Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting process. A business owner compares actual results to the budget expectations, and if actual costs are higher than planned, management takes action.
Phases of Control Procedure:-
The control procedure consists of 3 broad phases:
- Planning
- Operational
- Control after the event
Planning
Policies are nothing but predetermined guidelines laid down by the management of the organization. It outlines such matters as the market that is being aimed at, how it is to be catered at the level of profitability, which is to be achieved. The policy should be clearly defined before the business is commenced. It can be charged but whenever a major change takes place a new policy should be written down. Three basic policies, which need to be considered, are:
- Financial:- It will determine profitability and the contribution to the total profit. Setting of the target that has to be achieved, the financial policy is prepared for every single unit as well as for the whole organization. A budget is prepared at the beginning of the year for the whole organization. The budget contains the target of sales and total expenditure required to achieve the target sales and it will also contain all source of income and the total expenditure of organization/ units.
- Marketing policy:- It will identify the broad market that has to be served. It will also identify the immediate and future consumer requirement in order to maintain the broad market. A large city hotel could be broken down into a segment of the various types of users i.e. in a coffee shop, Chinese restaurant, Indian restaurant, etc. each unit having a specific customer. Marketing policy also defines customer, market share, turnover, profitability, the average spending power of customer, product and customer satisfaction.
- Catering policy:- It is normally evolved from the marketing and financial policy. It will also define the many objectives of operating f & b facilities and will also describe the method by which the objectives are to be achieved. It will usually include the following:
- The type of customer
- The type of menu
- Beverage provision necessary for operation
- Food quality standard
- Method of pricing
- Type and quality of service
- Degree and décor and comfort
- Type and style of table and chairs
Operational
After defining the policies it is important to outline that how they are to be interpreted onto the day control activities of the catering operation. The operational control consists of:
- Purchasing
- Receiving
- Storing
- Issuing
- Production control
- Sales control
Management control after the event
It consists of three main stages:
- F & B cost reporting:- The cycle of production is often perishable so it is compulsory to update your f & b cost reporting weekly or monthly.
- Assessment:- In case of a large unit it is necessary that someone from the f & b department analyses the f & b reports and confirm them with the budget & with potential food cost.
- Correction:- Control system does not cure or prevent problems occurring when the analysis of a performance of a department states that there is a problem. A corrective measure has to be taken to set aside any problem.
