Financial Controls Used in Food and Beverage Operations - Report Example

Financial controls used in food and beverage operations Contents Contents 2 Discussion of the use of financial ments in food and beverage operations 3 Demonstration of the use of cost and pricing processes 6 Analysis of the purchasing process 7 Conclusion 8 References 9 Introduction The food and beverage is a large industry with thousands of operators competing for the numerous markets. Just as is the case with any other business operations, such operators must consider their investments effectively in order to make effective decisions that enhance the profitability of their businesses. Effective business decisions require adequate information that arises from studying both the business’ history and the fundamental features of the industry that influence the performance of the business. This thus makes record keeping paramount in business. Among the most important financial records that influence the operations of food and beverage businesses among many others are balance sheets, cash flow statement, statement of retained earnings and income statement (Barnhart & Indiana, 1968). The above statements are fundamental financial records that influence the daily operations of any food and beverage company. Discussion of the use of financial statements in food and beverage operations The balance sheet, one of the most vital documents in a company carries important financial information about a company at any given time. The balance sheet provides the financial situation of a company at any given time by stipulating the value of both its assets and liabilities. Such contents of the balance sheet thus portray the size of a company influencing its investment decisions. A company’s assets have financial value and the company can use such as collateral in obtaining loans from different financial institutions operating in the country. This way, it obtains increased liquidity to enhance its investment decisions. Liabilities on the other hand are financial obligations that a company must meet. The difference between the liabilities and assets thus is the position of a company. Besides the balance sheet, a company must have an income financial statement. This refers to a record that lists the company’s revenue for a specified duration. Additionally, the record shows the company’s expenses in relation to the revenues. This refers to the amount of money obtained from the revenue that a company uses. By tabulating the two, the record thus either provides the profits or loses of a company. This document is essential in the daily operations of a company since it informs the amount of money a business can reinvest from its profits. Additionally, by providing the profits at the end of a financial period the document shows the viability of a company’s products thus the lucrativeness of the market. With such information, the business thus invests either more or less (Shankar & Carpenter, 2012). Cash flow financial statement is an equally important record in a company that influences the daily operations of the business. The document records the movement of money both in and out of the company. Such is an extensive process that requires the recording of every single transaction the company makes. This way, the document is therefore a reliable point of reference in case of a financial impropriety. Additionally, the record portrays the business’ ability to pay its bills among other important transactions that enhance its operations thus profitability. At the end of the cash flow, statement is the company’s net cash flow increase or decrease. This informs the company’s growth or decrease. The food and beverages industry is an exciting one with a unique structure since a company retails food products. Cooking is therefore the production process that results in finished products. Operating in the industry just as any other has the cost of doing business, which incorporates both the taxes and other related expenses that influence the profitability of such companies. Some products such as fruits require minimal processing a feature that requires the company’s creativity in positioning and promoting such products in order to achieve the desired profitability. Profitability in the industry requires operators to maintain specific unique records besides following the prevailing trends in the industry. This way, a company identifies its market niche thus steering profitability. Dish costing sheets are among the most essential documents that operators in the industry use in determining the cost of every meal. Just as its name suggests, the sheets contain numerous elements that influence the cost of every meal based on the uniqueness of each plate. The sheets contain vital information that influences the cost of a product. Such include the cost of the raw materials used in the production. A chef for example fills the sheet outlining the products he needs in preparing a particular meal (Webster, 1991). The cost of the products thus influences the cost of the plate. The menu price or the cost per plat of a meal relies on the cost of the raw products and the cost of other related ingredients used in preparing the dish. Operating statement is the third most important type of financial record coming in after the balance sheet and the cash flow statement. Operating statement also known as the profit or loss statement summarizes the revenues and expenses of a company. Food and beverage companies such as hotels and resorts among other are companies just like any other and must therefore have effective operating statement that detail he revenues and expenses of the company thereby presenting the position of a company at any time. Demonstration of the use of cost and pricing processes Different meals require different recipes and ingredients. Such are pertinent factors that influence the cost of a meal. A chef therefore develops the dish-costing sheet based on the uniqueness of a meal. The number of people eating a particular meal further influences the cost of a meal. Most business prefer many clients ordering for a similar meal since in such a scenario the efficiency increases thus decreasing the cost of production while maximizing the profits. However, the meal for one person is likely to require less money than a dish for thirty people. The calculation of dish costing therefore differs based on the uniqueness of a meal and the number of clients who order a similar meal. In costing the price of a three course, meal for example requires the consideration of the market values of such products as the salads, the soups and the meal. After securing the raw materials, the management must consider the cost of cooking which includes the cost of labor and the cost of power among other pertinent costs. Furthermore, businesses pay taxes, such are additional costs that affect the cost of a meal. After an effective consideration of all the costs involved in the cooking process, the business must consider the profit margin. The price of a meal thus includes the profit for the business. This implies that with effective consideration of such costs and the profit margin, the cash flow financial statement should record a net increase in the company’s finances thus growth of the company. Analysis of the purchasing process Purchasing is an important process that influences the profitability of a business. In food and beverages, companies must follow a particular mechanism by considering specific factors that ensure that the companies do not purchase irrelevant products besides purchasing such exorbitantly. The purchasing process begins with the determination of a need. After identifying the need, the company specifies the need thereby narrowing the purchasing process. Specifying the need ensures that the company purchases only the most appropriate products that will meet a need thus curbing loses arising from the purchase of unnecessary products. The sourcing option is the net stage and is important in ensuring that the company obtains value for its investment. The company must consider and assess the different suppliers and vendors in the market before choosing the most appropriate supplier who offers quality products at an appropriate and affordable price. After the selection of an appropriate vendor, the two parties discuss the price of the products. The discussion process is necessary in order to safeguard the interests of both parties. The two parties thus agree on the appropriate price after which the buyer prepares the purchase order. The preparation and delivery of the purchase order signifies the instigation of the purchasing process with the buyers often striving to expedite the purchasing process. The next stage is the reception and inspection of the goods after which the company makes payment thus marketing the end of the purchasing process. In the food and beverage industry, the purchasing process takes a shorter period owing to the urgency of the need. Conclusion In retrospect, food and beverage businesses just as any other have elaborate financial statements that record the movement of money in the business thereby informing the investment decisions that the managers make (Dorset Sheep Study Group & Great Britain, 1967). The businesses obtain raw materials from the market, process the raw materials and retail the finished products in the form of food. In order to achieve the desired profitability, food and beverage companies have effective price determination systems. Such systems provide the companies with adequate understanding of the cost of doing business, the profit margin and the price of raw materials among other associated costs. This way, they thus charge prices that enhance their profitability by ensuring that they provide value for the prices they charge. References Barnhart, J. R., & Indiana. (1968). A study of the factors affecting export profitability among selected Indiana small and medium-size firms. Bloomington: Indiana University, Graduate School of Business. Dorset Sheep Study Group., & Great Britain. (1967). Factors affecting the profitability of prime lamb production in Dorset: Report of the Dorset Sheep Study Group. Dorschester (Dorset: National Agricultural Advisory Service. Shankar, V., & Carpenter, G. S. (2012). Handbook of Marketing Strategy. Cheltenham: Edward Elgar Pub. Webster, F. E. (1991). Industrial marketing strategy. New York: Wiley. Read More