The physical process of counting Inventory takes place at the end of the fiscal week or reporting period, once the reporting period is closed. Inventory is best when done on the same day each week and when possible, around the same time of day. Small changes in the inventory process can make significant changes in achieving accurate inventory usage. Taking inventory on different days and different times of the day can impact your usage by either adding an extra day of product usage or losing a day.
It is recommended that you take inventory either before the unit opens or after the operation closes. It is difficult to get an accurate inventory when staff is taking products off the shelf while you are trying to count. Additionally, it is best to take inventory when you will not be interrupted repeatedly.
Remember, food cost is driven by product usage and revenue. (Product Usage ÷ Revenue = Food Cost %) If you add additional days of usage without the revenue, food cost % goes up. If you remove days of product usage but keep the entire week of revenue, food cost % will go down. Both situations give you false information.
There are many situations that can have a negative impact on your inventory accuracy, whether in the week you are currently in or in the following weeks. Inaccurate inventory counts will cause your inventory to fluctuate and give you false values. Most inaccurate reporting situations take a minimum of three weeks to be corrected.
Week 1: Over Reported a product. You entered 2,000 lbs of chicken breast instead of 200 lbs
This decreases product usage because you report more than you have – Result - Makes inventory look better than it is for this week
Week 2: Count the actual amount on hand, but you are starting with a deficit of 1,800 lbs in chicken usage that you entered incorrectly the week before. Result - Makes inventory look worse than it actually is because of false increased product usage in this week.
Week 3: Count accurately, Inventory is corrected
This is just one example of how your inventory can be affected. There are many unintentional mistakes as well as intentional false reporting that will give you inaccurate product usage, which will impact your food cost percentage.
Below are just a few situations that will impact your product usage calculations and period food cost both positively and negatively.