How to Count Restaurant Inventory Correctly

 In 5. Fred Langley, Inventory, SMART Systems

How do you know for sure your restaurant inventory is being counted correctly without actually doing it yourself?

First, let’s start with a refresher on your actual cost of goods sold calculation.

To determine your usage for cost of goods sold:

  1. Take your beginning inventory
  2. Add your purchases
  3. Then subtract your ending inventory

In real life it looks like this: at the beginning of a period you have a bunch of stuff on your shelves that is available to sell. Then you have purchases and this adds to the product that is available to sell. Finally the week ends, and you have all this product you didn’t sell so you need to subtract it from the total available. This number is your true usage. Your cost of goods sold percentage is your use divided by sales.

Your true usage should be fairly stable and not vary too much from week to week. My expectation would be within two percentage points every week, barring any large catering or change in mix that would skew your numbers. If your weeks look similar, so should your usage. If you start seeing peaks and valleys in your costs, it’s a sign your restaurant inventory is being counted wrong.

As an example, let’s look at draft beer. If I count a beginning inventory and forget to count three kegs that are buried in the back of the walk in, the math equation will say that I used them. Then when they get counted next week they essentially appear out of nowhere on the shelves as free product because they were not in my beginning inventory and I didn’t purchase them. These “FREE” kegs will make my cost plummet to a false low number.

Another way to determine if your restaurant inventory is being counted accurately

Monitor your inventory turns. This equation finds your average inventory, which is solved like this:

  1. Add beginning and ending inventory
  2. Divide by two

Then divide your usage (see first example) by your average inventory. This tells you how many times you completely empty your shelves in a week. Now compare this number to the number of deliveries you get in a week. I recently found an inaccurate inventory because there were three turns and only two deliveries. This is physically impossible. I determined the management team was taking shortcuts and not doing a complete count of the product sitting on the shelves.

Use this math to see if all the effort is giving you good numbers. It is definitely worth the effort!

Read more about the importance of inventory in our free special report, Breaking Away from the Insanity: How to easily take control of your restaurant and make more money. Download it here.  If you’d like to see how you can simplify inventory counts using our iOS and Androids apps, schedule a demo here

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