Food and Beverage Management Chapter 13 - Financial Management.

Slides:



Advertisements
Similar presentations
Financial Management F OR A S MALL B USINESS. FINANCIAL MANAGEMENT 2 Welcome 1. Agenda 2. Ground Rules 3. Introductions.
Advertisements

Chapter: 12 BFM Financial Management.
Understanding the role of finance in business.
Question Answer Accounting I Debits & Credits Analyzing.
How to read a FINANCIAL REPORT
© The McGraw-Hill Companies, Inc., 2005 McGraw-Hill/Irwin Adjusting Accounts and Preparing Financial Statements Chapter 3 3.
Analyzing an Income & Cash Flow Statement Oğuz Benice Bilkent University School of Tourism & Hotel Management.
Managerial Accounting Structure of Financial Statements.
Financial Aspects of a Business Plan
Cost Control Measures for Food Service Operations
Chapter 4, Slide #1 Ch.4 Income Measurement & Accrual Accounting.
©2008 Pearson Prentice Hall. All rights reserved. 3-1 Accrual Accounting & Income Chapter 3.
Chapter 14 – Budgeting, Accounting and Financial Management
Essential Standard 4.00 Understanding the role of finance in business. 1.
Section 36.2 Financial Aspects of a Business Plan
WEEK 12: ACCOUNTING CONCEPTS BUSN 102 – Özge Can.
Financial Statements Business Management.
FINANCIAL RESOURCES MANAGEMENT
FINANCIAL STATEMENTS. Why Use Financial Statements? Investors and bankers Investors and bankers Suppliers and creditors Suppliers and creditors You and.
Annie’s Project January 30, 2007 Coweta Oklahoma
SCORE ® Counselors to America’s Small Business Service Corps of Retired Executives Create a Winning Business Plan Session 5 Supporting Documents Other.
1 Accrual Accounting and the Financial Statements Chapter 3.
Financial Management Financial Planning
Financial Statement Basics Roy Williams – FHA Deputy Chief Underwriter.
Real Estate Investment Chapter 11 Tools of Analysis © 2011 Cengage Learning.
Part 6 Financing the Enterprise © 2015 McGraw-Hill Education.
Financial Analysis Ag Management Chapter 3.
1 CHAPTER 3 Operating Decisions & the Income Statement Acct 2301, Fall 2009 Cox School of Business, SMU Zining Li.
Entrepreneurship: Ideas in Action 5e © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible.
Chapter 4 Income Measurement and Accrual Accounting
Financial Control in Restaurants Overview □This presentation gives information about the financial management of restaurants Goal □To learn how to manage.
©2004 Prentice Hall Business Publishing Financial Accounting, 5/e Harrison/Horngren Accrual Accounting and the Financial Statements Chapter 3.
Janet Stan, CPP Corporate Controller Talco Enterprises, Inc x 3116 PAYROLL ACCOUNTING Chapter 6.
Recognition: formally recording an item in the financial statements of an entity Recognition and Measurement I know I need to record this... Measurement:
Lecture 28. Chapter 17 Understanding the Principles of Accounting.
7/e PowerPoint Author: Catherine Lumbattis COPYRIGHT © 2011 South-Western/Cengage Learning 4 Income Measurement and Accrual Accounting.
FINANCIAL STATEMENTS Business Management. Today’s Objectives  Interpret basic financial statements, including cash flow, income statement, and a balance.
First Canadian Edition Price • Haddock • Brock • Hahn • Reed
Objective 4.01 Understanding Financial Management. 1.
Recognition: formally recording an item in the financial statements of an entity Recognition and Measurement I know I need to record this... Measurement:
McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter 1717 Understanding Financial Information.
The Decision Maker. Managing a Profitable Company.
3-1 CHAPTER3 Adjusting the Accounts. 3-2  Generally a month, a quarter, or a year.  Also known as the “Periodicity Assumption” Timing Issues Accountants.
Chapter 4 Income Measurement and Accrual Accounting Financial Accounting: The Impact on Decision Makers 6/e by Gary A. Porter and Curtis L. Norton Copyright.
Chapter 3 Accrual Accounting Concepts. Why is Accrual Accounting Needed? Cash received or paid Revenue earned Expense incurred.
7/e PowerPoint Author: Catherine Lumbattis COPYRIGHT © 2011 South-Western/Cengage Learning 4 Income Measurement and Accrual Accounting.
CHAPTER 12 FINANCIAL MANAGEMENT Financial Planning FINANCIAL PLANNING Ongoing Operations Revenue – all income that a business receives over a period.
1 McGraw-Hill Ryerson College Accounting First Canadian Edition Price Haddock Brock Hahn Reed.
Chapter 36 Financing the Business Section 36.1 Preparing Financial Documents Section 36.2 Financial Aspect of a Business Plan Section 36.1 Preparing Financial.
GLENCOE / McGraw-Hill. Financial Statements and Closing Procedures.
Accounting Basics, Part 3 It’s 10 o’clock, do you know where your money is? Part 3 The Income Statement, Balance Sheet and Basic Financial Analysis.
C. Financing a Small Business 5.00 Explain the financial statements maintained in a small business Develop the financial records used in a small.
Business Entity Concept
FINANCIAL RESOURCES MANAGEMENT
Unit 4: Agribusiness Management Lesson: AM2
FINANCIAL PLANNING Beginning a business Startup Money source
Analyzing Financial Statements
Financial Statements Business Management.
© 2007 McGraw-Hill Ryerson Ltd.
Recognition and Measurement
FINANCIAL PLANNING Beginning a business Startup Money source
Chapter 36 Financing the Business
Kevin J. Collins, CPA/PFS, MST
C. Financing a Small Business
Business and Personal Finance
12-2 Financial Records and Financial Statements
Understanding Financial Statements
Preparing a Worksheet for a Merchandise Company
How to Read, Analyze, and Interpret Financial Reports
The Dental Practice: Business Foundations
Presentation transcript:

