Report: Financial Analysis, Purchasing, and Success in F&B Operations

This report provides a detailed analysis of food and beverage (F&B) operations, focusing on the use of financial statements, the purchasing process, and the major factors contributing to the success of F&B services. The introduction outlines the scope of the F&B industry, emphasizing the importance of financial statements in cost control, revenue improvement, and decision-making, with examples such as calculating the cost of goods sold (COGS) and determining product pricing. The report then delves into the purchasing process, including searching for suppliers, selecting the best items, negotiating contracts, receiving goods, recording transactions, issuing items, and gathering feedback. Finally, it identifies key success factors for F&B services and offers recommendations for improvement. The report highlights how financial statements are crucial for determining profitability, making purchasing decisions, and assessing the overall financial health of an F&B operation. The purchasing section emphasizes the importance of quality, cost-effectiveness, and efficient inventory management. Overall, this report offers a comprehensive overview of critical aspects of managing and improving F&B businesses.

FOOD-AND-BEVERAGE

Table of Contents
Introduction......................................................................................................................................1
.........................................................................................................................................................1
2.1 Use of financial statement in food and beverage operations.................................................2
2.3 Analyses of purchasing process of food and beverage operations........................................4
4.3 Major factors to success of the services making recommendations for improvement..........1
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

Introduction
Food and Beverages are comes under catering industry, they prepared meal outside the
home and it gives services through institutions and companies . This types of industries includes
restaurants, school and hospital cafeterias, operations of catering, etc. Person who supplies food-
service are known as distributors of food-service. Along with this, One of the major purpose of
this report is to analyse purchasing process of food and Beverage operations. This industries are
highly growing as the report says that in 2010 food retailing supplied more than $1.24 trillion
worth of food in US (Hill and Hill, 2012)
On the other hand Food and Beverage Service involves many activities like preparing
food and beverage, keeping the inventory of material, maintaining service quality, managing
catered events, purchasing raw materials and at the end analysing the revenues from selling. So
this can be demonstrate in below diagram:
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Purchasing
ReceivingConsuming
StoringServing
Presenting Issuing
Preparing

