EG403 Food and Beverage Management

Task 2: Understand the financial controls used in food and beverage operations 

2.1 Discussion of the use of financial statements in food and beverage operations: 

The financial statements help in describing the financial condition of a firm and it is a formal record of each financial activity related to the overall business operations. There are four kinds of financial statements in an organisation, which include income statement, balance sheet statement, statement of changes in equity and cash flow statement. In relation to the financial state of food and beverage operations, the managers are involved in using the financial statements in the form of a tool (Borges Lopes, Freitas and Sousa 2015). The financial statements enable the managers to maintain formal record of daily transactions associated with the purchase of raw materials, beverage items and kitchen equipment. The significant financial statements used in food and beverage operations of the event are explained as follows:

Operating statements:

With the help of these statements, the final preparation cost of food and beverage has been described. This takes into account the carrying cost, material transformation cost and procuring material cost to the final product. For the end of term party, the operating statements constitute of the final price of food and beverage along with the preparation (Dopson and Hayes 2015).

Cost statements:

These statements include the segregation of all the costs incurred and these costs take into account direct and indirect expense of preparation of food and beverage. With the help of these statements, budget could be allocated for a single dish to be presented in the party.  

Dish costing sheet:

The dish-costing sheet is used in computing the selling price of menu or dish. This costing statement helps in assessing the cost of each ingredient and raw materials that the chefs use in preparing and cooking food. In this costing sheet, all costs of the ingredients are computed. As a result, the managers could undertake the decision of food selection in relation to the menu of end-term party (Gianni, Gotzamani and Vouzas 2017).

Sales records:

Sales records would enable the managers to gain an insight of the preference of the guests. It is very essential to maintain the sales record properly, as it helps in estimated the upcoming sales of food and beverage. The buying pattern and guest preference could be identified with the frequent purchase of products and services. The sales records of the pubs would enable in deciding the recipes and menu of end-term party.

Variance analysis:

Variance analysis helps in estimating the difference between the actual product prices and planned budget. The actual product prices are those that the hotel or resort sells to the customers. Such evaluation tool enables the managers to obtain an overview of the existing cost and it allows in controlling the future cost as well (Graham and Potter 2015).

2.2 Demonstration of the use of cost and pricing processes: 

The cost and pricing process takes into account different elements like dishes, beverages, sales mix, menu prices, gross profit and net profits, fixed, direct, variable and indirect costs. Pricing is associated with the amount of money, which is required for purchasing products and services. Conversely, cost takes into account time, money, labour cost, efforts and cost of transformation, which are used when the recipes, events and menus are prepared. For deciding the menus of different recipes based on the nature of the guests, it is significant to incur the determined budgeted money in an efficient manner to make the event memorable and enjoyable. In order to meet this purpose, pricing and cost process is needed. In this regard, the direct cost is the material and ingredient cost, which is used for preparing the items of food and beverages on the part of the pub.

In addition, indirect cost is the cost that is not included in the food preparation; however, it is the most significant part during the food preparation loss like needed equipments or oil needed in cooking food (Ivert et al. 2015). The variable cost is associated with the cost of food and beverage and this cost changes with time, since the ingredient cost changes with time. The final cost is the fixed cost that does not vary with time and even at the business growth stage, the fixed cost does not change (Koc and Boz 2015). The following financial statement is prepared in the context of a restaurant:

2.3 Analysis of the purchasing process: 

The role of the purchasing process is significant in the context of the hospitality industry. In the words of Lashley (2018), purchasing process is associated with buying the needed tools and equipments in order to prepare food and beverages. This takes into account the raw materials of preparing the final dish, utensils to serve cold and hot food and beverage production along with the service system.

The primary aim of the purchasing behaviour is represented as follows:

• Reinforcing the competitive arrangement of a firm
• Effective delivery of commodities
• Storing the excellence and worth of products of an organisation (Ramanathan et al. 2017)
• Storing the effective input flow
• Effective space of storage for the products
• Reassessment and enhancement of the overall product needs
• Upholding the smooth production flow
• Assessing the promotions and propositions aimed for the tenders
• Investigating the received products
• Reducing the amount required for inventory

It is of utmost importance for the managers in managing and controlling the level of inventory. The rightful buying process helps in maintaining the prepared food stock, which is utilised for fulfilling the expectations and demand of all the guests. The purchasing process includes the following series of steps, which is depicted as follows:

Purchase of food and beverages/ need recognition:

In a pub, a manager is needed to ascertain the amount of raw materials for food and beverages. Thus, the manager could evaluate the same with the help of past sales records and statements.

