The head chef (Joe) at Joes Steakhouse orders 20 lbs of USDA Prime NY strip steak meat from Prime Meats. The price is discounted to $12/lb with net 30 payment terms due to their consistent high-volume orders. Upon delivery the next day, Prime issues an invoice to Joe for $320 (20 lbs X $16/lb). Before signing the invoice, Joe crosses off the $16, and replaces with $12, then updates the invoice total to $240. The delivery driver and chef agree to the price discount, update their copies of the invoices and move forward with their days.
30 days later, the bookkeeper for Joes Steakhouse receives a statement from Prime Meats stating a balance of $320 due. The bookkeeper never received a copy of this invoice from Joe, so he relies on the vendor’s statement for the true balance due then writes a check for $320.
Assuming Joe sells a 16 oz NY Strip steak for $45 (w/no sides), this mistake resulted in food cost for those 20 steaks increasing from 26.7% to 35.5%. Joe’s Steakhouse generates $300,000 a year in NY Strip Steak sales. If this scenario happens even 1 out of 10 times, that’s $2,668 in additional food costs for the NY Strip Steak sales! If it happens half of the time, that’s $13,334 in additional food costs! Scenarios like this are very common in restaurants. If you’re serious about growing and becoming more profitable then you need to hire an accountant that will implement all the necessary processes, controls, and technology to make sure situations like this do not occur. Your staff should not have to spend their time reconciling statements, instead they should be focusing on delivering superior hospitality to customers. Do not hesitate to ask us about these services, the benefit of hiring an expert will far outweigh the costs, especially in an industry with such delicate margins!