Sometimes when we talk to both customers and non-customers, we find that they have a rather relaxed view of the importance of accounting and inventory for a restaurant. Some have the perception that dividing invoices into different accounts is something done only for accounting reasons — and inventory is seen as a time-consuming task that does not affect the bottom line.
Let's explain why accounting and inventory are important, and how they can be used to create better profitability for your business.
The Numbers Behind Raw Material Cost
A restaurant has purchased raw materials for 6,750,000 SEK during a fiscal year and sold for 25 million SEK — resulting in a raw material cost of about 27%. Raw material cost shows how much of your turnover goes to raw materials:
PURCHASES (SEK) ÷ Sales (SEK) = Raw material cost (%)
If this restaurant manages to reduce its raw material costs by just 2%, it means a reduced cost of 500,000 SEK — which falls directly to the bottom line.
This is generally achieved in three ways:
- Lowering purchase prices
- Reducing waste
- Raising the price to the customer
Lowering Purchase Prices
To improve purchase prices, you first need to understand where you are losing your margins. Is the food cost too high? Are we spending too much on takeaway materials? How much money are we really making from our alcohol sales?
By dividing the restaurant's purchases and sales into categories — food, breakfast, wine, beer, spirits, non-alcoholic beverages, coffee — you can pinpoint where the highest raw material cost lies. If beer comes in at 40%, that's where you should focus: consolidating suppliers, negotiating better prices, and ensuring you always pay the correct invoice price.
If your purchase accounts don't correspond to your sales accounts, it's impossible to determine where margins are suffering. Bazaro automatically categorises supplier invoices in detail and functions as a controller to ensure that no price increases go unnoticed.
Reducing Waste
Once purchase prices are under control, how do you find out where waste occurs?
The only solution is continuous monthly inventory. Fortunately, digital tools now make this significantly easier — no more searching through invoices for items and prices. You can use a phone or tablet to fill in quantities, and the system calculates the amount per account automatically.
Inventory gives you both a theoretical and an actual closing value:
Opening inventory + Purchases – Sales = Theoretical closing inventory
If the actual closing inventory differs from the theoretical value, the difference represents waste. In one real example, a restaurant discovered that the waste amount for wine was the largest — and after spot checks, identified both staff theft and incorrect pouring as the root causes.
The Result
By categorising purchases and conducting ongoing inventory, one restaurant identified that beer purchase costs and wine waste were their biggest problems. After taking targeted action, they reduced raw material costs from 27% to 25% — an increase in profit of 500,000 SEK.
Bazaro has an inventory module where all items and updated prices are automatically entered, making this process straightforward for any restaurant. Book a demo to see it in action.