Money Matters for Hospitality Managers, Cathy Burgess

This chapter aims to show how costs can be planned and their usage controlled
through standard costing. In Chapter 4 we looked at the monitoring of
costs and in 5 at pricing. Here we will consider how to plan spending the
correct amount on raw materials. This can be fairly complex in terms of
recipes, and a loss of standards can easily cause significant cost variances.
We will then look at identifying deviations from these standards what is
due to variances in price, and what is due to variances in quantity used. We
will also consider the specific problems of food and beverage materials,
which can cause them to be so difficult to manage.
Standard costing techniques can also be used in other areas. We discussed
the management of labour cost earlier but you can also use the technique to
monitor labour cost where a flexible workforce is employed and where
productivity is important to the profitability of the business. A further use
for the technique is in identifying variations in revenue and considering
whether differences there are due to volume or price (or both) as well.


Within every business theres a need to plan ahead. If we didnt then theres
a likelihood of not having enough food to cook, not enough staff to serve
or lots of empty rooms. You could also have too many staff, or too much
food, which would lead to wastage and unnecessary expense.
Forecasting is a simple technique that lets any manager plan for the more
efficient working of their area, and use of resources. Generally forecasting
means to look ahead but in hospitality we use it to mean planning on a
short-term basis that is: tomorrow, next week, next month. The term
budget is used to mean a formal, detailed plan for the next financial year and
strategic plan for long-term (around five years) planning. We will look at
these two briefly towards the end of this chapter but the main purpose is to
look at forecasting and to see the effect of not planning ahead from both
customer service and financial aspects. Well also look at predicting cash
flows, which helps the business manage their working capital.


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