Career Development Skills & Workshops LIQ COS AND STOCKTAKING WORKBOOK. Management. Employee name:

Transcription

1 Career Development Skills & Workshops Management LIQ COS AND STOCKTAKING WORKBOOK Employee name: Pub:

2 Career Development Skills & Workshops Liquor COS and Stocktaking The skills and knowledge you will gain: What COS is and how it is used as a KPI within our business How to calculate the cos for a product How to prepare and carry out weekly line checks for key products How to investigate and resolve poor stock take results Introduction After a busy week every bar and restaurant business needs to make sure that all the hard work has paid off and that not only have its customers enjoyed a great selection of bar drinks but also that the bar department has met its financial targets. Every good bar manager will be itching to know the financial results the bar department has achieved. In order to generate accurate results it s important that costs for drinks, particularly cocktails are calculated correctly to ensure the bars target COS % is met. It s also vital that a weekly calculation is carried out to check key product lines are being measured and sold correctly and that all stock can be accounted for. This can be done in one of two ways; carrying out a full bar stocktake to generate a monthly cos result or to carryout daily or weekly line checks on specific high risk, valuable or high volume items. Whichever option is chosen it s important that the correct process for generating the results is understood by those carrying out the stocktake. The process also includes a small amount of administration and preparation throughout the week. This workshop will give you the skills, knowledge and financial understanding to be able to prepare and carryout end of week line checks as well as a full stocktake. It will also help you to understand how waste control, diligent stock ordering and accurate costings have a positive effect on the stocktaking result. What to expect: Some reading and simple exercises for you to practice and complete within this workbook. A practical assignment to complete and be reviewed by your General Manager Who will be your mentor and what can you expect from them? Your mentor is there to coach you through the financial learning and can help with any questions you have. They are there to support you during the practical exercises but not to carry out the practical assignment that s down to you to show off your talents! Your mentor will be a person who is competent in the skills and knowledge you need to gain either a General Manager or Deputy Manager. How long do I have to complete my workshop? You may take as long as you need to practice and complete the exercises within the workbook so you are comfortable and able put your learning into practice. For the practical assignment you will have time allotted throughout your working week to complete simple administration tasks and a half day to count key stock lines, input and generate a result for your General Manger. So let s get started, remembering our Team Value, Preparation is the key - always prepare for success. 1 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

3 Understanding Cost of Sales Within our business we have 3 different departments; food, liquor and rooms. All of these have revenue and profit targets to achieve. Both the food and liquor departments use cost of sales as a key measure to ensure they are making the correct profit margin. Food is controlled and looked after by the kitchen and liquor is controlled and looked after by the bar department. For the purpose of this workshop the term liquor is used to describe all the different types of drinks sold over the bar or in the restaurant. These include soft drinks, beer, cider, wine, spirits and liqueurs. However this does not include tea or coffee as these items are part of the kitchen depts. food stocktake. What is cost of sales? Cost of Sales (COS) is the cost incurred to make the cocktail or drink sold. It is expressed as a percentage and is simply defined as the ratio of liquor or beverage costs to total drink sales. The formula for calculating liquor COS is simple: Net liquor purchases Net drink sales = drink COS % You ll notice that both sales and costs are NET. This means the VAT has been deducted from them before the formula is used. When we talk about sales in the business we always talk about net sales rather than gross. Remember that VAT at 20% applies to both food and drink in restaurants and as its revenue the company does not get to keep, we always talk about sales after VAT has been deduced. With liquor, beer or soft drinks costs we also use the net figure on the invoice for calculations. Many restaurant businesses measure their food and drink by a COS% target or budget. It is a simple way to ensure that costs are in line to achieve a good profit from each food or drink sale. Different types of bars or bars with restaurants will want to achieve different cos percentages which will be driven by the type of products they sell in the bar, the bar style and service, and the pub or restaurants overheads such as property rent or lease. Here are some examples: Wine bar with high end products liq costs 30 to 35% Value branded pub with the majority of entry to mid-level brands - liq costs of 26 to 27% Cocktail bar with premium range drinks selection liq cost 25% Tenant pub tied to brewery liq costs 32 to 35% 2 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

4 The formula for working out COS can be applied to one beverage or to all the beverages sold over the trading week. Generally, the lower the liquor COS percentage the better the profit margin as you ll see in the wine example below: 75% Profit 25% Cost of sale If the cost to make and sell the drink (COS) increases then the profit decreases. Why use COS rather than Gross Profit margin? The weekly stocktake result is used by the GM to ensure the bar is achieving the target or budget COS percentage. However the figure also forms part of the pubs weekly trading results. The weekly trading results use a simple format; Net Sales All Costs = Net Weekly Pub Profit Using cost of sale rather than GP in s is simpler and cleaner for a weekly trading report. Calculating the COS % on a drink Lucy the GM has a new bottled drink to sell on the bar. Barrow Hill ginger beer comes in cases of a case. She has worked out the individual bottle price to be She is selling the cider for 4.50 The formula she will use to calculate her COS percentage is: Net liquor cost Net selling price = COS % Therefore the COS % for the Barrow Hill ginger beer would be: (gross selling price divided by 1.2 VAT) = 33.3% COS 3 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

