Monthly profit and loss reports are important for overall financial planning and to compare with previous month and year results. Weekly reports focus on current results, so management can review the previous week's performance. Irregularities can then be addressed immediately, rather than waiting a month to find out you had higher-than-desired food costs.

Weekly reports for managing food cost should be prepared as follows:

Cost-of-sales calculation. Many operators believe what they spend on food and beverage purchases is their cost of sales. While this might be true in the long run, it is inaccurate for weekly cost analysis. The true cost of sales isn't what you spend; rather, it's what you use. This is where one benefit of taking weekly inventory comes in.
The correct formula for calculating cost of sales is:

(Total food purchases + beginning inventory) - ending inventory = cost of sales

Operators who take inventory and calculate cost of sales each week are far more profitable than those who don't. They generally gain 2% to 10% more profit to the bottom line. Why?

  1. By calculating the cost of sales weekly, operators can quickly identify problems. That gives them the opportunity to react immediately rather than wait a month and lose even more profit.
  2. Maintaining tight control on inventory levels ensures your cash is in the bank and not on the shelf in the form of excess inventory, or even worse, susceptible to spoilage, waste and opportunity for theft.

Ideal cost calculation. Periodically computing your ideal cost helps provide a sense of what your food cost percentage should run. You can use the same tools to monitor ideal cost on a weekly basis. Needless to say, you need to keep your menu cost updated for this to have relevancy. You then can compare your actual cost for the week against the ideal cost.

Some POS systems provide a setting to affix arbitrary costs to each menu item, and many have ideal (theoretical) cost reporting built into their reports. That saves you the trouble of transferring the totals from your sales mix reports to the ideal cost spreadsheet.

Inventory turnover calculation. Review inventory turnover each week to spot excess inventory. Many suppliers will buy back nonperishable items. For all other excess inventory, you could run daily specials to move it.