We recently had a client recover $12,000 in accidental vendor overcharges... on ketchup. The most exciting part: Ketchup is only one of hundreds of items in their order guides.
In the super-competitive world of food distribution, prices change constantly and it's common for an invoice to show a price that's above or below the contracted price the order was based on. In many cases restaurant costs can be driven down materially simply by comparing what the company SHOULD be paying for products vs. what it actually IS paying.
Companies typically use one of four strategies to deal with the problem:
- Have accounting compare invoices to orders and contracted prices
- Have the restaurant manager double check invoices against a price sheet
- Use a back office system to automate the comparison and generate alerts.
- Don't do it and hope for the best
The first option is fairly common when there's enough manpower in the office. It can work well, and though manpower can be expensive, the savings often make it worthwhile. More problematic is that this option leaves room for human error (it's a shame to make errors when trying to fix errors).
The second option puts a knowledgable manager to work doing a purely mechanical task; his time may be better spent circulating through the restaurant improving operations, reducing waste, and training people.
The third option is highly efficient, though it obviously requires the implementation of a restaurant back office software system; however in the right setting the return on investment can be outstanding.
And while the last option isn't really a strategy, and is hugely expensive, many, many companies use it!
Whichever method your company prefers (except #4), it's important that it's executed for every order. Because as with so many things, getting the basics right day after day is the key to better restaurant food cost management.
Have a success story about cost recovery? Share your expereince in the comments section below.