Jeremy Julian

How the Right Restaurant POS Can Slash Your Raw Material Costs

December 16, 2020

Like everything else, raw material costs are skyrocketing for restaurants.

The profitability and even the survival of low-margin and highly competitive businesses such as restaurants depend on rigorous cost-control – and a quality restaurant POS system is crucial in achieving this.

And what accountants call “prime cost” – the cost of goods sold (CoGS) plus labor costs – is a crucial metric.

CoGS simply refers to the purchase cost of the raw materials required to produce your food and beverage menus; labor costs are the wages and other benefits of the staff who create and serve your dishes.

The ideal ratio of CoGS to labor costs will vary depending on the type of outlet, but a good rule of thumb for most is to aim to keep CoGS to around 25-35% of sales. Labor costs may then add another 20-35% of sales to your prime cost      

Today’s restaurant POS systems can help reduce both elements of prime cost, but it’s often easier to achieve immediate savings by focusing on CoGS rather than labor costs, which tend to be relatively inflexible.

Managing Inventory and Raw Material Costs with a Restaurant POS System

Strict inventory management is crucial for any business, but perhaps particularly for restaurants.

Over-order perishable goods and you may be forced to discard or discount unused stock that hits its sell-by date.

Run out of the essential ingredients of your chef’s signature dish and you may be throwing away profits on your busiest nights.

Add to that the risk of theft and natural wastage, through customer returns or staff error, and it’s clear that no manual system of inventory control can hope to keep track in a timely fashion.  

Efficient Waste Control and Storage

But a good POS system will automatically update your current stock levels and let you know what has been used, what is to be delivered and when, and what your storage requirements are – matching these to your menu requirements.

An effective kitchen management tool within your POS should also help you plan your storage of perishables, particularly, and will also allow you to set re-order prompts when inventory falls below certain levels.   

Research, Reporting and Accounting

The old adage has it that “what can be measured can be improved”, and nowhere is it more relevant than in a low-margin, highly competitive business such as a restaurant.

Controlling food costs depends to a great extent on the accurate estimation of what your menu requirements will be, and the right restaurant POS will be able to produce reports analyzing the success or otherwise of particular dishes over weeks and months, and including any spikes in response to holidays, special events or promotions.

Drilling down, you can even analyze the demand for particular sides, upsells or beverages. And with this historical data to hand, it becomes far easier to assess and plan accurately for your future inventory needs.

Efficient Menu Planning

Knowing the exact rates of usage and wastage of every single ingredient purchased will also help in the planning of menus.

For example, many items that are being under-used in poorly performing dishes can often be re-designated for alternative offers or sides, allowing them to be sold before the end of their shelf life.      

The great thing is that this just a sample of the many business management features offered by today’s restaurant POS systems. And a creative use of the numerous reports available, it’s possible to achieve enormous cost savings both in raw materials and labor.  

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