5 Lucy also wants to use the alcoholic ginger beer within a cocktail, Ginger Fizz Banger. She wants to sell it for 6.95 but she needs to ensure she makes a healthy COS, ideally 26-30%. The ingredients costs are: 25ml vodka -.80 Fresh lemon juice -.05 Syrup de gomme.05 Sherbert dipper /2 bt of Barrow Hill ginger beer.75 Total cost : 1.75 Using the formula above what COS will Lucy make on this cocktail? (Show your calculations) Look at this example of Lucy s drinks menu. Her target for COS percentage is 32%. Look at the COS % of the products. Drinks Menu (175ml) COS % House wine (Dry) 4.50 (30%) Pinot Grigio 5.25 (34%) Sauvignon Blanc 5.75 (32%) House Red 4.50 (30% Rioja 5.25 (34%) Cabernet Sauvignon 4.75 (34%) Errazuriz Estate reserva 5.00 (36%) Cava 5.95 (125ml) (30%) Cocktails Old Fashioned 5.00 (36%) Martini 6.95 (30%) Mudslide 6.50 (31%) Belini 8.00 (29%) Looking at the COS percentages list the best performing drinks? Which items would she be better to try to work to improve the cost of sale or remove from the menu? Remove: Improve margin: 4 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

6 Sales Mix As well as an individual drinks COS percentage the sales mix of the drinks menu plays a big part in the overall weekly COS result. Certain items may prove to be more popular and always sell. In this case it s important that these products achieve a decent cos percentage. If not a product that has volume sales and poor margin within the overall sales mix will bring down the weekly cos percentage results. The actual weekly sales mix can be viewed on a report generated by the epos system and should always be checked on a regular basis especially when launching new products to monitor their success. Other factors that can affect the sales mix are seasonal changes such as colder months; red wine sales usually rise whilst warmer weather drives lighter wines and beers. Specific events, for example, weddings or celebrations, can have an impact on drink sales such as bubbly and wine. The drinks menu itself can help steer the direction of sales. Savvy bars use prime space within their drinks menu to promote popular categories, carefully selecting the order in which the products are listed to facilitate sales of items with stronger margins. There are some categories of drink that have a fairly high cost price which means the selling price will probably not achieve the target COS percentage. However these items usually have a large cash margin which some companies will be happy to accept regardless of the lower COS percentage. An example of this would be champagne and quality wines. Time to practice Print off your pubs bar sales mix report for the last trading week from the EPOS listing all bar categories e.g., wine, sprits, beers, ciders, ale and soft drinks. Print off your pubs bar sales mix report for the last month listing all bar categories e.g. wine, spirits, beers, cider, ale and soft drinks. 1. What are the top 5 selling products for the last trading week? (Specific products or drinks i.e. Fosters pint, Becks beer bottle, gin and tonic. 2. How does this compare to the top 5 products for the month? 3. What are the top 3 categories of drinks sold over the last trading week? (e.g. white wines, spirits, red wines, draught beer) 4. How does this compare to the top 3 categories for the monthly sales mix? 5. Looking at the monthly sales mix can you identify any products that have reasonable sales volume but COS percentage is below your pubs target? 5 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

7 6. Looking at the monthly sales mix can you identify any products with low sales volumes but have a good COS percentage and cash margin? If so what do you think could be done to try to improve sales of the product? 7. Turning your attention to the drinks menu look at where the top five sellers for the month are positioned within the layout. In your opinion, are the top five sellers driven purely by customer brand awareness, visual identity on the bar or have some connection to their position within the drinks menu? Work out the following bar selling prices for these new products based on a minimum COS target of 27% for cocktails and 31% for all other products: a. Bottle of prosecco costing 5.75 Sell as a bottle and also by the glass (125ml) b. Cask ale Little Red Devil firkin size (9gallons) costing Sell as a pint and half pint c. Burrow Hill vintage sparkling cider- (1x12 case) costing Sell as an individual bottle d. Cucumber martini Ingredients prices - cucumber vodka, cl, Noilly Pratt vermouth cl, ½ lime juice 14p, gomme 05p Recipe - 50ml cucumber vodka, 25ml vermouth, lime juice, gomme. 6 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