Specification of needs:

It is necessary to specify the needs of the internal and external customers in order to deliver the right products to the right persons in appropriate amounts. This would help in avoiding over-production or under-production.

Suitable suppliers/ choosing the sourcing options:

The list of needed materials is made, which have to be bought. In this step, the suitable suppliers are detected from which the materials could be purchased at a lower cost in contrast to the other suppliers. Due to this reason, a pub could use the tender option in relation to a long-term contract (Mattevi and Jones 2016).

Settling prices and terms with the suppliers:

The purchasing procedure involves two phases, which include the financial phase and the legal phase. It is necessary to obtain an overview of the market segment with reference to the costs to be spent on materials and the final prices to be charged from the customers. This needs to be dissected depending on the principle of demand and supply (Wambua 2014).

Preparation of purchase order:

This could be considered as an official manuscript that takes into consideration the terms and conditions inherent between the buyer and the seller. Such purchase order is crucial for buying the material and it specifies each settlement area that both the parties agree. This written document could be referred during conflict situations in future between both parties.

Placing order/accelerating processing:

After the supplier requisition, it is time of placing the order, which is essential to prepare food.

Acceptance and anticipation of purchasing:

This steep could help in approving or disapproving any item in accordance with the order. If the material is accepted, the buyer has the obligation to pay for the material  prices to the suppliers.

Invoice creation and order receipt:

The above-mentioned obligation could be cleared on the part of the supplier for providing out invoice for the payment. Such payment is made after careful evaluation and computation of the invoice.  In this procedure, after the order is received, it is necessary to take into account the quality and quantity of raw materials, as damaged stuffs could have direct impact on the taste of food.

Storage facility:

After the checking process is over, the raw materials need to store in data warehouse for ensuring their freshness and safety. In order to assure convenience, kitchen staffs could preserve the materials with the tag name (Rahimi and Kozak 2017).

Maintaining records:

It is necessary to maintain the records for future reference along with auditing financial issues.  

Figure 1: Purchase cycle in the hospitality industry

(Source: Robinson et al. 2016)

References:

Borges Lopes, R., Freitas, F. and Sousa, I., 2015. Application of lean manufacturing tools in the food and beverage industries. Journal of technology management & innovation, 10(3), pp.120-130.

Dopson, L.R. and Hayes, D.K., 2015. Food and beverage cost control. John Wiley & Sons.

Gianni, M., Gotzamani, K. and Vouzas, F., 2017. Food integrated management systems: dairy industry insights. International Journal of Quality & Reliability Management, 34(2), pp.194-215.

Graham, S. and Potter, A., 2015. Environmental operations management and its links with proactivity and performance: A study of the UK food industry. International Journal of Production Economics, 170, pp.146-159.

Ivert, L.K., Dukovska-Popovska, I., Kaipia, R., Fredriksson, A., Dreyer, H.C., Johansson, M.I., Chabada, L., Damgaard, C.M. and Tuomikangas, N., 2015. Sales and operations planning: responding to the needs of industrial food producers. Production Planning & Control, 26(4), pp.280-295.

Koc, E. and Boz, H., 2015. All-inclusive food and beverage operations. F&B/Restaurant Management, Pearson.

Lashley, C., 2018. Education for Hospitality Management. In Innovation in Hospitality Education (pp. 33-48). Springer, Cham.

Mattevi, M. and Jones, J.A., 2016. Food supply chain: Are UK SMEs aware of concept, drivers, benefits and barriers, and frameworks of traceability?. British Food Journal, 118(5), pp.1107-1128.

Rahimi, R. and Kozak, M., 2017. Impact of customer relationship management on customer satisfaction: The case of a budget hotel chain. Journal of Travel & Tourism Marketing, 34(1), pp.40-51.

Ramanathan, U., Subramanian, N., Yu, W. and Vijaygopal, R., 2017. Impact of customer loyalty and service operations on customer behaviour and firm performance: empirical evidence from UK retail sector. Production Planning & Control, 28(6-8), pp.478-488.

Robinson, P., Fallon, P., Cameron, H. and Crotts, J.C. eds., 2016. Operations management in the travel industry. CABI.

Wambua, J., 2014. Food and Beverage Operations Management.

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