Food and Beverage Management Chapter 13 - Financial Management

Preparing A Budget Always have a plan – (Budget)!!! Operations Budget is a profit plan and control tool Your budget is your plan for operating a business expressed as a financial plan Common mistakes are to assume unrealistic revenues and assume large financial obligations

Budget Steps Based on history Number of events per year Average Selling Price of each event Seasonal Variations National and Local Economic indicators Competitive Factors Industry Trends

Budget by month – not year Bills must be paid monthly – Can chart achievement of revenue goals Lean months and fat months Watch how holidays fall Can develop reactions if revenues fall short of goals in a particular month

Budget as Control Compare Actual Results to anticipated Budget Allows adjustment for future months “Circle of Management”

Expense Categories Cost of Sales Food Costs Payroll and related costs Labor plus benefits Direct Operating Costs Supplies, transportation, utilities, advertising Administrative and General Costs Office expenses, Insurance, rent, repairs and maintenance

Sample Budget

Differences - On an Income and Expense budget- An annual insurance policy, while paid in one or more payments, is spread over 12 months A Cash Budget – The annual insurance payment is recorded by the actual way it is done – (quarterly for example)

Cash Flow Statement Assumptions – A. All clients are paying a 50% deposit due 30 days prior to the event B. Cost of sales is paid the month following the event C. Administrative and General expenses are paid in the month D. The caterer has a $3,000 Insurance premium, $1,000 paid in January – the rest over 10 months ($200)

Break Even Points You Must know the break even point Variable Costs of goods sold(33 1/3 % of revenues) Payroll and related (part timers) (10% of revenues) 43 1/3 % of revenues total Fixed Fixed Monthly Payroll Administrative & General

Calculating Break Even Many ways to calculate - Fixed Costs / Contribution Margin = Break Even $3,732 /.5667 (contribution margin) = $6,585 Break even point on any given month is $6,585.

