Use of Financial Statements in Food and Beverage Operation - Assignment Example

Use of Financial Statements in Food and Beverage Operation Financial statements are used by managers and entrepreneurs in food and beverage to make long-term corporate decisions such as whether to continue with a particular product line or not, to produce or purchase certain components, to procure or hire premises and equipment in the production process. Financial statements are also used in carrying out financial analysis, which is a significant element in making investment decisions. When operations need to be financed through credit, lenders assess the financial statements to evaluate the financial health of the business to guide them on its creditworthiness.

Tax authorities need to evaluate the financial statements to determine the level of taxation to be applied on the business. The balance sheet is an important financial statement that indicates the position of a food and beverage enterprise’s assets and liabilities as well as the shareholders’ equity. In a balance sheet, the difference between assets and liabilities equals equity (Reid & Botanic, 2006). Income statements contain operating costs that are categorised as direct and indirect costs.

Direct costs are those incurred in running specific functions such as casual labour and raw material supplies while indirect costs are non-specific expenses that support the entire business such as depreciation, cleaning and general office supplies. These expenses are considered in determining the shareholder incomes per share. The revenue earned in a particular period of time is also contained in the income statements. They help the owner of the food and beverage operation to know if the business made a profit as well as whether the profits attained conformed to the targets set for the business.

Income statements also help the owner to determine whether the profits decreased or increased compared to earlier periods. If the owner is not the manager, he/she can use the income statements to appraise the restaurant manager’s performance. Cash-flow financial statements are important in tracking the movement of monies in and out of the business. They can be used to identify irregular payments and also to track the business’s capacity to settle outstanding bills. The owner of the food and beverage operations can evaluate the net cash increase or decrease to determine if the business is achieving the growth strategy (Bowie & Buttle, 2004).

It is important to recognize and appraise the need of a product in the company. The product may be necessitated by finished stock, innovations or demand from customers. Specifications should be done to ensure that all the necessary details are taken care of to offer customers the best value. These include physical qualities such as colour, size, texture and weight and conceptual qualities such as smell and taste. The next step is for the purchasing and supplies department to evaluate the available sourcing options based on past relationships as well as market competition.

After determining the market prices, a supplier is selected based on their prices, past records of quality and after sale services among other factors that generate value for the business. A local purchase or service order (LPO O or LSO) is then raised, clearly stating the nature and quantity of products, price, time of delivery as well as the terms and conditions that are legally binding. The LPO or LSO is sent to the successful seller in the most secure and convenient means (Reid & Botanic, 2006).

The seller delivers the products to the company, which are examined for conformity with the purchase order. The person receiving either accepts or rejects the products giving reasons such as missing items, different quality other than what was specified in the LPO or LSO. If the products are accepted, the receiver signs the delivery note from the seller and is also issued with an invoice that obligates the company to pay the supplier. The payment is made after confirming that the LPO or LSO, the delivery note and the invoice match.

The transactions are entered in the relevant records and the documents filed for future reference such as warranties if any (Bowie & Buttle, 2004). BibliographyBowie, D. and Buttle, F. 2004. Hospitality Marketing: An Introduction. Oxford: Elsevier Butterworth Heinemann.Reid, R. D. and Botanic, D. C. 2006. Hospitality Marketing Management. 4th Ed. New Jersey: John Wiley & Sons Inc.