Hence in the above diagram of Food and beverage product cycle, the purchasing
department is responsible for purchasing, storing and issuing of raw food items, etc. Purchasing
department works with accounts department to make the strategies in allocated budget
(Gastineau, 2013)
2.1 Use of financial statement in food and beverage operations
A financial statement can support food and beverages operations through suggesting the
measures to control its costs, improving its revenues, etc. Thus food industries requires to
compare its performance within a week, month and year.(Food and beverages sector taking
energy management seriously: Report, 2017) This can be possible only through financial
statement, which will show the sales figures of the business. To calculate the profit, every food
and beverage companies requires to know the total cost of its operations. Costs are of two types
fixed cost and variable costs, fixed expenses are regular cash outflows which every company has
to pay to run its business (Kilcast and Subramaniam, 2011) Some of the examples of fixed costs
are factory rent, COGS (Cost of goods Sold), electricity bills, etc. On the other hand variable
costs are those expense which are variable in nature, means it varies with the numbers of
production units. Some of the examples of variable costs are: raw materials cost, labour wages,
order cost, etc. Therefore financial statement is very necessary to see whether the food and
beverages company is running in profit or not (Canning, 2011) And if it is running in loss, than
financial statement helps in knowing about how long it can run in losses. There are various uses
of financial statements in food and beverage operations which are described as follows:
 Helps in taking purchasing decision: Financial statement helps food and beverage
operations by supporting it in the decision about how much quantity of raw materials has
to purchase. Through financial statement, company can know its sales revenue which
indicates how many products is sales by company during a week, month and year. So if
the sale is going down, than the purchase department will not order more raw materials of
food. Because the gap between demand and supply of product will increase the
maintenance cost of the company for holding the raw material. (Davis and Farmer, 2013)
 Helps in decide about the price of the product: No food and beverage industries can
decide the price of the finished food without analysing its financial statement. Because to
price should cover desired profit, labour cost, operating cost, administrative cost, cost of
production and all types of expenses whether fixed or variables. Hence price can be
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identify after knowing gross profit and net profit of the company at the end of particular
year. As more production helps company in reducing their prices because in mass sales,
company can cover their cost even at small profit margin. But if the product demand is
limited than food industry has to cover their cost by selling the product at high price.
(Ortega-Rivas, 2012) Lets understand this through an illustration: M&M is a restaurant,
it's main business is to selling pizza's. Its fixed cost is $1500 per month, and its labour
cost, raw material cost and other variable cost is $15 per unit. So variable cost is
dependent on production of unit, more production can reduces variable costs. M&M
pizza's demand is around 600 a month. Let's find the cost of above illustration:
Cost of 600 pizza = Fixed cost + (variable cost per unit * Sales units)
= $1500 + $9000 = $10500 per month
Cost of per pizza = $10500/600 = $17.5 per pizza.
Hence M&M has to charge more than $17.5 to earn profit, if it sets the price less
than $17.5 than it will face loss.
 Suggests whether to continue the business or not: Financial statements of every food
and beverages company, alerts the business when the loss happens. So with the help of
this instrument, company can forecast their future sales and profits. If the firm finds that
in future it is facing losses than it will be easy for the company to shut down the business.
On the other hand if the company is finding profit in future than it can decide to expand
its business. (Nestle, 2013)
 Tells whether the company is earning profit or loss: A financial statements states
about the profit and loss of the company either in the form of gross profit which is getting
from trading account or in the form of net profit, calculated from profit and loss accounts.
So food and beverage company can make the strategies to earn profit if the financial
statement is indicating loss to it. Hence there are number of ways suggested by the
financial statements to convert the losses into profits: (Diller and Graff, 2011)
◦ It can increase the sales units
◦ It can reduce the cost of production
◦ It can increase the price of the product
These are the ways by which food and beverages company can convert the loss into
profits.
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 Finding the cost of the business: Financial statement supports food industries in finding
the cost of the business in overall production operations. Because cost of the production
is necessary to identify the price of the product as discussed in the illustration of M&M.
(Bayraktar and et. al., 2010)
 Helps in finding EOQ level: Financial statement has a wide scope, so it also helps
company to find how much to order to maintain there costs. EOQ level also known as
economic order quantity, tells about the quantity to be order so that it can take benefit of
economic cost or minimum cost which is ordering cost and carrying cost. Like if the sales
is going down than purchasing department can find how much order is suitable for the
food industry through EOQ. It also helps in identifying the quantity to be order, which
helps in reducing its order cost during the year.
Hence, from the above evidences and explanation it is clear that financial statement is not
only useful but are the part of the food and beverages industries.(Baldwin, Wilberforce and
Kapur, 2011)
2.3 Analyses of purchasing process of food and beverage operations
Purchasing of food is not an easy task it takes a week or month depends on the size of the
organization. A purchasing manager should be good enough in bargaining, negotiations and
quality check of the raw materials it is purchasing from the market. (Byker and et. al., 2014)
Therefore its not an easy job, lots of analyses and examination of market is required before
placing or finalising any order. The motto of every purchasing department is to order best quality
of raw food at minimum price possible to help the food company or restaurants to sell their
quality finished product at best price. Thus if the food company is able to sell its food product at
best quality and at minimum price than it will get cost advantage. So below is the diagram in
which procedure of purchasing is given:
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Searching
Selection
Buying
Receiving
Recording
Issuing
Feedback

