chapter17
DESCRIPTION
the restaurant businessTRANSCRIPT
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Chapter 17Accounting, Finance, and Cost Control
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
After Reading and Studying This Chapter, You Should Be Able to:
Describe the systems of accounting typically used by business organizations in the restaurant, lodging and club segments of the hospitality industry
Identify various accounting statements and outline the major components of an income statement, balance sheet and statement of cash flows
Review the basic role of managerial finance in hospitality operations including ratio analysis, cash management and budgeting
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
After Reading and Studying This Chapter, You Should Be Able to:
Describe features of systems used to control major direct operating costs including food, beverages, labor and other operating costs
Calculate key financial ratios used to analyze the results of operations in hospitality operations
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Accounting in the Hospitality Industry Financial recording of revenues and
expenditures to maximize profit margin Accounting department responsible for:
Tracking Reporting Communicating
Size of department depends on the size of the operation
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Uniform System of Accounting and Regulatory Agencies
Standardized accounting system for all industries Lodging Restaurants Clubs
Guidelines for better decision-making Industry-wide consistency
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Principles Established by Profession
GAAP FASB SEC
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Types of Accounting
Auditing Financial Managerial Cost Tax
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Types of Business Organizations
Proprietorship Partnership Corporation
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Finance in the Hospitality Industry
Cash inflows/outflows Find money to run a business Find money to grow a business Make investments in real assets Plan for companies’ financial future Manage cash on hand
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Financial Statements Income statement Balance sheet
Assets Liabilities Owner’s equity Equity Liquidity
Statement of cash flow
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Food and Beverage Cost Control
Greatest percentage of operating cost
Average food cost percentage – 25 to 35 percentage of food sales
Average beverage cost percentage – 16 to 26 percentage of beverage sales
Reporting and tracking is critical
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Cost Lowering Methods Specification sheets for inventory purchases Standardized recipes Detailed menu costing Tracking Security Regulating inventory Highlighting seasonal items Educating employees Include condiments, oils, dressings, etc. in plate cost Perform regular yield tests Consider employee meal cost Monitor overtime Training
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Food Cost Percentage
Cost of Foods SoldTotal Food Sales x 100
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Beverage Cost Percentage
Cost of Beverage SoldTotal Beverage Sales x 100
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Labor Costs Control
One of the largest operating costs Adequate training is essential Lower turnover helps maintain
reasonable costs Job descriptions facilitate better
hiring practices which control costs
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Labor Cost Percentage
Total Labor CostTotal Sales Revenue
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Other Operating Costs Property taxes Maintenance Music and entertainment Business fees and licenses Insurance Management fees Rent Utilities Uniforms
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Other operating Cost Percentage
Total Other Operating CostsTotal Sales Revenue
Introduction to Hospitality, Fourth EditionJohn Walker
©2006 Pearson Education, Inc.Pearson Prentice HallUpper Saddle River, NJ 07458
Trends
Increased use of technology Sarbanes-Oxley Act of 2002 Focus on increasing cost of
business risk