8 The Monthly Stocktake The liquor stocktake is completed at the end of the months trading but before the new month trading begins. In order to calculate the monthly COS result the following costs and information is needed: The value in s of the stock at the start of the months trading The liquor and any soft drink purchases that were delivered during the month The value of any products transferred to the kitchen dept. Any allowances given ( comp guest drinks for complaints, wine tasting events, promotions) The closing stock value in s after the month has ended, before the new month s first trading day begins The net bar drink sales for the month The epos system is used to calculate the stock take and generates a cost of sales result for the trading period. The opening value of the stock will be taken from the previous months closing stock count held within the epos system. Purchases will include any items purchased from a local shop or paid via petty cash by the duty manager and must be entered onto the epos system before count sheets are printed or the count is entered onto the system. One point to note is that any order placed but not delivered in the trading month or any item incorrectly received that requires a credit should not be entered onto the epos stock system. The physical count and the epos process to generate a COS result can only be carried out after a day s trading or before a new trading day begins. The bar count cannot be performed once the new period has begun or the holding stock left after the previous trading period will be inaccurate due to it being sold in the new week of trade over the bar or in the restaurant. Liquor stock taking guidelines There are guidance notes for performing a stocktake using the epos system within the core mngt training module M27.1 Weekly Line Checks The epos system can be used to carry out mini stocktakes at the end of every trading week which is known as a line check. After a full monthly stock take the epos system will provide the COS result and as well as a variance report. This report lists all bar products and highlights any variances, positive or negative, taking into account deliveries, entered waste and any promotional offers against the bar revenue. The report may highlight cross overs where two similar products in the same category show a negative and a positive balance therefore counteracting any deficit. An example of this could be Coke and Diet Coke or apple juice and sparkling apple juice. 7 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

9 As well as identifying the number of units missing the variance report also highlights the net cost of missing stock which is important to know when selecting which items to line check after the stock take result. An example of this could be a loss of 1.7 bottles of house wine at a cost of 8.50, against 20 ½ pints of guest ale at a cost of There may not be a lot of difference in price but the number of missing or lost units in relation to the time period needs to be considered; is the loss a fair and reasonable assumption for the type of product in relation to the amount that has been sold during the stock taking period? Two missing bottles of expensive wine over a week s trading period will have an impact on the week s results showing the loss of s value and the loss of margin. Line checks can be carried out for any time period providing the epos system is kept up to date with daily administration (see below) and the line check is carried out before the start of trading or at the end of a trading day. This is a useful tool if large amounts of product are missing, enabling a manager to pinpoint the loss to a particular day. Further investigations can then be actioned. Preparing for Stocktake - Midweek Administration To ensure the stocktaking result is accurate and the process is carried out efficiently it s important that the midweek administration is kept on top of so that the actual end of week stocktaking process is as quick and easy as possible. It s very easy let the purchasing administration slip until the end of the trading week. However, this will add at least another hour possibly two onto your day. If you keep on top of the administration tasks on a daily basis your end of week stocktaking will be slicker and quicker. No manager wants to be stuck in front of a PC until the wee small hours of the morning! Remember our team value Preparation is the key - always prepare for success. Daily orders and invoice administration On a daily basis you will need to check any bar deliveries to ensure the invoice tally s with the delivery. All bar invoices must to be inputted onto the epos system so the stock is accepted and accounted for. Any new products will need to be added as a new stock product as well as accepted into the system. Any items that are awaiting a credit note should not be entered or the system will count the items as part of the holding stock. Raise the error with the supplier as soon as possible in order to receive a credit note. At the end of the trading month the stock level on hand should be as low as possible leaving enough for one trading week. A lower stock on hand value at the end of the week means: Less stock to count during the stock take. Large amounts of stock mean the stock will take longer to count and it is easy to make mistakes. Large amounts of expensive stock sat in the stores is money not earning interest in the bank or money that could be used to pay other suppliers or purchase new small ware. Large amounts of stock on shelves means there is a greater risk of stock going out of date particularly if it s a product that is used infrequently or in small amounts. 8 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

