Running a pub, club, or hotel in Australia involves more than just serving drinks and food to make money. Discovering ways to increase your profit can be as straightforward as focussing on one key target area in your business at a time. The “one percenter” or “power of one” as I like to refer to my clients.
Today, we’ll delve into the often-overlooked aspect of your hospitality success or failure: effective inventory management! 🚀
Inventory can hold a very big hidden cash flow impact, favourable and unfavourable. My clients often neglect this area but utilizing it can increase profits by 1% or improve cash flow.
Your inventory is like a hidden source of money, like a secret recipe. It goes beyond just the products you have. It also involves getting good credit terms, receiving discounts for buying in bulk, and taking advantage of rebates and discounts.
Here are my five top tips on “taking stock” of your inventory to boost profit and cashflow:
Ever found yourself pondering stock levels or questioning the efficacy of your ordering process?
Envision your stock as a financial asset. You need to order or maintain stock levels just before you run out, or “Just in Time” (JIT), to maintain operational smoothness. Optimally aim for no more than a two-week supply of product or stock on hand.
This ensures a seamless conversion of stock into sales and cash before you must physically pay for them. It’s like serving up a dish before it loses its flavour. Basically, it’s like buy now, pay later!
Just in time ordering above can improve and unlock cashflow when your stock turn days are less than your creditor days. Two metrics you should measure and review every month and then analyse these compared to your cashflow that month.
Extending credit terms to 30 days boosts your business by refreshing your cash flow.
It injects additional funds into your operations, empowering you to make more powerful purchasing decisions. For example, buying in bulk or before CPI increase can get you that extra 1% on gross profit.
Have you considered exploring storage solutions with your transport partners?
It’s not merely about avoiding price increases; it’s about realizing substantial long-term savings – it’s like finding a budget-friendly wine that tastes like a million bucks.
Cultivating strong relationships with suppliers is akin to establishing valuable allies in the restaurant industry.
Understanding pricing structures, navigating rebate opportunities, and negotiating for immediate impact are essential. Regular adjustments to these agreements ensure a steady flow of profits – it’s like tweaking a recipe until it’s just perfect.
During the COVID period, I observed that clients with strong relationships with suppliers could negotiate deferred payments, return stock, or increase credit limits. This helped them navigate lockdowns and closures without going out of business.
Let’s delve into stocktakes– an indispensable aspect of effective hospitality management!
Stocktakes play a crucial role in efficient hospitality management, extending beyond mere counting.
They serve as a tool to:
Ultimately, treating your stock as equivalent to cash emphasizes the importance of accurate and consistent valuation practices.
Sustaining profitability in adynamic hospitality landscape requires a keen awareness of the industry’s price fluctuations, reminiscent of a rollercoaster ride.
Just as one monitors an oven to prevent a culinary masterpiece from burning, staying ahead in the hotel industry demands constant attention to the numbers.
Regular data assessments empower informed decisions on menus and pricing, ensuring agility akin to crafting an ever-popular menu.
This practice not only maintains business profitability but also consistently leaves customers satisfied, resembling guests leaving with a full belly and a smile.
Timely adjustments to supplier cost increases, passed on promptly to customers, prevent the burden of absorbing additional expenses. In this dynamic space, knowledge truly becomes power.
Knowledge is power in this space.
Navigating the intricate balance between stock levels, credit terms, and profit margins may seem daunting. However, fret not!
If handling numbers feels too difficult, get help from experienced professionals like The Gild Group’s Business Management division.
Our Gild expertise spans various establishments, from bars, nightclubs, pubs, tavern and hotel groups.
The hospitality business management team possesses extensive experience and financial finesse to handle intricate details. This way, you can focus on what you love and excel at.
Together, you can boost your business’s growth, just like adding a finishing touch to enhance the whole dish (or cocktail).
Effective hotel, pub, tavern, and club management strategies are essential for the success of the hospitality business.
Achieving food and beverage business growth involves implementing innovative profit optimisation techniques, emphasizing strong leadership and management skills.
Successful business management for hotel chains requires a comprehensive understanding of hospitality consulting, accounting practices, and strategic decision-making.
Hospitality entrepreneurs can use these elements in their business approach. This will help them manage the complexities of the industry. Additionally, it will enable them to achieve sustainable growth and profitability. This is especially important in the dynamic world of hospitality business management.
We’ve got experience in hotel management strategies when it comes to best inventory management and accounting practices – so whether you’re a small business starting or you’ve been in the industry for a while, it helps to have someone who knows market trends and industry benchmarking on your side.