Revenues and Expenses Basic Accounting – Simple – but does not replace a CPA, especially for tax purposes Records need to be kept on a daily basis Accounting software – QuickBooks, etc. Basic records are Income Statement and Balance Sheet

Journals The basic component of accounting is the journal The “name” typically describes the type of information recorded Example: Sales and Cash Receipts journal Advance deposits Food Sales Labor charges Corkage and other beverage fees Rentals and equipment Accessory Services Service charges Sales taxes Totals

When a figure is entered into the journal it is called “posting” an entry The figure is called a “journal entry”

Types of Journals Petty Cash Journal Advance Deposit Journal Until the event is concluded this is a “liability” Forfeited deposits are considered “other income” Cash Disbursements Journal Payroll Journal All journals feed to the main statements

Chart of Accounts USA – Uniform System of Accounts – Accounting standard Revenue Accounts – Food Revenues Beverage Revenues Equipment Revenues Floral and Décor Revenues Music and Entertainment Revenues Other Services revenues Sales taxes collected

Expense Accounts Cost of Sales Accounts Cost of Food Cost of Beverage Cost of Equipment Cost of Floral and Décor Cost of Music and Entertainment Cost of Other Services Payroll and Related Costs

Expense Accounts Direct Operating Costs Uniforms Laundry Replacement costs Supplies Transportation Licenses and Permits Advertising and Promotion Utilities Sales Taxes payment to State Misc.

Expense Accounts Administrative and General Office Supplies, Printing, Postage Telephone Data Processing Costs Dues and Subscriptions Insurance Fees to Credit Organizations Professional Fees Miscellaneous Repairs and maintenance Rent and Lease Expense

Income Statement Summary Cost of Sales Calculation - Basic formula is – Value of beginning inventory Plus (+) purchases Less (-) value of ending inventory Less (-) employee meals and other credits Equals – Total cost of sales Accurate inventory accounting is critical

Payroll Calculation Gross Wages Plus (+) employers share of FICA Plus (+) federal and state unemployment Plus (+) cost of employee meals Plus (+) cost of workers compensation insurance Equals (=) total payroll and related Other employee benefits (insurance, etc.) are included in this category

Prepaid Pre Paid expenses can be spread through the year or taken as a lump sum Spreading the expenses through the year avoids huge “losses” in particular months.

Income Statement Food Revenues – Includes food sales and labor charges, service charges and sales taxes Beverage Sales – Includes beverage sales, and sales of related items. Also, Beverage specific labor charges, alcohol taxes and other beverage taxes Accessory Services Revenue Equals (=) Total Revenue

Expense Side Beverage Cost of sales Food Cost of sales Equipment Cost of Sales Accessory Services Cost of Sales Equals (=) Total Cost of Sales

Payroll and Related Direct Activity Profit – The amount remaining after deducting payroll and remaining from the gross margin Operating Expenses and Administrative and General Expenses are last

The Balance Sheet Shows Assets, Liabilities and net worth Assets included Cash on hand Accounts receivable Food and other inventory Prepaid expenses Fixed Assets (depreciation )

Liabilities Outstanding Loans Advance Deposits for future events Accounts payable Accrued Payroll

Understanding Financial Statements Month to month and year to year are best comparisons Watch Percentages for revenues and expenses, as well as payroll Calculate “Average Check” – revenue per guest Don’t neglect fixed and other operating costs.

Balance Sheets Accounts Receivable Too High? Seasonal fluctuations Aging by Current Over 30 Over 60 Over 120 -

Controlling Costs Daily Function Checking Trash Counting rental equipment Schedule intelligently Monitor Utility costs Labor saving devices Safety hazards Watch the percentages Break down costs by sales (chicken vs. beef)

Ratio Analysis Best compared against planned goals Classified by type Liquidity Ratio – ability to meet short term financial obligations – “Current Ratio” = Current Assets/Current Liabilities Solvency Ratios - debt related – ability to meet long term obligations = Total Assets/ Total Liabilities

Ratio Analysis Activity ratios – ability of managers to use the assets – “Inventory Turnover Ratio” = (Beginning Inventory + Ending Inventory)/ 2 = Cost of Food Used /Average Inventory Factor High number reflects high turnover of product Profitability Ratios – or Profit Margin = Net income before taxes / Total F&B revenue

Operating Ratios Food Cost Beverage Cost Labor Costs Average Check Seat turnover

Next Week Final Quiz Review for Final Exam