10 Daily wastage book Wastage is one of the biggest causes of a poor COS result. It s really important that waste is tracked daily and is the responsibility of the whole bar and server team to record mistakes, accidents or remade orders. Everything counts including the ullage in the draught beer trays. Bartenders and servers must all know how record bar waste on the daily waste tabs. At the end of the night the manager should record the waste within the epos system. Without this a line check or full stocktake will show a negative loss on these items. Updating Epos Some products prices can fluctuate so it s important the purchase price is updated on the stock system in the week the increase occurs. If not the result will be inaccurate as the count value will be less than it actually is. The epos system we use allows the price to be updated when entering a delivery. The price is changed on that specific delivery and can either be saved as the new price or can revert back to the original price which is very useful in the case of a limited, special purchase offer. Stocktake Counting and Recording Before the count make sure that the bars, cellar and stores have been tidied so that the counting time is not extended by organising products or throwing away empty boxes or wrappers. Print off the stock count sheets from the epos system and attach to a clip board for ease. It is always preferable to count with another person; one person counts and one records. This way there are two pairs of eyes checking stock and the process will be quicker. Some practical tips for counting: *Count store rooms and wine fridges in a logical order e.g. counting stores mid-afternoon after all stocking up on the bar has been completed as it is unlikely any more liquor stock will be needed. *When counting store rooms always count the shelves working from top to bottom working around the area, to prevent missing items. Do not be tempted to skip around the room because you can see the item on the count page, stick to counting in a logical way. *Some counting sheets may help to guide you by grouping products under categories e.g. red wine, spirits, bottled beers and cider. *When recording the quantities of a product ensure you measure or weight the ingredient in the measurement that it s listed as on the count sheet. If the packet sizes are different convert them to the count sheet measurement. Make sure you write clearly on the count sheet using 10ths to indicate where there is part measurements of a product e.g. bottle of gin (75ml bottle) with 6. 8 bottles in stock. 9 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

11 Generating the weekly COS result To generate the liquor COS result the epos stock system will use: The opening stock value taken from the previous closing stock The net liquor sales The purchases value for the period The closing stock value from the count you have inputted into the system Any drink allowances (comps, promos) Total weekly wastage in s that has been inputted into the epos stock system Investigating Poor Stock Results When a stock result is not in line with the required cos target it s important to check for errors within the stocktake before you reconcile the stock take and commit it. Work through the investigation process in a logical manner. Often it is a very simple mistake that has caused the poor result e.g. an input error from the count sheet or a double entry of an invoice. Likewise if the result looks too good this maybe down to liquor deliveries not being accounted for or perhaps an inflated closing stock value caused by a stock counting error or perhaps gross sales being used rather than net. Always do recounts on products with large variances (whether positive or negative) before confirming and committing the stock result to the epos system. If the result is not a desirable one and you simply cannot find the mistake it often helps if a fresh pair of eyes looks over the result. More often than not the mistake is then found. Poor COS results Investigation and action plan A poor COS result maybe down to one of the following areas but more often than not it can be down to several areas that go hand in hand together such waste and portion control. Causes of poor COS results: Unrecorded or excessive wastage Over portioning of product Unexpected inflated product prices from a supplier Incorrect calculations for GP margins on products Stock loss due to a lost or missing delivery or theft Unauthorised consumption of product by staff Always start to monitor one or two areas you feel maybe the cause of the poor result. Ensure you enlist the help of the whole bar team placing focus on the area you think is causing the problem. Put measures in place to monitor the area of concern and monitor daily. 10 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

12 Let s look at Lucy s poor stock result issue Lucy s bar COS result has come in at 35% when the target is 31%. She has checked the count calculations and is satisfied that the poor result is unfortunately correct. Lucy knows she needs to find out what has caused the 4% margin gap by looking at where the stock or its value has gone. She has noticed that the wastage is only totalled 100 of product when the trading month was busy with sales of on liquor This means there is 660 lost drinks value. She has also noticed that the usage of guest real ale, cava, which is served by the glass and bottle and BIB Coke is very high. She can tell this by comparing the amounts ordered on invoices with the sales of these products and the fact that very little is left. Lucy looks at the variance report which confirms that all the products above are showing a negative variance. She decides to monitor these products and also the general wastage in the bar dept. If you were Lucy what would you do this to make sure the COS result for the coming week was back in line with target? (Tip think about the controls and ways within your own pubs bar that are used to monitor bar waste and stock consumption. Think of the processes in place that ensures measures and recipes are followed correctly) Well-done! You ve completed the workbook. Ask your mentor to check through your answers with you. Once this is done you re ready to start your practical assignment. 11 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

13 Remember you have all the knowledge you need to help you carry out your practical assignment within your workbook. Practical Assignment 1. Carry out the weekly administration needed to prepare for the weekly line checks. 2. Carry out the line checks at the end of a trading week. Make sure you complete the whole process from generating the count sheet to entering the closing stock totals into the epos system. Conduct recounts where necessary. The GM will support you and supply you with any allowances and any petty cash purchases. You must gather the rest of the information needed to complete the line checks yourself. 3. Highlight any stock losses you feel should be looked into and write up a simple action plan of how you would investigate and resolve the issue. You must show your results, findings and action plan to the GM for them to review. Tip - Remember to use the information within this work book to help you. Use the blank pages in the back of this work book to make any notes during the assignment. Remember our Team Value, Preparation is the key - always prepare for success! 12 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)

14 Blank for Notes General Manager Comments: Operations Manager Comments: 13 Development Skills & Workshops/MNGT/Liq COS and Stocktaking Workbook (v3)