturn has made effective cost control the single most important aspect of operating a successful restaurant.  My experience is that very few restaurateurs establish and maintain effective control over their costs.  My hope is that this blog will motivate more owners undertake this very important activity. 
My sister blog, Canadian Restaurant Tax Advisor, provides a comprehensive source of information about restaurant taxes and how to prevent unfair tax audit reassessments.  If you haven’t visited this site, I strongly urge you to take advantage of this valuable source of information that could save you thousands of dollars.
I’ve started a Linked-in Group for Canadian restaurateurs to discuss important issues.  You can join by visiting Linked-in and searching for “Canadian Restaurateur”.
I welcome your comments and questions.