 Searching: In the first step of purchasing procedure, the officer is looking for the food
items which is suitable for the business. (Food and Beverage Management Commons,
2017.) Here he assures that proper understanding is done about what quality products are
required by production department. Operation officer gives the list of required raw food
for input process so that finished product can be produce as an output. In this step the
purchasing department give an add in newspaper, and inviting the suppliers to fill up the
tender at minimum costs. Here its the responsibility of the purchasing officer to create the
network with several good suppliers. Because several suppliers works as an alternative
for the business and it helps purchase department in bargaining with suppliers. (Barnhill
and King, 2013)
 Selection: This the next step, here the officer is responsible for selecting the suitable
items. As in searching, the responsibility of the purchasing department is to find various
sources and suppliers of the raw food. Invitation for tender has been done at first step. So
in this step, purchasing department will evaluate several quality and success factors to
select the best choice. Here they have to analyse on the different aspects and must
concerns the selection factors. Like there main objective is to select best quality product
at minimum prices. But it is necessary to keep in touch with several other buyers who
takes part into tender, because in case if the supplier is failed to fulfilled the order
required then in that case it can utilise its second option. It is good to safe yourself from
the risk. Because if the supplier is not able to supply on right time than the strategy of
selecting quality product at right price will be failed.(Rane, 2011)
 Buying: After selecting the perfect raw food, the next step for purchasing officer is to
enter into the contract. In contract following things will be mentioned: no of quantity
required, duration of delivery, tenure of the contract, price of the product, amount of
penalty if the product is not delivered on time, etc. It is good practise to always sign a
contract at the time of placing an order. Because there can be no. of reasons which can
fail the suppliers to deliver the product on time. (Adebayo and et. al., 2013)
 Receiving: After entering into the purchase contract the next step is to receive the goods
and make sure that raw food is in good condition and also make sure that quantity is
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matching with the ordered quantity or not. In case any defect is found than purchasing
department has full authority to replace that item with good one.
 Recording: After receiving the food in good condition the another step is to ensure that
the item is recorded properly in purchase book or not. Because in case if it wants to
replace particular item with new one than it has to concern the previous entry of the item.
In recording date, time, purchase order and batch number is recorded. Which helps both
the parties food company and suppliers to track the raw food.
 Issuing: Here the responsibility of purchasing officer is to ensure about delivery of
required raw food at user units is done or not.
 Feedback: At last purchase officer gets the feedback about the suitability of the Raw
food according to the desired requirement of production manager. This feedback can
either be negative or positive. This helps in searching next time.
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4.3 Major factors to success of the services making recommendations for improvement
Every business firms seeks to be get success as well as attain their goals and objectives in
a effective and efficient manner. Therefore, they focuses on to adopt appropriate and effective
and methods within the organisation. Apart from this, there are several factors or causes which
directly impacts business firm wither positive or negative in nature. Due to this, it is necessary
for every companies must be effectively analyse and evaluate all major factors in a effective
manner so that they can get success in competitive market place. However, factors or causes are
impacts working system of the employees. So that they cannot able to supply better and effective
quality of food and beverage facilities an services to customers as well as they cannot understand
their needs and requirements. (Long, Henderson and Schwartz, 2010) Hence, due to the major
factors consumers cannot get proper satisfaction. Thus, affects ion profitability and productivity
of the company therefore, it is required to be systematically analyse and evaluate all major
factors with the help of appropriate factors and causes so that employees of the firm can
effectively attract towards company as well as provide better quality of foods and beverage to
them as per their needs and demand. In the other words, there are explaining the major factors of
the services such as follows:
 Management system: This is one of the major system of every organisation because it
aids to manage and control business activities and operations in a effective manner. So
that every staff members will effectively perform their tasks and provides services and
facilities to consumers. Apart from this, it is essential for company must be adopt and use
appropriate management system so that they can manage all over operations. Sometimes
ineffective management working as a factors in the organisation because due to this
employees does not effectively focuses on their works. Hence decrease their working
performance and involvement.
 Communication: It can be carried out as important process in every organisation
because with the help of this employees an employers can easy and effectively interact
and communicate with each other. It helps to increase understanding and healthy
relationship. Therefore it is necessary to be use and adopt effective communication
process in the company. In the other words, while employees and employers are not
systematically interact and communicate with each other so that respectively increase
problems and conflicts among them. Additionally, due to the communication problem

employees and customers also cannot interact. Therefore, creates misunderstanding
among them as well as employees cannot understand their needs and expectations.
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 Market condition: Market situation and trends are also impactors on business firm,
hence this is aspect necessary for every business firm must be effectively analyse and
evaluate with the help of appropriate methods and techniques. So that company can
understand customer's demand and market condition. Market situation unstable in nature
because it depends upon several contents such as buying power of customers, trends,
share market, economic condition and so more. Hence, market condition sometimes
behaving like factor for the company. Due to this may directly impacts on sales and
revenue of the business firm. Apart from this, before launching any products and goods in
the market place have to be effectively analyse and evaluate market factors.
 Working environment and culture: Generally, environment of the business firm
categorised into two section such as internal and external. Therefore, there are included
several factors which directly impacts on company either positive or negative in nature.
Hence, it is essential for the firm must be evaluate and analyse internal and external
factors of the company so that employers of the company can take appropriate decisions
as well as supply food and beverages to customers. Along with this, culture and working
environment of the organisation must be effective and impressive in nature because it
helps to enhance employee's working performance and involvement in their works and
tasks. Thus, profitability and productivity of the enterprise will respectively increased in a
impressive manner. With the help of this they can take compete with their major
competitors as well as set an brand image in the market place.
In order to this, there are providing some appropriate recommendations to the company
for effective improvement such as follows:
 Employers of the company must be implement and adopt appropriate management
system within the organisation so that effectively manage and compete business activities
and operations according to the time. Due to this respectively increased working
performance and involvement of employees. So that they will effectively perform their
operations.
 Within the organisation must be implement appropriate communication system so that
customers, employees and employers can easy to interact and communicate with each
other as well as their ideas, views, problems and so more.
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 In the last, should be develop healthy and effective environment within the organisation
so that employees of the firm will systematically perform their tasks in unity.
CONCLUSION
From the above mentioned report it has been define food and beverage products of the
retail market thus, here has been explained an effective process of purchasing and delivering
foods and beverage to the customers. In the other hand, there also represent food and beverage
process in a effective and efficient manner. In the last has been elaborated major factors which
impacts such as management system, communication process and so more. As per the factors has
been provided appropriate recommendations to the company for improvement.
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